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GARY S. WINUK, SBN 190313 Chief of Enforcement FAIR POLITICAL PRACTICES COMMISSION 2 428 J Street, Suite 620 Sacramento, CA 95814 3 Telephone: (916) 322-5660 Facsimile: (916)322-1932

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KAMALA D. HARRIS

5 Attorney General of California PETER A. KRAUSE 6 Supervising Deputy Attorney General GEORGE WATERS

7 Deputy Attomey General State Bar No. 88295 8 nOOIStreet, Suite 125 9 10 11

P.O. Box 944255 Sacramento, CA 94244-2550 Telephone: (916) 323-8050 Fax:(916)324-8835 E-mail: George.Waters(a),doi.ca.gov

for Petitioner FAIR POLITICAL 12 Attomeys PRACTICES COMMISSION

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IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SACRAMENTO

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FAIR POLITICAL PRACTICES COMMISSION, a] State Agency

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF APPLICATION FOR PRELIMINARY INJUNCTION

Petitioner, vs. AMERICANS FOR RESPONSIBLE LEADERSHIP, an Arizona Non-profit Corporation, Respondent.

No.

EXEMPT FROM FILING FEES (Gov. Code Sec. 6103)

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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF APPLICATION FOR OSC RE: PRELIMINARY INJUNCTION

INTRODUCTION

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Petitioner the Fair Political Practices Commission ("Petitioner") is primarily responsible for

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enforcing the Political Reform Act of 1974 fotmd at Govemment Code sections 81000 through 91014

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(hereafter the "Act"), The Act, and its accompanying regulations found in Title 2 of the Califomia Code

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of Regulations, place various reporting requirements on those who contribute and expend money to

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advocate for or against ballot measures. These reporting requirements are intended to ensure that voters

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have access to infonnation about who is behind campaigns to support or oppose ballot measures. The

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Act also empowers Petitioner to perform audits and investigations to determine whether persons or

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organizations are violating the Act.

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Respondent Americans for Responsible Leadership ("Respondent") refused to comply with

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Petitioner's effort to audit Respondent's records in relation to an $11,000,000 contribution made by

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Respondent to a Califomia campaign committee opposing one initiative on the General Election ballot

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and supporting another. This $11 million contribution is toward two initiatives that will appear on the

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November 6 general election ballot. Petitioner seeks immediate action conceming this contribution to

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ensure that disclosure laws are complied with before the November 6 election.

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FACTS Respondent is an Arizona non-profit corporation.

In the past, Respondent's campaign

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contributions have been for campaigns in Arizona. There is no record of Respondent making

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contributions in the State of Califomia prior to the contribution in question here. On or about October

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15, 2012, Respondent made a contribution of $11,000,000 to Small Business Action Committee PAC, a

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recipient committee organized under the Act, for the purposes of opposing Proposition 30 and

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supporting Proposition 32, which are initiatives on the November 2012 General Election ballot. Small

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Business Action Committee PAC reported the $11,000,000 contribution from Respondent on a Late

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Contribution Report (Form 497) filed with the Office of the Secretary of State on October 16, 2012.

26 27 28 1 All further statutory references are to the Governinent Code unless otherwise indicated. 2 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF APPLICATION FOR OSC RE: PRELIMINARY INJUNCTION

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Due to the large sum of Respondent's contribution and lack of prior contributions to Califomia

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campaign committees. Petitioner commenced an audit of Respondent's records related to the

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contribution to review whether the reporting of the contribution was done in accordance with the

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requirements of the Act. Petitioner contacted Respondent on October 22, 2012 via e-mail to request

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records regarding the source(s) of the $11,000,000 that made up the contribution to SmaU Business

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Action Committee PAC. On October 23, 2012, Petitioner sent Respondent a formal letter requesting

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that Respondent cooperate with Petitioner's discretionary audit and produce records that Respondent

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was required to maintain related to the contribution. Due to the imminent public harm of potentially not

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publicly disclosing the source of one of the single largest contributions in the 2012 election season

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before the election occurred on November 6, 2012, Petitioner requested the records for the contribution

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be provided no later than close ofbusiness, Eastem Standard Time, on October 24,2012. These records

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should have been easily available for production, as the contribution was made only a single week

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before the request for records by the Petitioner. Respondent did not produce the records within the

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requested time period.

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ARGUMENTS A. Petitioner's Authority to Seek Injunctive Relief

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In addition to levying administrative fines. Petitioner may enforce the Act by obtaining a civil

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injunction compelling a party to comply with any provision of the Act. Section 91003, subdivision (a)

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states:

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Any person residing in the jurisdiction may sue for injunctive relief to enjoin violations or to compel compliance with the provisions of this title. The court may in its discretion require any plaintiff other than the Commission to file a complaint with the Commission prior to seeking injunctive relief The court may award to plaintiff or defendant who prevails his costs of litigation, including reasonable attomey's fees.

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Petitioner is considered a "person" under the Act. (See Section 82047 and Fair Political

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Practices Commission v. Suitt (1979) 90 Cal. App. 3"* 125, 133.) "Jurisdiction" means the state with

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respect to a state agency. (Section 82035.) Based on these definitions. Section 91003 applies to the

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Petitioner as well as to individuals.

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B. Standard for Issuing a Preliminary Injunction


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Generally, in determining whether to issue a preliminary injunction, courts weigh two

2 interrelated factors: (1) the likelihood the moving party will ultimately prevail on the merits; and (2) the 3 relative interim harm to the parties from the issuance or nonissuance of the injunction. {Hunt v. 4 Superior Court (1999) 21 Cal. 4'*' 984 at 999.) But in cases involving a govemment entity seeking to 5 enjoin a defendant from violating a law where the law specifically provides authority to seek injunctive 6 relief to enforce the law, the defendant has the burden of proving it will sufifer irreparable harm if the 7 court issues an injunction. (JT Corporation v. County of Imperial (1983) 35 Cal. 3d 63 (hereafter "/7 8 Corporation ").) The Califomia Supreme Court ruled in IT Corporation that: 9 10 11 12

Where a govemment entity seeking to enjoin the alleged violation of an ordinance which specifically provides for injunctive relief establishes that it is reasonably probable it will prevail on the merits, a rebuttable presumption arises that the potential harm to the public outweighs the potential harm to the defendant. I f the defendant shows that it would suffer grave or irreparable harm from the issuance of the preliminary injunction, the court must then examine the relative actual harm to the parties.

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Once the defendant has made such a showing, an injunction should issue only i f - after consideration of both (1) the degree of certainty of the outcome on the merits, and (2) the consequences to each of the parties of granting or denying interim relief - the trial court concludes that an injunction is proper. {Id. at 72.)

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C. Respondent's Violation of the Law Section 90003 provides that Petitioner may conduct an audit or investigation with regard to any reports or statements required by the Act. Specifically it provides that:

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In addition to the audits and investigations required by Section 90001, the Franchise Tax Board and the commission may make investigations and audits with respect to any reports or statements required by Chapter 4 (commencing with Section 84100), Chapter 5 (conimencing with Section 85100), or Chapter 6 (commencing with Section 86100).

24 Tax exempt organization receives a donation and the donor "requests or knows that the payment

25 will be used by the organization to make a contribution or an independent expenditure to support or

26 oppose a candidate or ballot measure in California, the full amoimt of the donor's payment shall be

27 disclosed by the organization as a contribution." Further, once such an organization solicits emd receives

28 contributions totaling $1,000 it becomes a committee under the Act and is then subject to the reporting

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF APPLICATION FOR OSC RE: PRELIMfNARY INJUNCTION

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requirements of the Act. Regulation section 18412, subdivision (d) provides that an organization must

2 retain all records necessary to establish its compliance with Regulation section 18412, subdivision (b) 3 Specifically it provides that: 4 5 6 7 8 9 10 11 12 13

(a) Application. This regulation establishes rules goveming organizations that are formed and operate as tax exempt organizations under Intemal Revenue Code Sections 501(c)(3), 501(c)(4), 501(c)(5), and 501(c)(6), as well as federal or out-of-state political organizations, which make contributions or independent expenditures totaling $1,000 or more from their general treasuries to support or oppose a candidate or ballot measure in California, and report the sources of the funds used to make those contributions or independent expenditures as required by Regulation 18215(b)(l). (b) If a donor to such an organization requests or knows that the payment will be used by the organization to make a contribution or an independent expenditure to support or oppose a candidate or ballot measure in Califomia, the full amount of the donor's payment shall be disclosed by the organization as a contribution. For purposes of this regulation, a donor "knows" that a payment will be used to make a contribution or an independent expenditure if a donor makes a payment in response to a message or a solicitation indicating the organization's intent to make a contribution or independent expenditure. Ari organization that

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solicits and receives contributions totaling $1,000 or more becomes a committee pursuant to Section 82013(a). (d) The organization shall maintain all records necessary to establish its compliance with subdivisions (b) and (c).

17 18 Due to the circumstances surrounding the $11,000,000 contribution. Petitioner seeks to verify

19 that the reporting related to the contribution was done in accordance with the Act. Specifically, the size

20 of the contribution and the fact that it was made to a Califomia campaign committee give rise to

21 Petitioner seeking to review the records related to it and ensure compliance with the Act's reporting

22 provisions. The Respondent, in its campaign disclosure filings with the Arizona Secretary of State for

23 the period covering August- September 2012, reports no contribution over $500,000. Additionally, the

24 Respondent reports no previous campaign activity in Califomia with the Califomia Secretary of State.

25 Although Petitioner draws no conclusions from these circumstances, and under the Act does not need

26 any justification to audit campaign records related to reporting obligations, these circumstances and the

27 pending imminent election date required immediate action. For this reason. Petitioner sought to audit

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those records related to the $11,000,000 confribution to determine Respondent's reporting obligations

2 under the Act. 3

For example, if Respondent solicited the contribution from a donor(s), then Respondent would

4 become a recipient conmiittee under Section 82013 and be required to disclose these donor(s) before the 5 election under Section 84202.5.

Similarly, if Respondent "earmarked" the contribution for the

6 Califomia campaign committee that received it, Respondent would be required to inform the recipient 7 committee of the "earmarking" and the recipient conimittee would be required to disclose the donor(s) 8 before the election under Section 84302 . 9

Respondent has failed to comply wdth Petitioner's request for records, thereby preventing

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Petitioner from conducting its audit, and potentially preventing the public from leaming the tme source

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of this contribution if the Act's reporting requirements were not followed.

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For these reasons, Petitioner is likely to prevail on the merits of the case. Thus Respondent has

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the burden of proving it will suffer irreparable harm from the issuance of a preliminary injunction

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Petitioner's contend there will be no harm to Respondent in tuming over records that it is legally

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obligated to provide to Petitioner. If Respondent has complied with the Act, then the Act's provisions

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are fulfilled and proper reporting has/will occur. Conversely, Petitioner will suffer irreparable harm if a

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preliminary injunction is not issued because it has no adequate remedy at law or through administrative

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action for the injuries currently being suffered because it must have the information sought before the

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election for it to have any value. Any action in law or adminisfrative action would not be sufficient

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because it would not compel Respondent to comply wdth the law in time for the General Election,

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thereby denying Petitioner and potentially voters the information sought and subverting the intent ofthe

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law requiring disclosure of campaign contributions and expenditures.

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CONCLUSION Respondent's refusal to cooperate with Petitioner's audit is a clear violation of the law. Because the records sought by Petitioner may be highly relevant to the upcoming election, it is imperative that

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Respondent be ordered to produce the records inimediately in order to avoid irreparable harm to

2 Petitioner and the voters of Califomia. 3 4

Date: _October^, 2012

Respectfully submitted,

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GARY S. WINUK Chief of Enforcement Fair Political Practices Commission KAMALA D. HARRIS Attomey General of Califomia PETER A. KRAUSE Supervising Deputy Attomey General GEORGE WATERS Deputy Attomey General Attomeys for Petitioner FAIR POLITICAL PRACTICES COMMISSION

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MEMORANDUM OF POJNTS AND AUTHORITIES IN SUPPORT OF APPLICATION FOR OSC RE: PRELIMINARY INJUNCTION