From the Sacramento Bee:

Politicians' funds for legal woes grow

By Judy Lin - Bee Capitol Bureau
Published 12:00 am PDT Monday, April 23, 2007

A little-known provision in California's campaign financing law allows candidates to collect unlimited amounts of money for legal defense funds without having to reveal the nature of their legal troubles.

These accounts are slowly growing in popularity. One lawmaker, Sen. Ron Calderon, D-Montebello, used one to raise over $150,000 after his legal issue was resolved. Moreover, nearly half the money raised for his legal defense fund went toward "fundraising" expenses at tony venues: one of the Pacific Northwest's premier golf courses, two restaurants in Hawaii and a Lake Tahoe day spa.

Campaign finance watchdogs worry that lax spending and fundraising rules on these accounts let candidates and elected officials circumvent Proposition 34, the state's campaign finance law passed in 2000 establishing campaign contribution limits. They are urging tighter controls.

"Since few people are watching, I wonder if people are following the rules carefully," said Bob Stern, president of the Center for Governmental Studies in Los Angeles.

Legal defense funds were initially created as a way for politicians to pay legal fees they otherwise wouldn't be able to cover under contribution limits. They became more important in 2000, when voters adopted Proposition 34, which limited contributions to campaign accounts but allowed the funds to help a candidate or elected official pay legal expenses arising from a criminal, civil or administrative proceeding related to the campaign or office.

Unlike campaign accounts, which have a $3,600-per-donor limit for legislative candidates, legal defense funds aren't subject to contribution limits. Politicians are free to solicit as much money as they see fit, and the law gives them wide latitude on spending, saying the funds can be used to "defray attorney fees and other related legal costs."

The law doesn't require politicians to reveal the nature of legal troubles that triggered the creation of the defense fund -- meaning no one is verifying that the funds are opened for valid reasons or closed in a timely manner.

"It's a big loophole right there," Stern said. "I think there should be a contribution limit on defense funds because there's no difference between a $10,000 donation to a campaign and a $10,000 donation to a legal defense fund."

Ross Johnson, the new chairman of the Fair Political Practices Commission, says changes in rules governing legal defense funds may be needed.

"The law has become more and more complicated over the years, providing contribution limits in some cases but not in others," Johnson said. "Clarifying how much money officeholders or candidates can collect for legal defense funds, what are appropriate expenditures and when fundraising must stop is an important part of simplifying campaign disclosure and increasing public awareness."

Calderon, chair of the Senate Elections Committee, said he initially opened a legal defense fund in response to an election challenge during his June 2006 Senate primary race against former Assemblyman Rudy Bermudez, D-Norwalk. Bermudez sought a recount after Calderon won by a few hundred votes but tossed in the towel by mid-July.

Yet disclosure forms show the senator spent a high percentage -- roughly $75,000 of his $154,000 fund -- on events to raise even more money for his legal defense fund between July and December 2006 after Bermudez conceded the race.

Calderon said his legal bills started to pour in after the election dispute had been settled. The fund will remain open "until I have received all final billings associated with services rendered towards my defense," he said in a written response to The Bee.

Calderon racked up a $6,993 tab at The Ridge at Larkin Valley in Santa Cruz. He spent $10,277 on a golf fundraiser at Bandon Dunes in Oregon -- "built on a beautiful stretch of sand dunes perched 100 feet above the Pacific Ocean," according to the golf resort's Web site -- $7,092 on a chartered flight from Sacramento to Oregon, and $11,200 on a second golf event at Edgewood Tahoe Golf Course on the south shores of Lake Tahoe.

The legal defense fund also paid $807.51 to a South Lake Tahoe spa called Body Essential II. And the fund paid for the senator's meals while attending a policy conference in Hawaii: $172.71 at Nick's Fishmarket in Kihei and $262.04 at Ruth's Chris Steak House in Wailea.

Other bills appeared more closely related to legal defense. Calderon paid the political consulting firm Kaufman Downing LLP $28,040 for legal and political advice. Another $16,263 was paid to John Jacobs of Innovative Marketing Promotions group, which has done fundraising work for Calderon's regular campaign account, for campaign consulting.

"The cost of raising the legal defense money was much higher due to the fact that I had to raise a lot of money in a short amount of time," Calderon said. "This, coupled with the fact that I had maxed out with just about every possible donor in my database during my Senate campaign, made it necessary to hold more attractive and costly events to attract new donors quickly."

Calderon has filled his legal defense fund with several donations over the Proposition 34 limits for standard campaign committees.

The list of Calderon's legal defense fund donors is headed by the California Correctional Peace Officers Association, which gave $30,000 last year, and the Bay Meadows Land Co., owner of the Bay Meadows racetrack, which chipped in $25,000. Both also contributed to his Senate campaign fund.

The California Building Industry Association and Pacific Hospital of Long Beach each contributed $10,000 toward Calderon's legal defense.

It isn't the first time Calderon has spent his donors' money on far-flung events. While in the Assembly, he used his campaign accounts to spend nearly $30,000 on trips to Las Vegas, including payments to Mandalay Bay, Bellagio, Venetian and Las Vegas Hilton casino resorts.

According to the Secretary of State's Office, 10 other former and current politicians have legal defense funds. The funds have been used by politicians facing serious legal trouble.

Senate President Pro Tem Don Perata, D-Oakland, has accrued the largest debt as the FBI investigates his political and business dealings. To date, Perata has spent over $1 million defending himself.

Nearly all of the money he's raised has gone to pay attorney's fees, private investigators, and political consultants. His spokesman, Jason Kinney, said Perata hasn't held any fundraisers.

Former Secretary of State Kevin Shelley and former Lt. Gov. Cruz Bustamante still have legal defense funds and owe their attorneys thousands of dollars for legal services and advice. Shelley resigned in 2005 after audits criticized his management of the statewide office.

Bustamante was slapped with a $263,000 fine by the Fair Political Practices Committee for campaign finance violations for improperly raising $3.8 million in the gubernatorial race in the 2003 recall election.

Attorneys representing candidates and elected officials say accounts are usually opened only when necessary because they draw attention to a politician's legal problems.

Chuck Bell, who represented Sen. Jim Battin, R-Palm Desert, during an FPPC inquiry into whether the senator misused campaign funds, said the prospect of negative publicity acts as a built-in deterrent for those looking to take advantage of the system. Bell received the bulk of $40,000 Battin raised for his legal defense fund.

Bell said: "You wouldn't even consider setting one up if you weren't involved in some kind of a defensive action."