Guest Commentary: Laundered Campaign Contributions Appear to Have Been Made to the Yes on Measure L Campaign

by Alan Pryor

In previous articles pertaining to the financial disclosures of the Yes on Measure L/West Davis Active Adult Community campaign on the November 2018 ballot in Davis, I provided evidence showing:

1) About $70,000 of campaign expenditures that were made by the Yes on Measure L campaign for attorney’s fees were probably illegal under FPPC campaign finance regulations as set forth in the FPPC Disclosure Manuals that provide guidance and requirements for such campaign expenditures.

2) The Davis Vanguard ran daily ads from the inception of the campaign until voting day and for a substantial period beforehand. The payment for these ads is not disclosed on any financial statements filed by the Yes on Measure L campaign which may be a violation of FPPC regulations.

3) A disclosed financial filing expenditure of $3,000 was made to “Froggy’s” for food service for a Vanguard fundraising event. This is probably not an allowable campaign expense for the Yes on Measure L campaign under FPPC guidelines.

4) Over $64,000 of non-monetary contributions to the Yes on Measure L campaign for “salaries” have been disclosed in campaign filings but the recipients of these salaries have been kept secret. Further, it is not known if these payments were for personal gain, which is prohibited by FPPC regulations, or may be otherwise disallowed under FPPC guidelines.

This information is more fully disclosed in the BACKGROUND section attached to the end of this article and referenced in previous articles I have written as disclosed therein.

In this article I report how the primary financial contributor to the Yes on Measure L campaign is the West Davis Active Adult Community entity itself, totaling $164,500. In 2017, West Davis Active Adult Community was formed as a Fictitious Business Name business under the charter of Doug Arnold Real Estate Inc. Doug Arnold Real Estate Inc was a California Domestic Stock Corporation whose Agent for Service of Process was David Taormino. However, Doug Arnold Real Estate Inc was dissolved in 2018, thus apparently rendering West Davis Active Adult Community as an orphan company without legal status in California.

If true, this potentially makes ALL of the campaign contributions made by West Davis Active Adult Community to the Yes on Measure L Campaign Committee illegal or “laundered” by concealing the true identity of the campaign donor(s). “Laundered” funds so received by a campaign committee are the most serious of campaign financing violations according to California’s Fair Political Practices Commission (FPPC) and all such funds are required to be deposited in the State’s General Fund by the recipient campaign committee.

Let me explain.

THE NAME “WEST DAVIS ACTIVE ADULT COMMUNITY” HAS BEEN USED IN MANY DIFFERENT WAYS FOR DIFFERENT PURPOSES INCLUDING AS A CONDUIT FOR CAMPAIGN CONTRIBUTIONS

The name “West Davis Active Adult Community” has seemingly been used interchangeably for many different purposes:

1) To identify the proposed development itself for purposes of describing the project;

2) To identify the election campaign entity for purposes of identifying the supportive election/ballot committee; and

3) To identify a business entity for purposes of identifying a campaign donor.

As previously described in earlier articles (see BACKGROUND section for references and links), the phrase “West Davis Active Adult Community” (or “WDAAC”), has clearly been used to both identify the development project itself and interchangeably with the campaign committee, Yes on Measure L.

Most recently, investigations of the Form 460 campaign financial disclosures submitted by Yes on Measure L indicated that West Davis Active Adult Community is used to identify the primary financial contributor to the Yes on Measure L campaign committee where it is identified under Contributor Code as “Other” (“Other” is defined further by the FPPC as “e.g. a business entity”).

The West Davis Active Adult Community was by far the largest contributor to the Yes on Measure L campaign, and its donations totaled $164,500 as shown below.

Other than these $164,500 monetary contributions to the Yes on Measure L campaign committee, the only other monetary contribution received was for $1,000 from a currently active California Domestic Stock Corporation, Davd-Mar Inc, that lists David Taormino as the Principal Agent for Service of Process. There appear to be no violations of California FPPC regulations surrounding this particular $1,000 donation. However, there are no other known business purposes or functions of the supposed business entity, West Davis Active Adult Community, other than serving as a conduit for the campaign donations to the Yes on Measure L campaign committee.

WEST DAVIS ACTIVE ADULT COMMUNITY APPEARS TO NO LONGER BE A LEGALLY-FORMED BUSINESS ENTITY IN CALIFORNIA

Given the widely varying ways the name “West Davis Active Adult Community” is used, efforts were made to determine the formal business structure of West Davis Active Adult Community to determine its legal business status in California.

First, a search was conducted using the California Secretary of State’s search engine at https://businesssearch.sos.ca.gov/ for “West Davis Active Adult Community”. As of 2/13/19, it is not registered as a domestic or foreign Corporation, Limited Partnership, or Limited Liability Corporation in California.

Next, a search was made for a Fictitious Business Name registration under the same name in Yolo County. This determined that the name “West Davis Active Adult Community” was indeed duly registered on 5/18/2017 as a Fictitious Business Name by Doug Arnold Real Estate Inc.

As shown below, Doug Arnold Real Estate Inc was formed in 1982. Although it’s most recent agent for service of process was David Taormino, it is believed that Doug Arnold, a deceased prominent former real estate agent in Davis and father of current Davis City Councilmember Will Arnold, was  the majority shareholder until his passing in May 2015 whereupon that interest was purchased by David Taormino. However, that corporation was dissolved on 6/27/2018 as shown below.

Fictitious business names do not create separate legal entities. Because of the fact that the parent company that filed the Fictitious Business Name statement on behalf of the West Davis Active Adult Community—Doug Arnold Real Estate Inc—had already dissolved renders the West Davis Active Adult Community as an orphan entity without any legal status. In extensive research of official records, I was unable to find any other references to the West Davis Active Adult Community as an independent legal entity.

DONATIONS MADE BY WEST DAVIS ACTIVE ADULT COMMUNITY TO THE YES ON MEASURE L CAMPAIGN COMMITTEE ARE THUS SUSPECT AND POTENTIALLY ILLEGAL

Because West Davis Active Adult Community does not appear to be a viable legal entity, donations to the Yes on Measure L are potentially illegal. The following are excerpts from the Campaign Disclosure Manuals pertaining to campaign contributions and proper disclosure of such (see http://www.fppc.ca.gov/learn/campaign-rules/campaign-disclosure-manuals.html –  Manual_3_Ch_3_Contributions.pdf and Manual_3_Ch_4_Contribution Restrictions.pdf).

“Chapter 3 Contributions

 Reporting the Intermediary of a Contribution

An intermediary is a person or entity that makes a contribution on behalf of another person and has been or will be reimbursed for the contribution. For each contribution of $100 or more from an intermediary, the name, address, and, if applicable, the occupation and employer information must be disclosed for both the true source of the contribution and the intermediary.

Failure to disclose the true source of a contribution is considered one of the most serious violations of the Political Reform Act

Committees are required to check, and, if necessary, correct any information regarding the true source of a contribution that a person of reasonable prudence would question based on all of the surrounding circumstances. If there is reason to believe the information contained on the contribution check does not contain the name of the person who is actually making the contribution, the donor should be asked if he or she is acting as an intermediary for the true source of the contribution.”

 

“Chapter 4 Contribution Restrictions

 Restrictions on Contributions

Reporting the True Donor

Failure to disclose the true source of a contribution is often referred to in media reports as campaign money laundering, which is a serious violation of the Act. Campaign reports are often the only means for the press and the public to determine who is supporting or opposing a ballot measure.

One type of common violation is when an entity reimburses individuals for contributions so that the committee receiving the contributions discloses the individuals rather than the true donor on campaign disclosure reports.

 Another occurrence is when a person (e.g., organization, business, or individual) makes a contribution to another person, with the condition, agreement or understanding that the payment will be subsequently used for political purposes, such as a contribution to another committee. It is a violation for persons to conceal their identities by contributing through another person without proper disclosure.

 If it is discovered that a committee received a contribution and the donor and intermediary were not properly identified, the contribution must be paid to the Secretary of State for deposit in the State General Fund. A local agency may deposit laundered funds into its general fund when the action is brought under its local campaign finance law.”

I believe that it can be shown that contributions were made to West Davis Active Adult Community—which is not a viable legal entity—with the express understanding that these monies would be donated to the Yes on Measure L campaign and that this mechanism was used to intentionally hide the true identities of the donors. This meets is the classic definition of “money laundering” in the FPPC Disclosure Manuals. If so, the full amount of the “laundered money” should be deposited in the State’s General Fund as prescribed by FPPC Regulations


BACKGROUND

David Taormino is the principal promoter of the West Davis Active Adult Community (WDAAC) which was recently approved by the voters of Davis on the November 2018 ballot as Measure L. During this campaign, a federal lawsuit was filed by the well-known Sacramento civil rights attorney, Mark Merin, against David Taormino and the City of Davis. This lawsuit alleged that a preferential “Davis-Based Buyers Program” in the Development Agreement signed between the Davis City Council and David Taormino was discriminatory and exclusionary in nature.

Readers can get more information on the specifics of this lawsuit by referring to the following articles – “Planned West Davis Adult Community, if Approved, Would Perpetuate Racial Imbalance in the City of Davis”  and “Measure L discriminates Against Blacks and Latinos”.

Mr. Taormino as defendant is represented in this matter by Stephen Boutin of the Sacramento law firm Boutin Jones. After the election, Mr. Taormino and Mr. Boutin have both made ambiguous but inflammatory allegations of nefarious behavior and improper reporting of campaign expenses by the No on Measure L campaign related to this lawsuit. In particular, they have claimed that legal expenses incurred in the prosecution of the Merin lawsuit should have been paid for directly by the No on Measure L campaign and subsequently reported as a campaign expenses by the campaign.

Most recently, the Davis City Council was petitioned by Mr. Taormino and Mr. Boutin and then agreed to send a letter to the Yolo County District Attorney and California Fair Political Practices Committee (FPPC) requesting investigations of these alleged wrongdoings by the No on Measure L campaign and to determine whether any campaign expenditure or finance reporting violations have occurred.

In an article I authored and published on February 12th in both the Davisite and Davis Vanguard, I vehemently disagreed with and disputed allegations that the No on Measure L campaign committed expenditure or finance reporting violations (see Background below). I noted, to the contrary, that California election law specifically disallows campaign monies to be used for the types of litigation expenses that were otherwise alleged we omitted from disclosing.

Further, I also disclosed that about $70,000 of campaign expenditures which were made by the Yes on Measure L campaign for attorney fees were illegal under FPPC campaign finance regulations as written in the FPPC Disclosure Manuals that provide guidance and requirements for such campaign expenditures.

In subsequent articles published on February 14 in the Davisite and Vanguard In the course of investigating such expenditures and in recent commentary on-line by different observers, it was noticed that there were other areas of campaign expenditures that are inconsistent with financial disclosure standards of the FPPC. In particular, the Davis Vanguard ran daily ads since the inception of the campaign until voting day and for a substantial period beforehand. The payment for these ads is not disclosed on any financial statements filed by the Yes on Measure L campaign which is a violation of FPPC regulations

Further, over $64,000 of non-monetary contributions to the Yes on Measure L campaign for salaries have been disclosed in campaign filings but the recipients of these salaries have been kept secret and it is not known if these payments were for personal gain which is prohibited by FPPC regulations or were otherwise disallowed under FPPC guidelines.

Together, the lack of disclosure of how Davis Vanguard ads were paid and the secrecy surrounding the payment of salaries supposedly associated with campaign raises serious questions as to whether or not the Yes on Measure L is compliant with campaign reporting requirements with respect to these matters.

Alan Pryor was Treasurer and Principal Officer of No on Measure L


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24 Comments

  1. Ron Glick

    Lots of finger pointing and accusations of FPPC violations all around and how these accusations shake out remains to be seen but at the bottom of it all is a single difference. We know where the money for Yes on L came from, but, we don’t know who paid the money for the lawsuit retainer. In my mind that is the $20,000 dollar question.

    1. Rik Keller

      Ron: where did the $ for the Yes On L campaign come from? We have no idea. The shell company that it passed through isn’t even legitimate.

      And how much did the Vanguard receive of this dark, illegal money? We have no idea. Neither the Vangaurd nor the campaign have disclosed this.

      1. Don Shor

        where did the $ for the Yes On L campaign come from?

        The developers.

        And how much did the Vanguard receive

        The ad rates are to your right. Click on the link. Do the math.

        1. Don Shor

          Who recruited the plaintiff?
          Who paid his attorney’s retainer?
          I feel quite certain at this point that Rik Keller and/or Alan Pryor know the answers to those questions.

        2. Rik Keller

          Don: I calculate tens of thousands of $ that the Vanguard received. Time to come clean and reveal it all

          We don’t know who is behind the WDAAC money that passed through the illegal shell entity. It’s the very definition of money laundering, on a large scale.

          1. Don Shor

            I calculate tens of thousands of $ that the Vanguard received.

            $600 x 6 months.

            We don’t know who is behind the WDAAC money

            Innuendo is your stock in trade. The developers paid for the campaign.

        3. Rik Keller

          Don: With your small revelation, that brings the total that has been disclosed to $6,600 so far (includes $3,000 of illegal food donations to the Vanguard fundraiser).

          WDAAC provided the Vanguard money for much longer than a 6-month period. What is that total? How much in undisclosed donations did the Vanguard receive from WDAAC or persons/entities related to that? We are easily talking about tens of thousands of $.

          Lets’s be very clear: accepting even a nominal amout of $ from a campaign casts suspicion. This is why responsible, ethical non-profit journalism sites have strict rules against it. The Vanguard needs to institute these industry-standard rules, fully disclose all past funding, and return moneys received from illegal shell companies.

          1. Don Shor

            Lets’s be very clear: accepting even a nominal amout of $ from a campaign casts suspicion.

            Let’s be very clear: recruiting a plaintiff, paying his attorney’s retainer, and then withdrawing the suit after the election “casts suspicion.” Any idea who did that?

  2. Ron Glick

    “Ron: where did the $ for the Yes On L campaign come from?”

    From Taoramino.

    “And how much did the Vanguard receive of this dark, illegal money?”

    First of all I don’t think its dark money since Taoramino wasn’t hiding that he was behind the project and funding the campaign in the hope that he would win and make a profit in the end. Also if its found to be illegal, my non attorney guess is it will be a technical violation because its not hard to find out the source of the money and the FPPC will address it as such. Of course the seriousness of the violation is yet to be determined.

    As to the buying of influence in the Vanguard I think that is a fair question and criticism and I’ll let others deal with that since I’m not in any way connected to the running of this website.

    Still I’d like to know who funded the lawsuit? Unlike Don I’m not certain Alan or Rik know that but it would be nice if they would give an unequivocal statement responding to the accusation that they do know.

     

    1. Rik Keller

      Ron: who provided money to Taormino that passed through his illegal shell entity? How much did that illegal shell company and other related entities provide to the Vanguard?

      It’s looking like Yes on Measure L ran the dirtiest, most illegal campaign in Davis history. Yet this supposed “community watchdog” site is deep in complicity and collusion with it, rather than exposing it.

  3. Sharla Cheney

    I think the entire community knows that the entire Yes on L campaign was paid for by the developers.  This seems logical, since they have a vested interest in the project succeeding.  Maybe Alan can use his research skills to find out who recruited the plaintiff and paid the $20,000 retainer to the lawyer to file the lawsuit against the developer and the City during the campaign.

    Every election seems to be the “dirtiest” in Davis history. (Remember when Nugget was trying to build its store on Pole Line and Covell? Oh boy.  Nishi’s toxic soup, Covell Village’s boogeyman, robocalls, … I could go on.)  Elections, especially the ones involving  land planning issues, are really a drag.  The anger and hate and misinformation that is flung around is a real disservice to the community.  Fortunately, the community is growing weary of this.  I think people were surprised that the developers finally clapped back in this last election.

  4. Matthew Wilhoit

    I have no problem with Alan and Rik defending themselves, but please stop misusing legal terms.  Terms like unclean hands, money laundering, orphan entity and illegal shell company are not applicable here. Their misuse undermines the case you are trying to make.    

    Unclean hands doctrine:  The doctrine is a legal defense a person would raise when sued for damages by another person.  Invoking the unclean hands doctrine is an admission that you committed the bad act which caused the plaintiff harm.  So when you raise the unclean hands doctrine what I hear is, “Yes, we funded that lawsuit, but Taormino did a lot of bad things too”.

    Money laundering: The allegations made here are not the definition of money laundering. Money laundering is concealing the origins of illegally obtained money so that a person can use that money for other purposes by showing a legitimate source for those funds.  If you need an example, think about the car wash in Breaking Bad.  Unless I misunderstand the allegation here, no one is accusing Taormino of laundering money he obtained from criminal activities through the Yes on L Campaign.      

    Illegal Company/Orphan entity:  if a shareholder dissolved a corporation but continued to do business under the name of that corporation he could be personally liable for the debts and obligations of the company, he could be sued as an individual for any wrongs by the company and anyone who contracted with that company might be able to void that contract.  In general there is no requirement to incorporate, if you conduct business without a legal entity formation you are treated as a sole proprietor.  It does not make one an illegal company, whatever that is supposed to mean, or an orphan entity. Orphan entities are legitimate legal structures used in financing transactions.

  5. Bill Marshall

    Well, I for one, found Matthew W’s 12:35 post enlightening… please share your CV as to “election and campaign financing regulations”… you appear to like to question others, and either don’t respond, or “deflect”, when you are asked questions… as I predict you will when I directly ask, “Rik, do you have any particular expertise or experience in election and campaign financing regulations?”

    I note that you have not refuted his clarification of terminology @ 12:35. So will give him credit for credibility..

  6. Matthew Wilhoit

    None whatsoever, it is not my area of expertise and I would never counsel anyone on the specifics of election and campaign finance regulation.  It would be malpractice if I did and if a non-lawyer did it, it would be the unauthorized practice of law.

    My post was constructive criticism in the hope that the hyperbole dial could be turned back from 11 to around a 2 or so.  Please defend yourself, but in my opinion you will convince more people if you do it with concise arguments in plain English.

    If you would really like me to refute a claim here, please explain to me why the company’s registration status is relevant to the argument?  Sec 84301 of the Political Reform Act says “no contribution shall be made directly or indirectly, by any person in a name other than the name by which such person is identified for legal purposes.”   So one point of the argument is that the lapsed corporate status meant the donation was not in the correct name for purposes of the statute. That is a large leap of faith to make and there is no analysis or case law provided to back it up.  Another argument is that the purpose of the law is to know the source of the funds, but would we have any greater insight into the source of the funds if the company’s registration had been up to date? That was never explained.   The whole illegal shell orphan company line of attack just strikes me as a lengthy distraction from your main argument.

    1. Dave Hart

      Yes, a breath of fresh air:  plain language explanations and comments.

      Maybe someone should investigate the lawsuit to stop Measure L as a secret illegal campaign contribution in support of Measure L.

      1. Alan Miller

        Yes, a breath of fresh air:  plain language explanations and comments.

        I feel like the two rendering plants in Davis have been shut down.  MWilh of great power of calm speak.

  7. Rik Keller

    Matthew Wilhoit said: “Money laundering: The allegations made here are not the definition of money laundering. Money laundering is concealing the origins of illegally obtained money so that a person can use that money for other purposes by showing a legitimate source for those funds.  If you need an example, think about the car wash in Breaking Bad”

    Let’s look at what the FPPC manual actually  says:

    Failure to disclose the true source of a contribution is often referred to in media reports as campaign money laundering, which is a serious violation of the Act…

    If it is discovered that a committee received a contribution and the donor and intermediary were not properly identified, the contribution must be paid to the Secretary of State for deposit in the State General Fund. A local agency may deposit laundered funds into its general fund when the action is brought under its local campaign finance law.”

    1. Matthew Wilhoit

      Rik, in one of your posts above you said, It’s the very definition of money laundering, on a large scale. In another version of this story Alan used a cutesy graphic of a dollar bill with a sponge and toothbrush.  You can’t talk out of both sides of your mouth.  Through imagery and imprecise language you are creating an impression that this is something that it is not.  If you mean campaign money laundering (or funneling) then use those terms and drop the cutesy graphics.  Again, please take this as constructive criticism. It is not an attack on you personally.

      1. Rik Keller

        Matthew Wilhoit: Alan Pryor provided the references to the definition of “money laundering” used by the FPPC in his article. But you decided to ignore this or you didn’t even bother to read it in the first place, in favor of providing a reference to a fictional TV show.

  8. Rik Keller

    Matthew Wilhoit said: “…it is not my area of expertise and I would never counsel anyone on the specifics of election and campaign finance regulation.”

    Truer words were never spoken.

    1. Matthew Wilhoit

      Thank you Rik. I’m glad we can agree on something. I don’t pretend to be an expert in areas where I lack subject matter expertise. You will note I have taken issue with the process, not with the conclusions.  Persuasive legal writing means setting forth the facts and the law, applying that law to your facts and then stating the conclusions. References to the law should be to primary sources like statutes and case law. Secondary sources like manuals should be used sparingly and only in support of your references to primary sources.   The most important part of persuasive legal writing is the analysis and application of the law to your facts. It is the meat in the sandwich.  You need to break the applicable law down into its separate elements and then show how your facts satisfy each of those elements. You need to support that analysis by showing on point case law, or if there is nothing on point then you need to look for analogous case law and draw parallels.  The piece above is missing the application and the analysis.  It is an all bread sandwich.  That makes it unpersuasive, but it doesn’t mean it is wrong.

      Have you ever stopped to consider whether the hostility and aggression in your posts hurts the causes and candidates you support?  You can’t bully me into agreement with you.  It is my human nature to take the other side in response to aggression. So for any candidate or cause you support the bar is set high from day 1 and it takes a lot of effort to ignore that aggression and separate it from the substance of the matter. Why would you ever want to make it harder for me to support your candidates and causes? It’s a shame because I bet we have a lot of common ground on many issues.

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