Corporations buy influence using big donations and sneaky tactics
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The upcoming election hasn't generated much voter interest, with only a couple of measures that seem likely to have an impact. But corporate interests in San Francisco and beyond are still spending big money in ways that are secretive, suspicious, and sometimes contradictory to influence the election and win the gratitude of elected officials.
Although the final preelection campaign statements were due Oct. 25, the money continues to roll in. And perhaps most ominously, many campaign committees are spending far more than they are taking in, effectively using this accrued debt to hide contributors until after the election.
And almost invariably, the person at the center of such schemes who facilitates the most creative and unsettling spending by downtown political interests is notorious campaign finance attorney Jim Sutton, who also serves as Mayor Gavin Newsom's treasurer (and didn't return our calls for comment by press time).
Political donations are supposed to be transparent and reflect popular support for some campaign. But once again, this election is showing the disproportionate influence that corporations have on local politics and the difficulties faced in trying to accurately trace that influence.
There are "No on K" billboards all over San Francisco, showing a giant image of a man's empty pocket alongside the dubious claim that "Proposition K will cut $20 million from Muni." The signs were created and funded by Clear Channel Outdoor.
Prop. K is an advisory measure that the Board of Supervisors placed on the ballot this fall to ask whether voters want to restrict advertising on public spaces like bus stops. But it was aimed at Clear Channel Outdoor's contract to maintain 1,100 city bus shelters and sell advertising on them, which was approved by the Board of Supervisors on Oct. 23. In exchange, the CCO agreed to pay the Metropolitan Transportation Authority $5 million annually, plus 45 percent of its annual revenues from shelter ad revenues.
Nonetheless, the measure would put city voters on record as opposing the CCO's basic business model, so the company fought back. The "No on K Citizens to Protect Muni Services" filing suggests that there is no citizen involvement in the No on K campaign. So far, No on K has only received donations from Clear Channel Outdoor, including $120,000 in cash and $55,750 in in-kind contributions of radio time and ad space.
Maybe Clear Channel really is trying to help Muni get more money, rather than pad its own profits. After all, its parent corporation, Clear Channel International, donated $20,000 to support Muni reform measure Proposition A authored by Board of Supervisors president Aaron Peskin on Oct. 15, just days before Clear Channel Outdoor won its big bus transit deal with the city.
Yet following the corporate money even further makes it clear that altruism isn't what motivates corporate spending. No on K also benefited from independent expenditures by the San Francisco Chamber of Commerce 21st Century Committee, a general-purpose committee created in 1999, which received major funding this year from the Gap ($10,000), Pacific Gas and Electric Co. ($7,500), Bechtel ($5,000), Catholic Healthcare West ($5,000), and Clear Channel Outdoor ($1,000).
The 21st Century Committee also spent $716 for newspaper ads opposing Prop. A, which would net the MTA at least $26 million per year from the city's General Fund. Sutton a former chair of the California Republican Party and his associates effectively control the 21st Century Committee, which is also helping Newsom, his top client, avoid facing the Board of Supervisors in public. The committee has made independent expenditures opposing Proposition E, a charter amendment that would require the mayor to make monthly appearances before the board, something voters approved last year as an advisory measure. According to Newsom spokesperson Nathan Ballard, defeating that measure is the mayor's top priority this election.
"I think he's focused on his own race and also Question Time. There's where he's spending his resources," Ballard said when asked why Newsom isn't campaigning or fundraising for the Yes on A and No on H campaigns, even though he supports those positions.
The 21st Century Committee has also made independent expenditures in support of Proposition C (which would require public hearings for measures that the board or the mayor places on the ballot), Proposition H (see "Transit or Traffic," page 18), Proposition I (which would establish an Office of Small Business), and Proposition J (Newsom's wireless Internet advisory measure).
Each of these ballot measures has a committee dedicated to raising funds, but as of Oct. 25, only the Small Business Campaign (Yes on C) appeared to have no outstanding debts, or accrued funds, as they are called in campaign finance circles. Maybe that's because the Small Business Campaign got $10,000 from the 21st Century Committee, $5,000 from PG&E, $2,500 from AT&T, $8,500 from the SF Small Business Advocates, and $1,000 from the Building Owners and Manufacturers Association of San Francisco's political action committee.
Yes on C also got a $7,500 contribution from the Committee on Jobs Government Reform Fund, which has ties to Clear Channel, the MTA, and efforts to influence local transportation policy. Records show that on Nov. 4, 2005 just before the election the Committee on Jobs Government Reform Fund reported a $6,900 "loan" for radio airtime and production costs from Clear Channel to help defeat a measure that would have split the MTA appointments between the mayor and the Board of Supervisors.
Fast-forward to Oct. 3 of this year, when the Committee on Jobs, which reported its "loan" as accrued funds for almost two years, reported that this debt has now been forgiven. Which is odd, given that, as of Oct. 25, the Committee on Jobs had a cash balance of $778,000 and had just received $35,000 from financier and Committee on Jobs board member Warren Hellman, $35,000 from AT&T, and $50,000 from the Charles Schwab Corp.
Equally interesting is the fact that the day after the Oct. 25 preelection filing deadline, the Committee on Jobs gave $25,000 to the Sutton-controlled No on E: Let's Really Work Together Coalition. Such large late contributions require a notice to Ethics that can often escape notice by the media and voters.
The donation perhaps went to help balance the committee's books; despite receiving $85,084 in monetary contributions, including $10,000 from attorney Joe Cotchett and society maven Dede Wilsey, No on E spent $110,244 before Oct. 25, leaving it with $26,610 in accrued debt.
No on E isn't the only Sutton-controlled committee whose spending has outpaced donations received: as of Oct. 25 the Yes on HNo on A pro-parking committee and Newsom's WiFi for All, Yes on J committee, not to mention the Gavin Newsom for Mayor campaign, were all registering large amounts of accrued debt.
Having these debts isn't illegal. And it's not unusual for a campaign to have a pile of unpaid bills at the time of its last preelection finance filing. But as Ethics Commission director John St. Croix told the Guardian, accrued funds "shouldn't be used to hide who your contributors are. The idea of disclosure is to let voters know ahead of elections who is trying to influence their vote."
St. Croix points to the fact that committees are required to make reports every 24 hours in the 16 days before an election "so you know what they are spending on.... But if committees don't report campaign contributions and people fundraise after the election, that could be a de facto way to hide who the contributors are."
And while Sutton has been characterized by many, including the Guardian (see "The Political Puppeteer," 2/2/04), as the dark prince of campaign finance, St. Croix says he doesn't automatically suspect something is wrong just because a campaign has a lot of accrued debt.
"But if people suspect that to be the case and they file a complaint, Ethics investigates," St. Croix said, adding that for him, "really massive accrued funds would be a red flag."
Asked what he meant by massive, St. Croix said, "It depends on the office. You might expect a lot more to accrue in a mayor's race or large campaigns that tend to do a lot of last-minute spending."
As of Oct. 25, Gavin Newsom for Mayor had received $1.1 million and spent $1.3 million, had a cash balance of $457,994 and was reporting $97,548 in accrued debt, with $46,500 owed to Storefront Political Media, the company run by Newsom's campaign manager, Eric Jaye.
Noting that Ethics' job is "to get people to file on time and chase after those who don't," St. Croix said that those who don't file and are making major expenditures right before an election are the ones who will face the biggest fines. "They could face $5,000 per violation, which could be $5,000 for every contribution that was made to finance a smear campaign and wasn't reported," he said.
The biggest fine the Ethics Commission has ever issued was $100,000 for Sutton's failure to report until after the 2002 election a late $800,000 contribution from PG&E to help defeat a public power measure.
Compared to other years, the amounts of accrued debt in this election may look small, but former Ethics commissioner Joe Lynn points to a disturbing pattern in which Sutton-controlled committees were insolvent before the election, then raised funds later or, as in the case of the Committee on Jobs, magically saw their debts forgiven.
"If I am a candidate running for mayor, like Gavin Newsom, and I personally rake up $100,000 in debt and have a big financial statement, then that means there's a creditor willing to advance me those funds," Lynn said. "But if the debt has been raked up by a ballot measure committee, then who is responsible? Why would vendors spend $10,000 for that committee unless they knew that debt was wired from the get-go?"
But the result is the same: voters don't know who donated to the campaign until after the votes have been cast. A clear historical example of this debt scheme can be seen in the June 2006 No on D Laguna Honda campaign. In its last preelection report, No on D had $59,750 in contributions, $18,664 in expenditures and $130,224 in debt.
But during the 16 days before the election, No on D suddenly got $110,000 in late contributions from the usual suspects downtown, including $2,500 from Hellman, $15,000 from Turner Construction, $10,000 from Wilsey, $2,000 from the San Francisco Chamber of Commerce, and $2,500 from the Building Owners and Manufacturers Association of San Francisco.
As Lynn explains, campaign finance laws only require disclosure of contributions, not expenditures, made in the 16 days before an election and only $64,000 worth of the contributions used to pay off No on D's accrued expenses were disclosed, with $10,000 each from the California Pacific Medical Center and Kaiser Permanente trickling in on or after Election Day.
This year campaign finance watchdogs like Lynn note that the Sutton-controlled Yes on HNo on A committee has been hiding its contributors. In its first preelection report, filed Sept. 22, Yes on H showed $113,750 in contributions, $111,376.18 in expenditures, and $69,806.98 in accrued debt.
A month later it has doubled its contributions, tripled its expenditures and had increased its accrued debt to $77,509. Lynn predicts that Yes on H's accrued debt will be paid down by late contributions after the election or forgiven later on.
"The solution to the debt scheme is twofold," Lynn said. "Prosecute people doing the scheme and pass a law prohibiting campaigns from making more expenditures than they have contributions. Technically there is nothing illegal about reporting more debt that you have the cash or contributions to pay, but no businessperson regularly offers services in situations where it isn't clear that they will be paid."
Since the Oct. 25 filing deadline, late contributions have continued to pour into No on E big-time, for a total of $59,500. That includes $25,000 from the Committee on Jobs, $2,500 from Jonathan Holzman, $6,000 from Elaine Tsakopoulos-Kounalakis, $1,000 from Chris Giouzelis, $1,000 from Nick Kontos, $1,000 from Farrah Makras, $1,000 from Victor Makras, $1,000 from Makras Real Estate, $5,000 from John Pakrais, $1,000 from Mike Silva, $1,000 from Western Apartments, $5,000 from Maurice Kanbar, and $5,000 from the San Francisco Apartment Association PAC.
The Yes on A committee hasn't used the accrued debt scheme, but it has been the second-largest recipient of late contributions. It received $57,000 in late contributions, with donations from Engeo ($1,000), Singer Associates ($2,500), Trinity Management Services ($10,000), Elysian Hotels and Resorts ($5,000), Luxor Cabs ($1,000), Marriott International ($15,000), the SF Police Officers Association ($2,000), Sprinkler Fitters and Apprentices ($1,500), Barbary Coast Consulting ($2,500), and SEIU International ($3,397.14).
No on H (Neighbors Against Traffic and Pollution) received $4,500 in late contributions, with donations from Norcal Carpenters, Alice and William Russell-Shapiro, and Amandeep Jawa. And in what looks like a classic case of hedging bets, Singer Associates has made a $2,500 late contribution to both Yes on H and No on H.
Steven Mele, who is treasurer for Yes on A and No on H, told the Guardian, "There's some people that time their contributions, but their names are out there, reported on public sites. A lot of corporate money comes in prior to the last deadline, then some afterwards. If campaigns are running with a lot of accrued debt, then those people must have an idea of what money is going to come in."
Unlike the campaigns controlled by the Sutton Law Firm, Mele's committees, which work with Stearns Consulting, are not carrying massive loads of unpaid debt. Yes on A had received $302,452 and spent $279,890 and had $17,749 in debt as of Oct. 25. No on H had received $134,458 and spent $124,088 and had no debt as of Oct. 25.
Mele also believes that while campaign finance rules were written to make the money trail more transparent, "They've resulted in the public being inundated with so much information that they tend to glaze over."