A secretive nonprofit group with ties to billionaire conservative businessmen Charles and David Koch admitted to improperly failing to disclose more than $15 million in contributions it funneled into state referendum battles in California, state officials there announced Thursday.
The group, the Arizona-based Center to Protect Patient Rights, is one of the largest political nonprofits in the country, serving as a conduit for tens of millions of dollars in political spending, much of it raised by the Kochs and their political operation and spent by other nonprofits active in the 2010 and 2012 elections.
The settlement, announced by Attorney General Kamala D. Harris of California and the Fair Political Practices Commission, which enforces California’s campaign finance laws, includes one of the largest penalties ever assessed on a political group for failing to disclose donations. The center and another Arizona group involved in the transactions, Americans for Responsible Leadership, will pay a $1 million fine, while two California groups must turn over $15 million in contributions they received.
Together, the groups are part of an intricate, interlocking network of political nonprofits that have taken on a prominent role in state and national politics in recent years, bolstered by legal and regulatory shifts, including the Supreme Court’s Citizens United decision in 2010.
Records and documents uncovered during the California investigation provide a rare glimpse into how such groups closely coordinate transfers of money that mask the sources of the contributions and skirt state and federal disclosure rules.
“This case highlights the nationwide scourge of dark money nonprofit networks hiding the identities of their contributors,” said Ann Ravel, the commission’s chairwoman, in a statement.
Last year, as California voters faced two major ballot initiatives — one, Proposition 30, which would raise taxes on the wealthy, and another, Proposition 32, which would prohibit unions from using automatic payroll deductions to raise money for political campaigns — a Republican consultant, Anthony Russo, began raising money in connection with the initiatives.
Some of the money went into political action committees in California, which are required to disclose their contributors. But roughly $29 million came from a group of 150 California donors who wished their contributions to remain secret, among them billionaire investor Charles R. Schwab and Gene Haas, a prominent businessman and philanthropist. Those contributions were directed to Americans for Job Security, a Virginia-based conservative group that is not required to disclose donors, to spend on issue advertisements.
In September 2012, with the election drawing near, Americans for Job Security concluded that California law might require disclosure of some of those contributions and began transferring a total of $24.6 million to the Center to Protect Patient Rights, which was founded by Sean Noble, a Republican operative. Noble has worked closely with Koch-founded political groups and been a featured speaker at the brothers’ biannual donor conferences; he also worked closely with Russo to help draft the strategy in California.
A donor working with Russo called and emailed Charles Koch several times in early October, according to an email obtained by investigators, seeking a contribution of “several million” for the effort and praising Noble.
“Sean Noble from your group has been immensely helpful in our efforts,” the donor wrote. “I look forward to seeing you on a golf course — probably after the election.”
The center is not formally controlled by the Kochs, and Robert A. Tappan, a Koch spokesman, said neither brother ultimately contributed to the California effort.
“We did not support, either directly or indirectly, this ballot initiative, which would have restricted public and private sector employees’ rights to contribute to candidates,” Tappan said.
California requires that the underlying sources of money behind significant political spending be disclosed. To skirt this regulation, when the Virginia-based group gave $25 million to the Center to Protect Patient Rights, it did not specifically earmark any of those funds for the California referendums. But the group made clear that it hoped the center would financially support the efforts in California to block the income tax increase and blunt unions’ political power.