California grand jury investigating Arizona-based dark money 'Kochtopus' groups

Posted by AzBlueMeanie:

When last we heard about the Arizona-based "Kochtopus" dark money group Center to Protect Patient Rights, founded by GOP operative Sean Noble, California's Fair Political Practices Commission (FPPC) was ramping up its investigation into “the largest contribution ever disclosed as campaign money laundering in California history.” The Arzona political media has largely made this story disappear.

It now appears that a grand jury has been convened, and the butts of "Kochtopus" dark money contributors are beginning to pucker.

Peter H. Stone at The Daily Beast reports today in an Exclusive: California Grand Jury Probing Shadowy Money Groups:

A grand jury is now involved in a high-stakes California probe that is looking into whether a PAC and three so-called dark-money groups—including one with ties to the billionaire brothers Charles and David Koch—broke a campaign disclosure law by funneling $11 million from secret sources to influence ballot initiatives in the state’s 2012 election, The Daily Beast has learned.

The state grand jury, previously unreported, is part of an expanding investigation that’s been spearheaded by the state’s attorney general and the Fair Political Practices Commission (FPPC), according to two people familiar with the probe, who requested anonymity since they weren’t authorized to discuss the ongoing grand jury proceedings, which are secret.

The existence of a grand jury, something typically convened to obtain sworn testimony from witnesses, appears to signal increased prosecutorial interest in the inquiry to uncover the actual donors. Launched last fall, the probe could lead to eight-figure civil penalties and possible criminal charges, according to statements last year from the A.G.'s office and the FPPC, the state's election watchdog agency.

* * *

The inquiry, focused on three out-of-state dark-money groups and a California business PAC, was triggered when the PAC, the Small Business Action Committee, reported in October 2012 spending $11 million on two ballot initiatives—but did not reveal its donors’ names, a legal requirement in the state for contributors to ballot initiatives.

* * *

Since the probe’s inception, the FPPC, in tandem with the A.G., has issued subpoenas for documents and financial records to the PAC and the dark-money groups as well as individuals and other groups suspected of involvement in channeling the funds for the ballot drives, according to a person familiar with the inquiry. In recent weeks, the A.G.’s office, which has been ramping up its involvement, sent out another round of subpoenas, according to the same person.

Charles R. Schwab, the chairman of the Charles Schwab Corp., or an entity affiliated with Schwab has received a subpoena, according to a person familiar with the probe. In 2011 Schwab was one of about 30 wealthy donors who was cited in a speech by Charles Koch as having given at least $1 million the prior year to Koch backed conservative projects.

A spokesperson for Schwab declined to comment, as did Jason Torchinsky, a lawyer who has represented the PAC and also the three dark-money groups.

* * *

Grand juries are commonly used in cases where prosecutors are moving to bring chargesor pressuring targets to cut deals, say white-collar lawyers. It's not known whether any of the three dark-money groups, the PAC, or others have received target letters, which often signal that charges are in the works.

“The convening of a state grand jury is as serious a step in a state investigation as a federal grand jury is in a federal probe,” white-collar attorney Stan Brand told The Daily Beast. “It’s not a foregone conclusion that someone will be charged, but it indicates a heightened level of prosecutorial interest.”

Brand added that California’s disclosure law for ballot initiatives would trump the IRS rules that allow dark-money groups that have “social welfare” tax status to keep their donors secret. 

Other lawyers concur. “The Internal Revenue Code would not prevent California law from requiring disclosure of donors,” said Marc Owens, the former head of the IRS tax-exempt unit and now a partner at Caplin & Drysdale.

If prosecutors do move forward, their investigation could shine light on parts of the burgeoning network of conservative “social welfare” outfits that spent hundreds of millions in the last two elections.

* * *

One of the three groups that allegedly channeled the funds to California was the Arizona-based Center to Protect Patient Rights, founded in 2009 by Koch operative Sean Noble, who has emerged in recent cycles as a big player in conservative political and fundraising circles. Noble has spoken at least twice at the billionaire brothers’ biannual conferences aimed at tapping other wealthy conservatives for their favorite projects, and he has been a key strategist at small Washington meetings with other GOP allied groups such as the Karl Rove-founded American Crossroads.

“Sean is the wizard behind the screen” for the Kochs and their network of wealthy donors, said one GOP operative familiar with Noble’s political work.

In 2010 and 2012, Noble’s Center appeared to act mainly as a cash conduit, shipping millions to allied conservative groups. In the 2010 cycle, for instance, it channeled almost $55 million—a sum almost identical to its revenues—to a couple dozen conservative bastions including Americans for Tax Reform and the American Future Fund, according to the group’s filings with the IRS. Most of that largess went to pay for advertising backing GOP candidates or attacking Democrats.

* * *

The circuitous routes apparently used to funnel the $11 million into the state were deemed “the largest contribution ever disclosed as campaign money laundering in California history” by the Fair Political Practices Commission.

But the PAC only disclosed that the funds came from a group in Arizona, Americans for Responsible Leadership, a two-year-old “social welfare” entity that had never before spent funds in California. When the FPPC asked the Arizona group for more information and was rebuffed, the commission went to the California Supreme Court, which ordered the outfit to reveal where it received the funds.

To comply, the Arizona group said the $11 million came initially from another dark-money group, the Virginia-based based Americans for Job Security, which is registered with the IRS as a “business league,” which like social-welfare groups can shield the names of its donors.

Making the money trail even murkier, the Virginia group passed the $11 million along to Noble’s Center to Protect Patient Rights which, in turn handed it over to Americans for Responsible Leadership. (Notably, Noble’s Center donated $4.8 million to Americans for Job Security in a separate 2010 money transfer, according to the center’s IRS filings.)

* * *

The grand jury and the widening California probe has stirred considerable unease among some Koch allies and in certain conservative quarters, according to multiple GOP operatives who asked not to named. “People are very puckered up about it,” said one such operative.

The "Kochtopus" dark money groups have tentacles in the state of Maricopa. If we had an Attorney General and Secretary of State who are not compromised by their relationships with GOP operative Sean Noble and "Kochtopus" contributors to their campaigns, maybe the state of Arizona would be conducting its own investigation into money laundering by these dark money groups.

Instead, we have a Tea-Publican controled state legislature that refuses to even consider legislation to rein in the abuses by these dark money groups, because they directly benefit from the relationship and campaign contributions. Political corruption permeates Arizona politics.

Comments

[Pamela]

Is this the same group that I wrote about-- the one with Robert Graham and Kirk Adams?
http://www.blogforarizona.com/blog/2012/11/sonoran-alliance-says-grassroots-effort-not-dark-money-defeated-props-121-204.html

[AZ BlueMeanie]

Same group. These guys are on the board.

[movingazforward]

It looks like Noble and the Koch Bros. are also behind "Prosper" and 60Plus", the groups driving the anti-solar campaign in Arizona. I saw one of their ads on a YouTube video today.

http://www.cleanenergyauthority.com/solar-energy-news/tusk-fighting-aps-071613

[AZ BlueMeanie]

You are correct.