STUDIO INTRODUCTION: It's part of the urban legend of Los Angeles that big money controls the politicians. But do the facts match the legend? The following report, based on a two-months investigation, may strengthen your worst suspicions.
Responses To Investigation: Laundered Elections |
VideoKNBC'S PAUL MOYER: The mayor... the city attorney... seven sitting members of LA's city council. What shady activity have they all benefited from?
RICHARD FINE (FORMER FEDERAL PROSECUTOR): These people were guilty of accepting what is known as laundered money.
BOB STERN (POLITICAL SCIENTIST): Money laundering is the most serious violation of the campaign finance law.
JAY HANDEL (BUSINESSMAN/POLITICAL CONSULTANT): It just makes all of the politics dirty.
PAUL MOYER: According to city records... these high-profile politicos have all received illegal, laundered campaign donations in recent years. They all say they didn't know the money was illegal when they got it, but only one has given any of it up now that the truth is out, even though, under law, their obligations seem clear.
RICHARD FINE: The obligation on the politician is absolute. In other words, As soon as he/she finds out that he/she has received an illegal contribution they must give it back.
Ex-Federal prosecutor Richard Fine, political scientist Bob Stern, businessman and political consultant Jay Handel... all concerned citizens with experience in campaign financing. All say they're fed up with illegal campaign financing in this city and the city's failure to do much about it.
JAY HANDEL: The city has for years known about these violations and it slipped through their hands very happily
PAUL MOYER: This lack of enforcement, say the critics, allows unscrupulous donors, many of them real estate developers, to corrupt the political process.
JAY HANDEL: You've got developers continuing to pad the coffers of campaigns to ensure their people get in.
PAUL MOYER: The dirty dollar signs are daunting. Since 2000, based on city ethics files, over $180,000 in laundered money has been dolled out to winning and losing political candidates in LA, from ex-Mayor Hahn to Mayor Villaraigosa.
RICHARD FINE: The system is corrupt.
PAUL MOYER: Under state and city law each of us is limited in the amount of money we can give a local candidate, and each candidate can receive public money from the city treasury to match part of our donations. According to Bob Stern, who helped write the state ethics law...
BOB STERN: The contribution limit is designed to basically stop the corruption or the appearance of corruption of large campaign contributions.
PAUL MOYER: But, say critics, some donors are getting around the limits by funneling campaign funds through other people, through cutouts. This so-called laundered money -- especially when matched with public funds -- can give a recipient-candidate a head-start in campaign fund-raising and can discourage other potential candidates from running.
JAY HANDEL: It dissuades other people from wanting to fight that fight.
PAUL MOYER: City and state law makes laundered contributions illegal, and authorities have cracked down, most notably in 2004 when the LA county District attorney got 14 individuals associated with Casden Properties Inc. to plead no contest to laundering campaign funds. The City Ethics Commission fined them and went after other dirty donors... collecting more than $1,200,000 in fines. It's a record the Commission's executive officer, Lee Ann Pelham, is proud of.
LEE ANN PELHAM: The commission very aggressively pursues those individuals who are engaged in the deceptive practice of political money laundering.
PAUL MOYER: Commission case files list politicians who’ve received laundered donations. Among current LA office holders, Mayor Villaraigoa has collected $4,000 in such funds since 2000, Rocky Delgadillo -- $12,000; and City Council members Cardenas, Weiss, Greuel, Parks, Labonge, Smith and Janice Hahn -- various amounts.
All told, these politicians received more than $54,000 in laundered campaign financing, plus various matching funds. But only one of them has turned any of the laundered money over to the state or city as the law envisions, and not once has law enforcement punished any recipient politician.
LEE ANN PELHAM: We have not had evidence that a recipient of laundered funds knew that they were taking laundered funds or had been engaged in laundered funds.
PAUL MOYER: As Pelham sees it, if you don't know at the time of the donation that it's laundered money, you don't have to surrender it... even if you find out later. What's more, she says, her investigations usually take so long that politicians have closed their campaign coffers by the time settlements are reached.
LEE ANN PELHAM: It's two, three four years after their campaign, they have no funding left, what does the statute require?
PAUL MOYER: Critics say the Ethics Commission is simply giving a pass to the politicians it answers to.
JAY HANDEL: The Ethics Commission is appointed by the City Council people, approved by the City Council people and basically at that point you've got the fox watching the henhouse.
PAUL MOYER: City and state laws do require politicians to give up laundered funds once they learn about them, even if they're not prosecuted. In 2003 Xavier Baccera, now a US congressman, did the right thing by voluntarily giving up $10,000 in laundered donations he'd received as an LA Mayoral candidate.
XAVIER BACCERA: Anything that would have been associated with those contributions was returned.
PAUL MOYER: In 2005, the state's Fair Political Practices Commission persuaded Kathleen Connell to voluntarily give up $22,000 -- a fraction of the $60,000 she'd collected in laundered funds when running for LA Mayor in 2001. Critics say the commission should have asked for pay-backs from other politicians.
RICHARD FINE: Why did they just go after Connell and avoid all the other people?
PAUL MOYER: Recently, Mayor Villaraigosa, who received laundered money in two previous campaigns, has moved to clear his own record. On August 24, three days after we contacted his lawyer about this story, his lawyer voluntarily sent the City Ethics Commission a check for $2,000 to cover what the Commission says is only half of the laundered contributions. Commission official Le Ann Pelham told us she has no doubt the belated pay-out was prompted by our investigation.
LEE ANN PELHAM: Nobody wants a bad headline that suggests they violated the law.
PAUL MOYER: Though City Ethics Commission has spared recipients of laundered funds, the state's watchdog agency tells us in a written statement that it is "reviewing older unresolved cases and the issue (of pursuing recipient-politicians)... is still on our radar."
And which current office holders are possible targets? Legal records and press coverage of recent money laundering cases have repeatedly mentioned these politicians by name -- giving them all fair warning that dirty money flowed into their campaigns.
What's more, say critics, City Attorney Rocky Delgadillo and Councilman Jack Weiss are experienced prosecutors who should be particularly sensitive to the letter and spirit of the law.
JAY HANDEL: Jack Weiss is a former federal prosecutor. He gets it. Rocky is our top cop in the city.
RICHARD FINE: He is actually responsible for enforcing the law on the civil side against all the politicians, including himself.
PAUL MOYER: Neither Delgadillo nor any City politician we contacted was willing to be interviewed. Those who offered off-camera statements pleaded innocence and ignorance. In a typical response, a spokesman for Weiss stated: "The wrongful nature of these contributions was hidden from him and the Ethics Commission never notified him of any requirements."
Delgadillo echoed this theme through a spokesman, saying: "The City attorney and other elected officials who received money from Mr. Casden's associates had no knowledge of illegal money laundering when they received these contributions..."
Delgadillo says he "will work cooperatively with (the state's Fair Political Practices Commission) if they decide to revisit this issue."
But he and his fellow recipients on the City Council gave no indication they'll relinquish laundered funds voluntarily.
PAUL MOYER TO RICHARD FINE: Is there an avenue that these politicians should take if they suspect they received laundered money?
RICHARD FINE: They should go to the City Ethics Commission and inquire.
PAUL MOYER: Why not do that, take the first step?
RICHARD FINE: It comes down to the bottom line, that the money could be coming out of their own pocket.
PAUL MOYER: What are the ramifications to our political system in this city?
RICHARD FINE: Unless the politicians themselves decide to give the money back. This is the same thing as stuffing a ballot box. If we don't have clean elections it's not worth having a democracy.
TAG: Critics say one way to clean up the electoral process is to have politicians, who are up for re-election, pay off any past laundered funds by dipping into their current campaign coffers. Check our website for comments on this story from city office holders.
