Mysterious Mailers Toe Legal Line

By Susan Reines and Olin Ericksen
Staff Writers

October 22 -- A stealth group flooding Santa Monica with anti-City Hall mailers appears to be legally sidestepping new election laws that require groups to disclose who they are and where they get their money, The Lookout has found.

By filing as a nonprofit rather than a political action committee, Santa Monica Citizens for Sensible Priorities has avoided revealing the sources of its funding or the names of any of its members.

The address listed on the colorful mailers that blast City Hall's bureaucracy and criticize the current City Council is a post office box.

The new group, which identifies itself as a "a nonpartisan organization," is not bound by State and local election laws because it does not support or oppose any specific candidate or take position on any ballot issue.

The stories contained in the mailers do, however, negatively reference the current City Council -- which has been dominated by the same tenants' group for nearly two decades -- ten different times. Four of the seven council members are running for re-election.

"The current City Council is totally out of touch with its constituency," one of the mailers reads. Another mailer says "the City needs a new attitude. Unfortunately, I don't think that will happen with the current City Council."

One of the three mailers, which are reprints of stories relayed to the group by citizens frustrated with City Hall, goes as far as to name the group that has long controlled the council, Santa Monicans for Renters' Rights.

"One SMRR-backed City Councilman labeled my property a blight on the neighborhood," the mailer says, and goes on to accuse the council of "inept leadership."

But the mailers avoid naming any candidate, including the three SMRR incumbents running for re-election, or even directly mentioning the election at all, which allows the group to avoid filing a financial disclosure Statement with the City, legal experts said.

The election reform law passed by the council in August requires groups to report financial activities to the City only if they take positions on election issues.

City Attorney Marsha Moutrie said the new law would not apply to Santa Monicans for Sensible Priorities.

"If we look at the content of their letters, it didn't appear to me that there was any reference whatsoever to any candidate or that there was any explicit recommendation at all about what their comments about government meant in terms of casting specific votes," she said.

"The timing is very interesting," Moutrie said of the group's sudden flurry of activity in the weeks leading up to the election. "I don't recall the community being barraged by mailers like this six months or a year ago. But I don't believe, based on what I know at this time, that they have violated State or local law."

On October 13, City Clerk Maria Stewart sent an email to the group's lawyer, Barry Fadem, who practices in Northern California, asking whether the group was a political action committee -- and if so, whether Fadem knew it had to file financial disclosure forms with the city.

Fadem's reply, dated October 14, States that the group is a 501(c)(4) nonprofit, not a political action committee, and that the "specific purpose of Santa Monicans for Sensible Priorities is to promote social welfare by educating Santa Monicans about city government issues."

Stewart said the City had accepted Fadem's reply and would not be investigating his claims or the group's activities unless someone presented hard evidence that the group was taking positions on the election.

"Unless I am given that information I have no reason to suspect or investigate this group or any other group," Stewart said.

Moutrie, too, said she accepted Fadem's explanation.

"In this situation, I believe that Mr. Fadem's explanation to Ms. Stewart is adequate to assume that they are meeting the letter of the law," she said. "Now as to their motives, and as to whether they are meeting the spirit of the law, I can't comment."

Fadem did not return calls for comment.

Just as it slipped past City laws without identifying itself or its funding sources, it seems Santa Monicans for Sensible Priorities will be able to bypass State laws without providing identifying information before the election, according to election experts.

Campaign finance expert Robert Stern, who helped write the State law governing nonprofits' participation in political activities, believes that under his law the group will be able to hold off providing information until long after November 2.

"The test on whether they are violating the law is very objective," said Stern, co-founder of the nonpartisan Center for Governmental Studies. "If they mention a candidate's name, then they have to file a report for the election."

Because the mailers never mention any candidate by name, Stern said, the group will only have to report once a year to the State Attorney General.

Stern said he had never heard of a nonprofit organization sending out mailers like those being distributed by Santa Monicans for Sensible Priorities.

(The IRS code does, however, allow 501(c)(4) organizations to "engage in some political activities, so long as that is not its primary activity.")

Asked whether the group's activities could set a "dangerous precedent" allowing organizations to skirt disclosure laws, Stern said, "I don't know if it would be dangerous, because I don't know how effective they're going to be. This is the first time I've heard of this."

Although the identities of the members of Santa Monicans for Sensible Priorities remain secret, there is some indication that the group might be comprised of Santa Monica business owners.

Seth Jacobson, who recently formed Santa Monicans for Change, a hotel industry-backed group that supports candidates trying to unseat the SMRR majority, said that "a lot of the same people" were involved in the two groups.

Asked who belonged to Santa Monicans for Change -- which is sending out mailers supporting the four Chamber of Commerce-endorsed candidates -- Jacobson listed several local businesses.

Members include Shutters on the Beach Hotel, Marmalade Café, Patty's Pizza, Tom Viscount of the Red Cross and Chamber of Commerce Board President Nathaniel Trives, Jacobson said.

The group also includes and some 30 individual residents, Jacobson said.

He was unwilling to disclose which, if any, businesses or individuals were also part of Santa Monicans for Sensible Priorities.

"That's a group that I actually can't talk about," he said.