Setback in campaign finance disclosure realm

'Building Our Future' judgment overturned

Appeals Court finds in favor of bond committee, on a technicality

By David Tell, Messenger Editor

Government watchdogs thought they had reason to exult last year when a committee pushing Phoenix’s massive 2006 city bond package was found to have violated state disclosure law as to the funding sources for their advertising.
But a little less than a year after a Superior Court judge found the committee had unlawfully omitted disclosure, and awarded the plaintiffs over a million dollars in damages, the state Appeals Court has overturned the judgment, on what might well be considered a technicality.
The Appeals Court remanded the case to the lower court and directed that a verdict be entered in favor of the defendants, with court costs to be borne by the plaintiffs: Sonoran News reporter Linda Bentley and Childress Buick-Kia owner Rusty Childress.
The reversal hinged on a question dealt with by the Superior Court—wrongly, according to the appellate panel—concerning the application of a clause in the law’s disclosure requirement: that the disclosure of an ad’s top four funding sources is only mandated when at least 50 percent of its language deals with “the same subject.”
Superior Court Judge Michael Jones had ruled that because the seven Phoenix bond propositions constituted a package, with interlocking and overlapping spending items, they together represented a single subject—i.e., “the same subject,” per the clause in the law. Over about 23 pages of findings and supporting discussion, Appellate Judge Donn Kessler drew on law, precedent and the dictionary to conclude that, in supporting all seven bond propositions, the ads were not about the “same” subject.
In an interesting line of discussion, Kessler drew in points about the state Constitution’s “single subject” provision as illuminating the disclosure law’s “same subject” clause. Separately, he outlined the history of precedents, and the legal justifications, that required that the overall 2006 bond proposal be broken up into its seven separate ballot propositions in the first place.
According to a passage quoted in the appellate ruling, “the pertinent principle is that two or more separate and distinct structures or units cannot be combined into one single proposition and submitted jointly as one question. In the great majority of jurisdictions the general rule is well settled that ... there must be a separate proposition on the ballot for each distinct, unrelated, and independent object or purpose for which indebtedness is contemplated, showing separately the amount desired for each.”
So, for the Appeals Court—ironically—while the city was required to put forth its proposed bond items as separate propositions (thus representing different subjects), advertising supporting them was able to simply, easily and conveniently avoid disclosure requirements merely by supporting all of them in a single ad.
Kessler discussed the constitutional “single subject” requirement for initiatives and referenda to try to explain why the Legislature would have added the “same subject” exception to disclosure requirements, thus enabling such an easy avoidance of disclosure:
“Presumably, the legislative intent was to alert voters of the identity of supporters of ballot propositions dealing with the ‘same subject,’ so the voters could determine the possible implications of the propositions. This is especially true when various propositions deal with the same subject, but are actually adverse to or conflicting with each other such as those supporting bans on smoking but one of which is supported by the tobacco lobby. In contrast, in adding subsection (H), the legislature saw no need to require such identification when the advertisements dealt with more than one subject on which voters could separately cast their ballots and which were not conflicting,” Kessler wrote.
“Here, the voters could cast their ballots to approve some of the bond propositions, but not others, and the separate propositions were not necessarily dependent on each other and were not conflicting. Identification of supporters of all of the propositions, such as BOF [Building Our Future, the bond political committee], would not serve to identify the implications of voting on any one of the propositions.”
Kessler’s reasoning seems to contain the seeds of its own refutation. For example, he notes that it’s “especially true” that disclosure may aid voters in determining the implications of various propositions when they are on the same subject but backed by different interests. But while disclosure may be “especially” useful in such cases, that by no means implies it’s not also valuable when voters are evaluating different propositions.
In the case of the 2006 Phoenix bond program, watchdogs pointed out that the undisclosed backers of the propositions included some—Westcor and Arizona State University, to name just two—that might well have expected to benefit from all or several of them. The plaintiffs in the case believed the voters were entitled to know the identity of those backers.
Nonetheless, while admitting the Legislature’s underlying intent was generally to require disclosure, Kessler argued the limiting exception must have been legitimately and knowingly intended: “Applying the test from the ‘single subject’ rule to A.R.S. §16-912.01(H) is also compatible with the requirement that we construe statutory language to fulfill the legislative intent underlying the statute.”
“While we agree with the superior court that the overall legislative intent underlying A.R.S. §16-912.01 is to require disclosure to the public of who is supporting a ballot proposition, the clearly-stated legislative intent limited such requirement under subsection (H) of that statute to require disclosure only when fifty percent or more of the advertisement dealt with the ‘same subject.’ While there is no legislative history to guide us on what the legislative intent was in using the words ‘same subject,’ we presume that the legislature knew and approved of the judicial branch’s interpretation of the ‘single subject’ concept under Arizona Constitution, Article 21, §1.”
The question remains, then, why the Legislature would add an exception to disclosure that could so easily be exploited and invoked to avoid it? As argued above, the Appeals Court’s implication that the disclosure requirement is only useful to voters when applied to ads on a “single subject” does not necessarily follow.
Plaintiff Bentley said she’s trying to pursue just that question, to bolster an intended appeal to the state Supreme Court. “I’m researching the law and Legislature’s original intent,” Bentley said. “It goes back a long way. If you read campaign finance laws, they require disclosure, disclosure, disclosure. [But the Appeals Court is] saying ‘If you logroll it all together, you can circumvent the law.’”
“Logrolling” is the prohibited practice of bundling together disparate items in bond proposals or different subjects in state ballot propositions. But Bentley points out that in the advertising for the set of 2006 bond items, the Building Our Future political committee in effect “logrolled” its support for them all. And thus, per the Appeals Court, “In your promotion, you’re exempt from disclosure. It sounds absolutely stupid,” she said. “Out-of-state interests and others have spent millions of dollars on logrolling [support for the bonds] together.”
But why would the Legislature have created a loophole so big you can drive a truck full of cash through it? “Legislators don’t all have the best command of the English language,” Bentley said. “If you read [the statute], you go ‘What the hell does this mean?’”
Bentley said she was surprised the reversal turned on the apparent exception clause. “They threw it out on the one issue, which we thought was the nothing issue,” she said, reiterating that the Superior Court judge had found the bond propositions so entwined that they were on “the same subject.” “There’s so much crap in some of those bonds individually. So if they passed Prop 1 but not Prop 2, you’ve bought radio equipment for new police stations, and you don’t build the stations.” Or vice versa, she added.
The Appeals Court said since it found basis for reversal just on the clause at issue, it did not consider other arguments by the defendants, including attacks on the constitutionality of the disclosure statute on First Amendment grounds. Those defense arguments were also thoroughly considered and countered by Judge Jones.
In the meantime, the defendants have obtained a fraction of their approximately $1.2 million judgment, and they only got that—about $130,000—through assiduous legal wrangling, Bentley said.
“We have whatever they had left in the bank. They did a fraudulent transfer. They took the money and transferred it to a bank account and gave it to Andy Gordon’s firm to appeal, as a retainer,” Bentley said. “After we won, they were spending our money. If they lost [on appeal], there would be no way to pay us because they would have spent it. We had to go for garnishment, had a debtor hearing to find out what they did with the money—had to do a debtor exam. Lauren [Weinzeig] of Gordon’s firm finally told [plaintiff’s attorney] Carolyn [de Szendeffy], ‘We took that for retainer on appeal.’ We had the court make them give it back.
“We’re not going to spend it till we know for sure if we won or lost, in case we have to give it back,” Bentley said. In the meantime, if they lose, the fact they’re responsible for court costs isn’t so bad, she said. “Costs aren’t much, a couple hundred bucks. They were just awarded costs, not attorney fees—that would be hundreds of thousands.”