L.A. wants more details about business groups that donate to city campaigns

In the quest to make city elections more transparent, the Los Angeles City Ethics Commission is exploring whether to demand more information from businesses and other groups that donate directly to local campaigns.

At a meeting Wednesday, commissioners said they wanted city staffers to come up with ways to require corporations, limited liability companies and other “non-individual” campaign donors to publicly disclose more information about who controls them. The concern, said commission President Jessica Levinson, is that “it is really difficult to follow the money.”

The push for more information comes after The Times reported on how challenging it is to track who is behind campaign donations made by such groups. Many businesses — particularly small, privately held limited liability companies — do not have to publicly report who owns them.

That can leave it unclear who is financially backing a candidate. It can also make it harder for ordinary Angelenos to tell if donors are evading city campaign contribution limits by giving to a candidate through multiple entities. The Times found several instances in which different companies with the same chief executive, address or both donated to a candidate, but publicly available records left it unclear whether the companies were commonly owned.

Mike Altschule, policy director of the commission, said its investigators are “very good at ferreting out” such violations. Ethics Commission staffers have the power to obtain personal, banking or business records that can shed more light on who controls a company and help confirm if such donors are breaking campaign law. But it can take years before city auditors are able to comb through donations to every campaign.

The bulk of the money given to local candidates has come from individuals, rather than groups, an Ethics Commission analysis found. In city elections spanning the last decade, 22.5% of direct campaign contributions came from groups, including nearly 9.1% from corporations, 2.5% from LLCs and almost 11% from other groups including committees, partnerships and labor organizations.

The percentage of money coming from businesses and other groups has fallen over time, likely as a result of changes in city campaign finance laws, including a restriction on donations from city bidders and contractors. Limited liability corporations, which can be more “opaque” than other kinds of business entities, give an especially slim percentage of campaign contributions, Altschule pointed out.

Such non-individual donations were involved in 76% of all cases where donors were caught exceeding city contribution limits during elections from 2005 to 2011, but Altschule added that the excessive amounts given in those cases added up to only $92,082 — 0.22% of all contributions to candidates during that time.

The numbers “really left me with the impression that our laws are working,” Altschule told members of the commission Wednesday. For instance, local candidates rarely come close to reaching the city cap on how much of their campaign funding can come from groups, the report found. (The analysis did not include money given to independent committees not controlled by candidates, which are legally allowed to spend unlimited amounts to support or oppose them.)

Levinson said such information was useful, but that it didn’t address the broader question of whether such donations were sufficiently transparent to the public.

Even if LLCs and other groups do not give the bulk of campaign money, “that doesn’t mean we shouldn’t still want to know who’s behind it,” Commissioner Nathan Hochman later added.

Some cities bar businesses and other entities from giving to campaigns: San Diego, for instance, allows campaign contributions only from individuals and from political parties, prohibiting donations from all other entities. After the Ethics Commission asked the public to weigh in on that idea, several people argued that L.A. should follow suit and ban such donations.

“It’s a clean rule. It’s a simple one.... And it’s practiced by many cities,” said Kathay Feng, executive director of California Common Cause, which advocates for open government. Short of that, Los Angeles could require corporations and other entities to reveal who their “principal” is when they donate, Feng said.

But some campaign consultants worry that imposing such rules would make it much harder to raise money at a time when city candidates are already bracing for more costly campaigns. Shifting local elections to the same years as state and national contests, as Los Angeles voters recently opted to do, means candidates will need to spend more to be heard, they say.

“This does not seem like the best time to be making it more difficult to raise funds for municipal election campaigns,” political consultant Larry Levine wrote to the commission.

Barring groups from donating directly to candidates would simply push them toward funding independent committees, which are “a far more negative influence on the electoral process,” Levine argued. As for requiring campaigns to get more information from corporate donors, political attorney Stephen Kaufman said that “campaigns are already under significant strain to gather the information necessary to comply with the current disclosure requirements.”

Bans on business contributions have also been challenged in court by groups that argue they violate free speech rights. Altschule said it would be easier for Los Angeles to make a case for requiring more information from donors than to totally ban some kinds of contributions, which requires “a higher burden of proof that you have to show.”

The Ethics Commission is expected to continue its discussion at its next meeting in October.

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