California Democratic Party Faces $3,500 In State Fines For Mishandling Campaign Funds, Governor Gets Warning Letter

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The California Democratic Party has agreed to pay $3,500 in fines for mishandling a pair of six-figure contributions, but state investigators stopped short of accusing party officials of laundering donations from the oil industry to the 2014 reelection effort of Gov. Jerry Brown.

The findings released Monday by the state Fair Political Practices Commission grew out of a complaint by the activist group Consumer Watchdog in September that alleged hundreds of thousands of dollars were given by energy companies to the state party, which shortly afterward made large contributions to the Brown campaign.

The commission's enforcement chief on Monday issued a warning letter to Brown and his campaign, saying it had failed to deposit $1,318,316 into the designated campaign bank account, and instead deposited the funds into the campaign savings account.

The letter said Brown’s campaign also paid $35,357 in credit card processing fees from the savings account without transferring the funds into the designated campaign bank account first. Investigators also found the campaign accepted $3,700 in non-monetary contributions after the Nov. 4, 2014 general election, despite having no net debt remaining, another violation of the political reform act.

As for the  money laundering allegations by Consumer Watchdog: “Insufficient evidence was found to substantiate the other allegations in the complaint regarding this committee,” wrote Galena West, chief of enforcement, in the warning letter.

West said that despite the violations that were verified, her office “determined that further enforcement action is not warranted” because a Franchise Tax Board audit “concluded the Committee substantially complied” with the Political Reform Act.

Jamie Court, the president of Consumer Watchdog, said he was “very disturbed that there are pretty big loopholes in campaign finance laws that allow you to use the Democratic Party as a sieve and pass through oil industry contributions without it resulting in a penalty unless there is a wiretap.”

The commission investigation of the Democratic Party found only that the party and its treasurer, Katherine Moret, failed to properly identify a committee bank account, failed to notify a candidate’s campaign of the account’s use and failed to deposit $450,000 in contributions into the correct account.

“The Committee is an extremely sophisticated party who should be held to the highest standards,” wrote West in a report proposing the fine.

Candidates for governor in the 2014 election could not accept contributions from individuals of more than $34,000.

The Democratic Party was supposed to maintain separate accounts for money it received, with “all-purpose” accounts being those that accept contributions under the $34,000 limit for races and “restricted” accounts for funds in excess of contribution limits.

Restricted funds cannot be used to make contributions to candidates. They can be used to make contributions to ballot measure committees and for voter registration and administrative costs.

Investigators said that funds received over the contribution limit totaling $450,000 that should have been deposited into a “restricted use” account were instead deposited in error into the “all purpose” account.

“Fortunately, this error was caught before the funds were expended and the funds were then transferred into the 'restricted use' account,” the investigative report said.

West said the deposits “were reversed within 14 days and the error did not result in the Committee using any funds improperly.”

The fines have been agreed to by the Democratic Party and investigation staff but must be approved by the Commission at its May 25 meeting.

Consumer Watchdog also had alleged that Gov. Brown’s top aide, Nancy McFadden, influenced appointments to the state Public Utilities Commission while she owned stock in Pacific Gas & Electric Co., which was seeking utility-friendly decisions.

In a separate filing Monday, the FPPC investigators said McFadden failed to properly report stock options she owned in Pacific Gas & Electric Co., so she has agreed to pay $300 in fines.

However, the report said investigators “found no evidence of a conflict of interest resulting from this interest” and “no evidence of intent to conceal.”

McFadden agreed to pay $100 in fines each for the years of 2012, 2013 and 2014 when she did not report full information on the stock options, according to a report by the FPPC.

McFadden initially reported owning the stock options but later failed to fully report information on her sale of options, including the dates on which they were sold.

Evan Westrup, a spokesman for the governor, said the FPPC filing speaks for itself. As for  the McFadden fine “Inadvertent filing errors were acknowledged and amended Form 700s were voluntarily re-filed with the FPPC to clear this up more than a year ago,” Westrup said.  “Contrary to the poppycock some continue to peddle,” he added, “the FPPC’s findings make it clear there’s `no evidence’” of any `conflict of interest’” or `intent to conceal.”

Jamie Court  said he was upset that the FPPC investigators did not interview witnesses offered by Consumer Watchdog.

“I don’t know how you can investigate the chief deputy to the governor without talking to witnesses,” Court said. “In that case a $300 fine is not even a slap on the wrist.”

He said it appears that the governor’s appointees to the Fair Political Practices Commission may have limited the scope of the probe.

“It suggests to me the governor’s appointed FPPC clearly brought influence to bear on limiting the scope of this investigation and preventing there from being a different outcome, and that is troubling,:” Court said.

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