SACRAMENTO -- A Sacramento Superior Court judge tentatively sided Tuesday with the state's campaign finance watchdog agency in its fight to investigate a shadowy Arizona-based political group's $11 million donation to a California ballot measure campaign.
Ruling that Californians would suffer "irreparable harm" if the recent contribution were not investigated, Judge Shellyanne Chang ruled that the Fair Political Practices Commission could require Americans For Responsible Leadership to disclose all records related to its donation to the Small Business Action Committee. Chang will oversee a hearing Wednesday to make her final determination.
The small-business PAC is running campaigns against Proposition 30, Gov. Jerry Brown's tax-hike proposal, and for Proposition 32, the ballot measure aimed at forbidding unions from collecting dues for political purposes.
"This is really significant for us and will help us move forward," said Ann Ravel, chairwoman of the FPPC. "It is an important ruling to allow us to conduct these audits in advance of an election. If we didn't have that ability, that information would be meaningless after the election."
Brown also cheered the tentative ruling.
"This is the biggest campaign violation ever since the FPPC became operative in 1975, and it is heartening that the FPPC is going to court," Brown told The Associated Press late Tuesday. "All points in the direction of full disclosure of these secret donors ostensibly from Arizona."
A spokesman for the Arizona group expressed disappointment with the tentative ruling.
"We believe that the state has not proven its case and that the FPPC does not have the authority to issue an audit in advance of the election," said Matt Ross. "Depending upon tomorrow's final outcome, there is a high likelihood that Americans for Responsible Leadership will appeal."
The $11 million donation has become a rallying cry for Brown, who has kept up pressure on the campaign trail to "unmask" the Arizona group while seeking votes for his measure, which would raise income taxes on the wealthy and hike the sales tax by a quarter cent to help fund education and other programs.
And it brought scrutiny to the growing practice of nonprofit groups pouring millions of dollars into political campaigns this year. Under IRS codes, nonprofit 501(c)4 groups are considered social welfare organizations that are not primarily involved in politics and thus not required to disclose their donors.
But Ravel argues that California campaign disclosure laws trump the IRS code.
"They are undisclosed for purposes of the tax code, but California requires disclosure," she said. "When they're doing campaign activity in California, we have authority over the IRS."
The judge rejected a number of arguments posed by attorneys for the Arizona group, including one in which it said the FPPC could not conduct an audit until January, after candidates and campaign committees file their finance reports.
As an out-of-state nonprofit group, the judge ruled, the group could not delay an audit.
Ravel said her investigators are seeking all communications related to the donation -- including text messages, emails, letters, notes from phone calls, minutes -- between the group's board of directors, donors, attorneys and the Small Business Action Committee.
"We want everything that surrounds their decision regarding the donation," Ravel said.
Attorneys for Americans for Responsible Leadership also argued that the Supreme Court's 2010 Citizens United decision protected them from having to disclose their donors. But Chang knocked back that position, as well.
First, she said, the FPPC's audit will remain confidential. The commission would determine whether the Arizona group's lack of disclosure was legal, though it could later order the group to disclose its donors.
Chang also said that although Citizens United allows unlimited spending by corporations, it does not address whether donors should be publicly disclosed.
"Nothing in Citizens United prohibits the state-mandated disclosure," Chang wrote.