BILL ANALYSIS
AB 741
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 741 (Bill Berryhill) - As Introduced: February 26, 2009
SUBJECT : Political Reform Act of 1974: campaign funds.
SUMMARY : Prohibits funds held by a ballot measure committee
from being used for a candidate's or elected officer's
attorney's fees or other costs in connection with
administrative, civil, or criminal litigation. Specifically,
this bill specifies that the expenditure of campaign funds held
by a ballot measure committee for a candidate's or elected
officer's attorney's fees and other costs in connection with
administrative, civil, or criminal litigation is not directly
related to a political, legislative, or governmental purpose and
is not within the lawful execution of the trust in which
campaign funds are held pursuant to existing law.
EXISTING LAW :
1)Creates the Fair Political Practices Commission (FPPC), and
makes it responsible for the impartial, effective
administration and implementation of the Political Reform Act
(PRA).
2)Provides that a person who is entrusted with money or things
of value for the purpose of promoting or defeating an
initiative, referendum, or recall petition or any measure that
has qualified for the ballot is a trustee of the money or
things of value. Provides that wrongful appropriation of the
money or things of value is punishable by a fine of $5,000, by
imprisonment in the state prison for 16 months or two or three
years on in a county jail not exceeding one year, or by the
fine and imprisonment.
3)Provides that expenditures for attorney's fees and other costs
in connection with litigation are within the due and lawful
execution of the trust in which campaign funds are held if the
litigation arises directly out of any of the following:
a) Activities related to promoting or defeating an
initiative, referendum, or recall petition or any measure
that has qualified for the ballot;
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b) The enactment, by the initiative process, of any
ordinance, charter amendment, statute, or constitutional
amendment;
c) An election contest or recount; or,
d) A violation of state or local campaign, disclosure, or
election laws.
4)Provides that committee funds held by a candidate controlled
ballot measure committee may be used only to make expenditures
related to a state or local measure or potential measure
anticipated by the committee, or to qualification or
pre-qualification activities related to such measures.
FISCAL EFFECT : Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS :
1)Purpose of the Bill : According to the author:
Candidates for legislative and state constitutional
offices have the ability to sponsor initiative
committees to raise funds for the purpose of
supporting or defeating ballot initiatives. In recent
years, these campaign accounts have been the source of
abuse by candidates who have diverted millions of
dollars from these accounts into their personal legal
defense funds. . . This practice is specifically
allowed under the Political Reform Act of 1974. In
January 2009, the Fair Political Practices Commission
adopted a rule prohibiting candidates from using
initiative committee dollars for anything other than
the support or defeat of a ballot initiative, but it
did not specifically prohibit the use of funds for a
candidate's legal defense, nor did it codify the
prohibition in state law.
AB 741 would codify the FPPC's ruling by amending the
Political Reform Act of 1974 to specifically prohibit
candidates from using funds from these initiative
committees for their own personal legal defense. This
bill lends a greater degree of specificity to the
FPPC's ruling and codifies a prohibition on using
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initiative committee funds for legal defense in law.
This commonsense political reform helps restore
integrity to the initiative process.
2)Is This Bill Necessary ? As noted in the author's statement in
support of this bill, in January 2009, the FPPC adopted new
regulations governing ballot measure committees that are
controlled by candidates for elective state office. Among
other provisions, those regulations provide that funds held by
a ballot measure committee that is controlled by a candidate
for elective state office may be used "only to make
expenditures related to a state or local measure or potential
measure anticipated by the committee, or to qualification or
pre-qualification activities related to such measures." The
regulation specifies that "[s]uch expenditures include, but
are not limited to, payment of the committee's reasonable and
ordinary operating costs, administrative overhead, fundraising
activities, travel, compliance costs, and attorney's fees
incurred as a result of the committee's activities." A
candidate controlled ballot measure committee that is
preparing to terminate its status as a committee also is
permitted to disburse its leftover funds by making donations
to charitable nonprofit organizations, provided that no
substantial part of the proceeds will have a material
financial effect on the candidate or elected officer, any
member of his or her immediate family, or his or her campaign
treasurer.
In light of the adoption of this regulation by the FPPC, this
bill appears to be unnecessary. Although not codified in
state statute, properly adopted regulations that have been
filed with the Secretary of State have the force of law.
Under the FPPC's new regulation, an expenditure by a candidate
of funds held by his or her controlled ballot measure
committee for attorney's fees or other costs in connection
with administrative, civil, or criminal litigation would not
be permitted unless the attorney's fees or other litigation
costs were incurred as a result of the committee's activities.
3)Does This Bill Accomplish the Author's Purpose ? In addition
to the fact that this bill does not appear to be necessary in
light of the FPPC's recent action, it is not clear whether
this bill would accomplish the author's stated purpose of
"prohibit[ing] candidates from using funds from . . .
initiative committees for their own personal legal defense"
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absent the regulation adopted by the FPPC.
This bill prohibits a ballot measure committee from expending
funds for a candidate's or elected officer's attorney's fees
and other costs in connection with administrative, civil, or
criminal litigation. It does not, however, expressly prohibit
a ballot measure committee from contributing or transferring
funds to other committees. In the one example cited by the
author of funds from a candidate controlled ballot measure
committee being used to pay attorney's fees for the candidate
that controlled the committee, the ballot measure committee
did not pay those fees directly, but rather contributed to the
candidate's legal defense fund, which paid the attorney's
fees. Although such an arrangement would be illegal under the
FPPC's new regulation, it would not appear to be illegal under
this bill absent the regulation. As such, it is not clear
whether this bill would accomplish the author's stated
purpose.
4)Legal Fees Related to Ballot Measures : As this bill is
written, it is not clear whether it would allow a candidate
controlled ballot measure committee to expend campaign funds
for the controlling candidate's attorney's fees in connection
with litigation even if such litigation was directly related
to the ballot measure activities of the committee. If this
bill is construed to prohibit such payments, it could
significantly restrict the ability of candidate controlled
ballot measure committees to defend their rights and positions
in court.
For instance, if a candidate controlled ballot measure committee
was heavily involved in the passage of a ballot measure that
subsequently was challenged in court, this bill could prohibit
that committee from using campaign funds to defend the measure
in those court proceedings.
Such an application of this bill also would appear to conflict
with Section 18680 of the Elections Code, which explicitly
provides that attorney's fees and other costs in connection
with litigation where the litigation arises directly out
activities related to the initiative measure are an
appropriate expenditure of funds held in a ballot measure
committee.
Although it does not appear to be the author's intent to
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prohibit candidate controlled ballot measure committees from
paying attorney's fees in connection with litigation where
such litigation is directly related to a ballot measure with
which the committee was involved, this bill could be
interpreted to prohibit such payments. As a result, this bill
creates ambiguity in the law that does not exist in the FPPC's
regulation addressing the same issue.
5)Political Reform Act of 1974 : California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
REGISTERED SUPPORT / OPPOSITION :
Support Opposition
None on file. None on file.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094