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October 24, 2013
Dan Morain: Prop. 32 money trail leads to Koch brothers

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(Oct. 24) Tony Russo and Jeff Miller cooked up a grand idea. To carry it off, they needed money, lots of it.

For the same reason Willie Sutton visited banks, Russo and Miller went to the network controlled by David and Charles Koch. That's where the money is. The billionaire industrialist brothers fund many of the most conservative organizations and campaigns, especially if they are aimed at unions.

In 2011, Russo and Miller were looking for a project for the 2012 election and conjured up a plan they called the California Comeback. The goal was break labor's ability to raise campaign money.

To carry it out, Russo and Miller tapped donors in California but also enlisted the aid of anti-union organizations and individuals in Virginia, Iowa and Arizona that were part of what they called the Koch network.

Details of their plan became public Thursday when the California Fair Political Practices Commission and attorney general settled a yearlong investigation into the source of a mystery $11 million contribution last October to boost Proposition 32, the failed 2012 initiative that sought to restrict labor's ability to raise campaign money.

California authorities levied $500,000 fines on the Center to Protect Patient Rights and Americans for Responsible Leadership, both in Arizona and both part of the Koch brothers' network.

Outgoing FPPC Chairwoman Ann Ravel said she does not know whether the Koch brothers actually spent money in California. State and federal law protects the identities of donors to such groups. But in his deposition given in July, Russo said he was convinced that he was dealing with the Koch network.

"We thought we were dealing with the Koch network," Russo said under questioning by attorneys from the FPPC and the attorney general's office. "I mean, availability of funds never crossed our mind."

Russo, no neophyte, has worked for the Irvine Company, the major Orange County landowner, and consulted for the California Chamber of Commerce and Business Roundtable. He's now a consultant in Sacramento.

Miller is one of the most prolific Republican fundraisers in California, though he has moved to Austin, Texas, where he helps Texas Gov. Rick Perry raise money and lure California companies to the Lone Star state.

Russo told the lawyers that a donor to the Koch organizations introduced him to Sean Noble, the Koch's "outside consultant."

The point was made clear in the California Comeback, the brochure Miller and Russo handed to potential donors. "A real impact on unions," one of the pages says. It identifies states including Wisconsin that approved laws similar to Proposition 32 and cited the results, including massive drops in union donations and membership.

Noble was "very favorable" and thought the Koch network would be interested in helping fund a campaign similar to the one in Wisconsin, where Gov. Scott Walker attacked public-employee unions and withstood a recall, Russo said.

The FPPC released a rather chatty email from an apparent friend of Charles Koch, although the sender's name is redacted. Dated Oct. 11, 2012, the email cc'd Russo and Miller and told Charles "it would be great if you could support the final effort with several million."

"I must tell you that Sean Noble from your group has been immensely helpful in our efforts," the email says. "I look forward to seeing you on the golf course - probably after the election."

It might have worked out, except for what Russo called a "hiccup."

Russo and Miller had assured their donors that the law would permit them to remain confidential. They looked for help to groups outside California, assuming "nobody in California would want to do this ... because of all the risk involved with the unions."

The partners had raised $28 million and funneled it to a Virginia nonprofit, Americans for Job Security. The group would air television ads supporting the concept of restricting campaign fundraising by unions. But shortly before the 2012 election, Americans for Job Security concluded that it could not legally spend the money in California without disclosing the donors' identities.

The Virginia group donated $24 million to Noble's Center to Protect Patient Rights in Arizona. The center gave $7 million to American Future Fund in Iowa, which created California Future Fund, which spent $4 million on a California ad blitz in support of Proposition 32.

The Center to Protect Patient Rights then gave $13 million to another Arizona group, Americans for Responsible Leadership, which gave $11 million to the California committee established to promote Proposition 32, the Small Business Action Committee.

That's when FPPC sued, demanding to know the source of the money. The case is not quite over. The FPPC is demanding that Small Business Action pay the state $11 million, and that California Future Fund pay $4 million. The groups probably will avoid paying by ceasing to exist and fading into the woodwork. Such is the way of campaign money in 2013.

Follow Dan Morain on Twitter @DanielMorain.

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