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UncategorizedInvestigation: San Francisco's big-money campaign loophole

Investigation: San Francisco’s big-money campaign loophole

You can raise unlimited money to run for DCCC then use that for another campaign — say, for supervisor

You raise unlimited money for one campaign -- and shift it to another
You raise unlimited money for one campaign — and shift it to another

By Tim Redmond

FEBRUARY 4, 2015 — You want to raise political money, fast, in big chunks, in San Francisco? It won’t be through a campaign for supervisor, or even for mayor: Local laws limit individual donations to those races to $500.

But file for the somewhat obscure office of Democratic County Central Committee, and you can raise all you want, wherever you want, with essentially no legal limits.

And once you’ve raised that unlimited money, you don’t have to spend it on the DCCC race – it can go for all sorts of other things.

Including, apparently, a race for supervisor.

Campaign documents reviewed by 48hills show not only big special interest contributions to supervisor candidates’ DCCC campaigns – Scott Wiener, for example, got $10,000 from the San Francisco Apartment Association and Malia Cohen got $7,000 from Ron Conway – but reveal some curious transfers that at the very least raise questions about how local money is raised and spent.

In 2012, Cohen ran for DCCC and collected $116,700. That’s a lot of cash for an office that sets policy for the local Democratic Party. But DCCC campaigns raise name recognition for candidates, and Cohen spent $39,588 campaigning for the office.

The remainder of her DCCC money was spent after the race.

Among the disposition of that money: On Jan. 7, 2013, documents on file with the Ethics Commission show, Cohen transferred $10,000 from her DCCC account to the Malia Cohen for Supervisor campaign.

Now: The Cohen for Supervisor campaign can’t take $10,000 from anyone, even Cohen’s other campaign committee. The limit by law is $500.

So the supervisorial campaign listed 31 individual donations, from $100 to $500, and stated that they were “received through intermediary Malia Cohen for DCCC.”

In other words, that $10,000 was repurposed – from one campaign that can raise unlimited money to another that is under strict contribution limits.

I have left numerous messages for Cohen, who acted as her own campaign treasurer, and she hasn’t answered my question: Did all of those donors agree to move their money from one campaign to another?

Legally, it turns out, they don’t have to. Campaign finance experts I’ve spoken to say that as long as the total contributed by any one individual to the Malia Cohen for Supervisor campaign doesn’t exceed $500, what Cohen did is perfectly legit.

According to a Dec. 11, 2002 advice letter from the Ethics Commission, it’s legit to transfer money from one campaign to another, but:

[I]n order to comply with local contribution limits candidates must attribute to particular contributors funds transferred from one campaign account for City elective office to another of that same candidate’s campaign account for City elective office.

  1. To determine whose funds have been transferred, the Ethics Commission will use the same attribution procedures adopted by the Fair Political Practices Commission, which require a candidate to use either “last in, first out” or “first in, first out” accounting methods.

  2. Both candidates and contributors are responsible for complying with local contribution limits.

Here’s the relevant Ethics Commission regulation:

“Regulation 1.122-2    Transfer of Funds in a Candidate’s Campaign Account.
(a)       The use and transfer of funds held in a candidate’s campaign account during an election, after the candidate’s withdrawal or when such funds become surplus, are regulated by both state and local law.  Candidates and treasurers must comply with both state and local law in the handling of such funds.  Under some circumstances such as when funds become surplus, state law prohibits the transfer of funds.
(b)       A candidate who transfers funds from one candidate campaign account to another must file Form SFEC-122 to disclose whether “last in, first out” or “first in, first out” was used and information regarding the contributions that were transferred.”

In other words, Cohen should have taken the money from the contributors who had most recently given her money. It’s impossible to tell from campaign records whether that happened, since many of her contributions came in on the same days.

If there is an SFEC Form 122 on file for her DCCC of 2014 Supervisorial campaign, I can’t find it in the Ethics database.

Of course, once money’s in the bank, it’s all fungible: Was it those 31 individuals who actually shifted their donations to Cohen for Supervisor, or was it Ron Conway? If Conway hadn’t forked over $7,000, would Cohen be flush enough to move $10,000 in other donations to her supervisorial campaign? In the end, it’s all the same money flow.

Which is why critics say the DCCC loophole is a serious problem.

Jon Golinger, who ran the No Wall on the Waterfront campaign, told me that “While the Koch brothers and corporate donors may be using Citizens United to make a joke out of our national campaign finance laws, San Francisco voters have repeatedly made clear they’re serious about strictly limiting campaign contributions to local elected officials to $500 to stop political corruption and undue influence.

“That’s why it makes a mockery of what San Franciscans voted for not to close the unlimited donation loophole that some city elected officials have exploited to accept a $10,000 donation check with one hand when it would be illegal for them to take any more than $500 with the other hand.”

The city has every right to limit the individual donations to local campaigns. But thanks to a Republican bill that got through both houses of the Legislature in 2012 makes it impossible for local government to control contributions to partisan county committees.

The measure, by the GOP’s Chris Norby, is now enshrined in state law:

  1. (a) Nothing in this act shall nullify contribution

limitations or prohibitions of any local jurisdiction that apply to

elections for local elective office, except that these limitations

and prohibitions may not conflict with Section 85312. However, a

local jurisdiction shall not impose any contribution limitations or

prohibitions on an elected member of, or a candidate for election to,

a county central committee of a qualified political party, or on a

committee primarily formed to support or oppose a person seeking

election to a county central committee of a qualified political

party.

 

So unless that state law gets changed, county committee races will remain potential slush funds for candidates for other offices.

In 2012, for example, records show that the five members of the Board of Supervisors who were running for DCCC – David Campos, David Chiu, Eric Mar, Cohen, and Wiener – raised a total of $388,831 for that office. Almost half of that — $170,650 – was spent by those candidates after they had already won the DCCC election.

A total of 120 donors gave more than $500, the limit for a local race.

There are very few limits on what a candidate for DCCC can do with his or her money after the race is over. It can’t go for personal expenditures, of course, but it can clearly be used for polling, staff, and other work that is related to other campaigns (say, for supervisor).

The big donors know how the game is played. You want to help Wiener get elected supervisor? A cool ten grand to his DCCC campaign will allow him to print signs with his name on them, pay for slate cards with his name on them, and in general get his name out.

Wiener has been on the DCCC for years, and is a past chair. It’s inconceivable that he could lose a race for re-election to that body, where name recognition is a key element. He could spend $1.00 and win.

But the landlords can’t give $10,000 to his campaign for supervisor, any more than Ron Conway can give $7,000 to Cohen’s supervisorial effort. So they use the DCCC.

Campos raised $121,753 for his DCCC race, including several contributions of $5,000 or more, and that clearly helped his campaign for state Assembly. Those donations, however, could have gone directly to his Assembly race, where the limits are much higher. Same for David Chiu, who raised just $24,414, with several contributions higher than the local limit (but well within the state limit for Assembly races).

Wiener, like Campos, had no serious opposition in his re-election campaign for supervisor, and he’s been effectively running for state Senate for several years. So the extra promotion his DCCC money gets will wind up helping the (officially undeclared) Wiener for Senate race.

And Cohen? She was running for supervisor. Under $500 contribution limits. And this, while perfectly legal, sure looks a little funky to me.

 

 

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.
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41 COMMENTS

  1. (apologies, new to this site and I just noticed there is another, “small case“ on that first initial, “diane”, who has posted on this site. I am not that diane (not that I disagree with her (too new to even know whether I disagree), but I would not want her to be asked to account for my thoughts, in addition to hers), and I’ll use another name to describe myself in any further posts I might make.)

  2. The City could have told the bus operators to pay their fines when they use the bus stops just like everyone else and taken in $271 just like they do with everyone else without having to pass a single local law.

  3. Those Ancient London origined Big Four Audit – Limited Liability Corporations [LLCs]™ – “legally” (Ancient, and: “MY LAWYER”ED UP THE ASS – CODE) set up what are called Cushion Accounts, for those Multi-National Corporate taxes known to be DUE, but amnestied off.

    After all, white gloves and hatz …West Point™ … etcetera ….

    sigh.

  4. (And, on top of that, so very many, Middle Aged, quite a few years from retirement are certainly feeling hurt and stunningly undeserved SHAME, in not being able to save their elder parents from ghastly Nur$ing Home$/$killed Rehab Fa$ilitie$, nor afford their children the money it now takes (More than Harvard) to go to UC Berkeley.)

  5. Dear W.C.,

    yup, re those Tax Amnesties. Also, ‘Funny’ thing is, can we ever recall any amnesties for non-corporate (non obscenely wealthy and “My Lawyer”ed up the Ass) human beings?

    Let alone those Federal Tax Amnesties, I have it first hand that the 50 states offer all sorts of tax amnesties to perpetually M&A’d (M&A = Mergers and Acquisitions) Multi National Corporations, regarding taxes owed by that company – particularly with just acquired, or ‘merged’ with, companies – which are simply ignored because: Political hand/pocket/ambition greasing; and Too Big [Of A Swine FUNDER] To [Let] Fail.

    Meanwhile, for just one example, an actual heading towards homelessness human being, who worked all of their lives, but found it necessary to cash in their IRA/Pension early, gets fucked every which way and under with penalties they have no money left to pay, unless they forfeit a roof over their heads for going back to a college they already graduated from (with high honors), as if that is why, in their middle age, none of those Corporations will hire them. (To put it simply: If an unemployed person cashes in on their IRA/Pension/Retirement in order to simply pay, rent or mortgage, when they find themselves inexplicably jobless, despite current talent and prior degree[s], they have no Amnesty whatsoever, unless they put up thousands (but what about that rent and mortgage?) they clearly don’t have when they can no longer pay for shelter, to re-educate themselves when their education and CURRENT EXPERIENCE was not at all the problem.)

  6. Of course, WC. Because those punitive and confiscatory high rates of corporate tax have the effect of driving corporations to jump through hoops to avoid it.

    I think you are finally getting it!

  7. WC, there really are only two options here.

    Either we leave the law as it is and these corporations leave their cash overseas, which does the US no good at all.

    Or we offer them a deal whereby they repatriate at a blended rate, and we get the tax revenues and the nations gets the benefit of the reinvestment of those funds.

    Looks like a no-brainer to me.

  8. Tax amnesties are grants from other taxpayers to shareholders of a few companies with large amounts to repatriate. To what utility? You just encourage all companies to pursue the strategies and wait for the apparently inevitable repetition of holiday and attendant windfall.

  9. And yet, the US raises a smaller percentage of GDP from corporate taxes than any other large OECD country except Germany.

  10. My comment addressed only the specific reference to corporations “hiding” their cash. In fact the money is there in plain sight and there is no hiding.

    The issue is more to do with unintended consequences of US tax law. I happen to think the best solution is tor educe the rate of corporate tax but, failing that, a repatriation holidays seems reasonable to me. It will bring money and investment back to the US, and provide for some new revenues.

  11. (very sorry for all that bolding editors, I had intended to end that bolding after the word “I” in the first sentence. Also sorry for the topic diversion, had only intended to post that very short comment and link before that back and forth with Sam.)

  12. No Sam, I did no such thing, this was my exact post:

    Uuugh, and Speaking of scandalous California politician’s, this certainly needs more exposure:

    Press Statement: Boxer-Paul Repatriation Proposal Would Reward Corporate Tax Scofflaws

    And this is the piece the above link clicks to

    Following is a statement by Robert McIntyre, director of Citizens for Tax Justice, regarding the announcement by U.S. Senators Barbara Boxer (D-CA) and Rand Paul (R-KY) of a proposed “repatriation holiday” that would reward companies currently holding large amount of cash in foreign countries, including tax havens.

    “A repatriation tax holiday was a bad idea when Congress last enacted one in 2004. The only difference now is that it’s a bad idea with a track record. The plan would reward companies that have hidden their U.S. profits in offshore tax havens by letting them pay a 6.5 percent tax rate on those profits, less than a quarter of the 35 percent tax rate that should apply.

    “Sens. Boxer and Paul say their tax holiday will help pay for transportation infrastructure. But it’s ludicrous to argue that a tax holiday can be used to pay for anything since repatriation holidays don’t raise revenue—they lose it. The Joint Committee on Taxation has consistently found that repatriation holidays raise some revenue in the very short term, but lose revenue over the long term.

    “If Congress acts on the Boxer-Paul plan, the next sensible step for big multinationals will be to shift even more profits offshore on paper and wait for Congress to enact the next tax holiday. At a time when Congress should be taking steps to discourage corporations from hiding their profits in offshore tax havens, the Boxer-Paul plan would give these companies an incentive to stash even more profits abroad.”

    See CTJ’s report on the pitfalls of repatriation tax holidays for more information.

    On that note I’m done with you, since it appears you’re a Gate Keeper for stunningly overflowing Bay Area Multinational Corporate Coffers (while thousands are being pushed into extreme austerity, and homelessness) who delights in misquoting and slander. I’ll bet you have great fun, on heavily commented posts, misquoting/[lying] about what others have written; banking on the fact that most people won’t bother, or don’t have the time, to trace through old comments to verify your claims.

  13. Anon, I stand by my comment. You stated that US multinationals were “hiding money”. That is a lie because the money is not hidden at all. It’s in the accounts and everyone knows how much it is and where it is.

    The real problem here s twofold:

    1) The US has the highest rate of corporate tax in the western world, and

    2) We the people have continually elected politicians who think it is unfair to tax overseas profits.

    Your problem is not with the corporations, who are doing nothing illegal. Your problem is with the tax rules that encourage corporations not to repatriate overseas profits.

    So run for office and get the law changed.

  14. Sam,

    Re your comment:

    It’s a lie that companies have “hidden their U.S. profits in offshore tax havens” (as the biased article you cited claims).

    Yeah Sam, sure it is. Guess that’s why that scandalous repatriation is even being pushed? Multinational Corporations, via loopholes legalized by their Tax Attorneys and Political Scoundrels have thoroughly bastardized what qualifies as to where a profit can be attributed to and are paying far less into Income Tax Coffers than ever; compared to average citizens, and there is bi-partisan agreement on that ugly fact.

    Yeah Sam, Robert McIntyre (the author of Press Statement: Boxer-Paul Repatriation Proposal Would Reward Corporate Tax Scofflaws), with decades of tax Law background, hearings in Congress, and hundreds of respected Tax Law publications, is just a liar who is just confused about the tax theories and regulations behind Waters Edge filings:

    Robert S. McIntyre is director of Citizens for Tax Justice. CTJ is a nonpartisan research and advocacy group that fights for tax fairness—at the federal, state and local levels. Widely respected on Capitol Hill as “the average taxpayer’s voice in Washington,” CTJ was ranked at the top of the Washington Monthly’s list of America’s “best public interest groups.”

    Since he began his career in tax reform in 1976, Bob has written hundreds of articles on tax policy issues, in publications like the Washington Post, the New York Times, the New Republic, and academic journals. He also frequently appears on television and radio programs, and is a contributing editor at The American Prospect, where he wrote a column, “The Taxonomist,” from 2000 through 2006. Bob often advises government officials on tax policy, both informally and in written testimony.

    Profiles of Bob have appeared in The Wall Street Journal (May 2, 1985), Student Lawyer (Dec. 1985), National Journal (May 3, 1986), The National Law Journal (July 7, 1986), Smart Money (1995), The New York Times (May 21, 2001) (which called his analytical work “indispensable”), The Attleboro Sun (Sept. 27, 2004) and The Hill (Oct. 5, 2004).

    CTJ’s analyses of tax proposals are cited regularly in the media and by legislators and candidates in both parties. For example, in the mid-1980s, Bob’s detailed reports on corporate tax avoidance are credited with providing the spark for the bipartisan, loophole-closing Tax Reform Act of 1986. The Washington Post said that the studies represented a “key turning point” that “had the effect of touching a spark to kindling” (June 29, 1986) and “helped to raise public ire against corporate tax evaders” (July 18, 1986). The Wall Street Journal (July 18, 1986) said that the studies “helped propel the tax-overhaul effort.” CTJ’s most recent corporate tax study, Corporate Income Taxes in the Bush Years, was published in September 2004.

    [ Source: Robert McIntyre Wins Award for Outstanding Public Interest Work ]

  15. Tim, very well done, please please more investigatory articles like this one !!
    You have out done yourself on this one.

  16. Yes, Gary, but my point is that if the city tried doing that with any frequency, then the shuttles would just stop elsewhere and/or pay private property owners for the right to stop on private property instead.

    So it would be self-defeating for the city to try and price gouge here.

    Anyway it is all moot since the city and the shuttles have reached an accommodation, so the question of fines does not arise.

  17. Funny how buried at the end of this ominous-sounding, conspiratorial article is the fact that Campos raised $121,753 while running for DCCC.

    Reading between the lines, that’s apparently more than a third of the total raised by all of David Campos, David Chiu, Eric Mar, Cohen, and Wiener.

    So I guess the progressives also know full well {spooky tone} “how the game is played.”

  18. It may work out that they wind up with more centralized pickup system; that’s why the city is doing a pilot study to collect some orderly information as opposed to anecdotes.

    The thing is that many people want to come up with the best possible solution for all involved as they try to get to their jobs; not everyone starts with the objective of punishing the “Google brats”.

  19. The city cannot charge the tech shuttles anything for merely using the city streets, which are free for all vehicles.

    The question of a charge was only for using Muni stops. Clearly if the cost of doing that were excessive, the tech shuttles would arrange to stop at private locations instead, as the UCSF shuttles already do in some cases.

  20. Not to mention the stupidity of anyone not believing that removing Olague from the Planning Commission was the real objective.

    The cynicism and audacity of these people is disturbing.

  21. There is no state law that prevents SF from ticketing these busses into a more orderly, SF-friendly route/stop plan. Let the Google brats get on public transit to Google bus hubs, like Glen Park Bart, CalTrain, etc.

    It’s a bus – not a taxi or shuttle.

  22. Jordan was just a one-term mayor. If that is failing then Agnos failed as well, and of course Agnos was beaten by Jordan, who was then beaten by Brown.

  23. It’s a lie that companies have “hidden their U.S. profits in offshore tax havens” (as the biased article you cited claims).

    In fact those monies are not hidden at all, but fully declared and are available to see in corporate accounts and reports.

    Your beef is with the concept that we have a “water’s edge” system of taxation. But that was forced on us by the courts, as California discovered when it tried to tax foreign corporations that did business here on their world-wide earnings.

    You can’t have it both ways.

  24. I felt that Frank Jordan as Mayor qualified for a hostile takeover and we all remember how well that turned out.

  25. This goes a long way to explain the corruption of the DCCC. The wonder is that it managed to endorse, over Wiener’s objections, the collection of back taxes from Airbnb. Maybe some of them figure the fix is already in.

    It’s odd that campaign finance hawks missed the 2012 amendment that allows this to happen.

  26. Larry, You fail to mention the “fear factor”. Conway’s negative campaign money helped take down Sup. Christine Olague and stop David Campos. http://www.sfbg.com/politics/2012/11/02/billionaire-attack-d5

    Other supervisors know they could face the same treatment and fall in line quickly. This helps explain the votes on last fall’s Airbnb legislation. Yes, there has been a hostile takeover, and it has many dimensions.

  27. Thank goodness the defunct Bay Guardian sucked up to Weener, putting on forums at the gay center about transit issues with him getting another platform to appear moderate, and then endorsing his reelection campaign in the last issue. All that Weener sucking did nothing to save the paper. When he officially runs for state senate. he can tout having charmed the fools at the Bay Guardian.

  28. Yep. It’s not an accident that you had to go so many paragraphs into the article, after much discussion of SF moderates, to finally see David Campos’s name carefully buried in there. A donation of $5K that Campos received from an individual would still be over the limit for a state assembly race, as far as I can see.

  29. So looking forward to your copying the state law that determines our policies on his stops and who can usevyhem. I would like to hand it to the traffic officer the next time I stop in a bid zone.

  30. Look, “giving a minimal cost to google buses” was a function of state law, sorry. To get around that state law Google wrote a $6.8 million dollar check to provide free fares for low income youth for 2 years.

    So maybe it isn’t that “Sadly, too many people fail to see the connection between these actions”, perhaps many people are just better informed than you are.

  31. Debra Walker did the exact thing you are describing in the article but no mention of her bc she, like you, are a progressive partisan.

  32. I don’t think I can remember a time in the past 40 years when San Francisco faced the political equivalent of a hostile take-over. We have had lots of political divisions, and even bitter disagreements. But as a general thread to this dynamic, there has never been an effort to change San Francisco itself. Yet that is what Ron Conway announced when he said “We are going to take San Francisco back” and proceeded to flood political money into the pockets of officeholders and candidates. Tim identifies one route: DCCC contributions that far exceed the $500 limit on contributions to city office campaigns. But it also takes place by stuffing a mayor’s wallet for a trip to Paris, or plonking down $1 million at the mayor’s request to make up the deficit caused by exceedingly poor negotiations with Larry Ellison over the America’s Cup, or filling the coffers of a committee established to bundle money under the auspices of the mayor and in any amount from any source.

    Sadly, too many people fail to see the connection between these actions and the decision of raise parking fees while giving a minimal cost to google buses, or that hit homeowners with high fees for modest retrofits while letting the Academy of Art skate on code requirements, or offering up the fragile Coit Tower mural room for private dinner parties of the mayor’s backers while raising fees for something as simple as reserving a picnic spot in a city park.

    It’s not a conspiracy; it is a strategy, and it is working well for them.

  33. Golinger is known for getting upset when politicians exploit and take advantage of loopholes to advance their cause.

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