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.