Stung! Political Nonprofits in California under FBI Investigation

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November 16, 2013; Los Angeles Times

This is a useful case study of the difference between someone fleecing money from a nonprofit and someone using a nonprofit to fleece money from the public and taxpayers.

In California, the federal government is investigating state Senator Ronald Calderon on a number of charges of bribery—including, according to L.A. Times writer Patrick McGreevy, that he “tried to hide a $25,000 bribe in a charity run by his brother.” In this case, Calderon was stung by an undercover FBI agent. Allegedly, he accepted $60,000 from the agent posing as a film studio executive looking for expanded tax breaks. Twenty-five thousand of the $60,000 would be paid to the nonprofit Californians for Diversity, run by the senator’s brother, Assemblyman Tom Calderon. The senator allegedly told the undercover agent, “Then Tom and I down the road, we build that up, we can pay ourselves…. Just kind of make, you know, part of [a] living.”

The concern of some is that a number of nonprofits have been created by California politicians who can “collect cash out of public view.” According to Loyola Law School elections law professor Jessica Levinson, these political nonprofits are “a huge loophole” around campaign finance laws.

In addition to the alleged bribe from the undercover agent, Senator Calderon received another $25,000 from “Yes We Can,” a political committee of the California Legislative Latino Caucus, which was allegedly arranged by state senator Kevin de Leon, according to the FBI affidavit, “in exchange for Ronald Calderon agreeing not to challenge Senator [Ricardo] Lara to become the Chairman of the Latino Caucus.” The Calderons’ nonprofit hasn’t done much other than pay for travel and entertainment, plus a little to Tom Calderon as compensation and some contract money to Calderon’s consulting firm.

To be fair to the Calderons, they are hardly the only California pols with their own family-affiliated, if not family-run, nonprofits. For example, former Assemblyman Tony Mendoza gave up his position as chairman of the California Latino Legislative Caucus in February 2012, but not before during his last week in office that the caucus foundation was able donate $22,000 to the nonprofit Southern California LEAD Foundation, founded by Mendoza’s wife. The nonprofit Progress California was formed by assemblyman Isadore Hall III ostensibly to address obesity and diabetes (partly by distributing free turkeys in his district), but only $14,000 of the $51,000 Progress California raised went to food giveaways last year. Hall chairs the assembly committee that oversees billboard issues and gambling issues, making the presence of billboard company owner Mark Kudler and Commerce Casino CEO Haig Papaian on the nonprofit’s board suspicious.

You don’t need an FBI sting to figure out what many politicians are doing with nonprofits they or their primary family members or top campaign aides established and operate. Nonprofit Quarterly has been studiously revealing the pernicious roles of political nonprofits for several years, with groundbreaking investigations of charities associates with federal legislators such as Tom DeLay, John McCain, and Rick Santorum (here and here) and state and local legislators in several states.

While Congress has tightened some of the rules concerning charitable contributions by registered lobbyists, political 501(c)(3)s continue to exist, take donations from sources connected to the legislators’ own purviews, hide donations under (c)(3) confidentiality, report only the vaguest kinds of categories of expenditures on their Form 990s, and use the nonprofits as venues for off-the-record, undisclosed meetings between legislators and special interests looking for political facetime. FBI stings to the contrary, political nonprofits, if they should be permitted to exist at all, should have to disclose all donations above a de minimis level. Perhaps more should be done. But they virtually scream for scrutiny and oversight. –Rick Cohen