Newsom's $300,000 problem
Mayor's inaugural fundraising may have been illegal

By Steven T. Jones

Much has been made over the last two months about the destruction of a document that seemed to show an intent to misuse unregulated money raised by Mayor Gavin Newsom's swearing-in committee (see "Newsom's Funny Money," 2/11/04). But there's another, potentially more dramatic problem here: the committee may have been illegal in the first place, and at least one San Francisco Ethics Commission staffer has argued Newsom should forfeit the more than $300,000 the committee raised.

At issue is a section of the City Charter titled "Prohibition on Multiple Campaign Accounts," which San Francisco voters enacted in November 1993 by approving Proposition X. It reads, "An officer of the City and County of San Francisco, or any person or committee on behalf of an officer of the City and County of San Francisco, is hereby prohibited from establishing any account, other than a campaign fund, for the solicitation and expenditure of funds."

Prop. X was aimed at so-called friends committees, accounts city officials would fill with large corporate donations and use for "non-campaign purposes," according to the ballot analysis at the time. Among the uses the measure sought to ban were "advertising, entertaining, parties, and mailings."

Newsom's 2004 Swearing-In Committee, a nonprofit established under state law to receive "payments made at the behest of an elected officer," took in corporate donations of up to $20,000 each, spent money on non-campaign purposes, and wasn't required to disclose its expenditures to political regulators.

Neither the Ethics Commission nor the City Attorney's Office has ever issued a written opinion on the legality of such committees in San Francisco, although Mabel Ng, the acting Ethics director, told the Bay Guardian she doesn't believe Prop. X bans inaugural committees. She said she may have told that to representatives of Jim Sutton, the attorney for both Newsom committees.

"There is no opinion issued on whether or not that section applies to inaugural committees," Ng said. "But historically speaking, it hasn't been applied to inaugural committees. It hasn't come up until now."

Sutton and Ng base their argument on a 1994 opinion by the Fair Political Practices Commission, which concluded that inaugural committees aren't created for a political purpose and therefore aren't regulated by the California Political Reform Act. It doesn't discuss whether cities may ban such committees.

"The Ethics Commission has always advised that the provision does not prevent a nonprofit for swearing-in and transition purposes, following the lead of the FPPC and IRS," Sutton told us.

Yet the Ethics Commission has not weighed in on the matter, and even its staff is divided on the question. Under a Sunshine Ordinance request, we obtained a pair of Feb. 17 letters written by attorney and fines collection officer Oliver Luby to Newsom and former mayor Willie Brown ordering the forfeiture of funds collected by their inaugural committees in excess of the $500 campaign contribution limit. For Brown, that totaled $500,900, and for Newsom, $301,525.

Those letters were blocked from being sent out by Ng and departing director Ginny Vida because they disagreed with Luby's legal interpretation. Yet several legal and political sources contacted by us agreed that Prop. X bans inaugural committees, particularly those connected to a candidate who raises money beyond contributions limits. Those experts also said, however, that the lack of prior notice would probably prevent Newsom from having to return the money and face fines.

"[Prop. X has] pretty broad language, and it certainly could be used to apply to these funds," said Bob Stern of the Center for Governmental Studies, who helped write the CPRA. "It would be difficult to apply it retroactively, since no one has raised this before."

The Mayor's Office wouldn't comment on the matter, just as it has refused to comment on the destruction of the document or what it revealed. Ng said the matter does need clarification, but because of workload issues, she doesn't plan to bring it before the commission or the City Attorney's Office anytime soon.

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