The FCPC commissioners review their papers before a meeting. From left: Brad Smith, Jennifer Lombardi, Patrick O'Donnell, and Anna De Leon. Photo: Frances Dinkelspiel
The FCPC commissioners review their papers before a meeting. From left: Brad Smith, Jennifer Lombardi, Patrick O’Donnell, and Anna De Leon. Photo: Frances Dinkelspiel
The FCPC commissioners review their papers before a meeting. From left: Brad Smith, Jennifer Lombardi, Patrick O’Donnell, and Anna De Leon. Photo: Frances Dinkelspiel

The Fair Campaign Practices Commission on Thursday levied its second heaviest fine in 20 years on a landlord-backed group that spent more than $42,500 during the 2012 election.

The FCPC approved a stipulation agreement worked out between city staff and the people behind a Slate Mailer Organization that sent out five campaign mailers in support of the TUFF (Tenants United for Fairness) Rent Board slate.

The FCPC determined that the Slate Mailer Organization (SMO), its treasurer Rita Copeland, James Jay, an officer and rent board candidate, two of its donors, and Sid Lakireddy, the president of Berkeley Property Owners’ Association, violated Berkeley’s Election Reform Act in the way they administered the SMO and distributed its funds.

The FCPC also determined in another stipulation agreement that the four candidates running on the TUFF slate had violated Berkeley’s election laws by failing to file campaign spending reports on the in-kind support they had gotten from the mailers. Incumbent Nicole Drake (who was defeated) agreed to pay $300 in fines, as did two other defeated candidates, Kiran Shenoy and James. Judy Hunt, who won election to the Rent Stabilization Board, agreed to pay $20 in fines. Her fine was less because she amended her campaign reports two days after she realized she had violated the law. That was before the election. The others only did so a few weeks later.

All the parties also pledged to do a better job complying with the law in the future.

The vote to accept the stipulations came after more than an hour and a half of public testimony and commissioner discussion about whether the fines were proportional to the transgressions. Many speakers felt that the $4,000 fine was too small.

“It doesn’t seem to me the amount of the penalties are commensurate with the amount of money raised,” said Linda Franklin. “I don’t think this was a mistake or a misunderstanding. I think this was a conscientious effort to subvert the laws we all have to comply with. A message needs to be sent that this is not okay.”

At least three of the commissioners, all appointed by City Council members who are seen as more pro-tenant than pro-landlord,  agreed with this assessment. Anna De Leon, a Jesse Arreguin appointee who took her seat for the first time on Thursday, introduced a number of substitute motions that were defeated. She first suggested that the stipulations be rejected. Then she suggested that the FCPC hold a hearing to learn more about the matter. While two commissioners – Al Murray and Spencer Pritchard  (appointed by Max Anderson and Kriss Worthington) — supported her efforts, the motions did not pass.

“We’re talking about $50,000 raised by mega-landlords skirting the law,” said De Leon. … “The fines imposed should be reflective of that amount.”

The FCPC did vote to approve one of her motions: to delete a paragraph in the stipulation that absolved the SMO group of malice. It read: “Staff has not found evidence of any intent on the part of Respondents to deceive or mislead the public.”

Patrick O’Donnell, the chair of the commission and a Laurie Capitelli appointee, reminded the crowd that the FCPC had only been given the authority last year to assess fines on violations of campaign law, but they are only allowed to assess $1,000 per violation. While the fines may seem modest, they are the second highest amount levied in 20 years, he said. The last time the FCPC levied fines was in the 1990s when it and the state fined Don Jelinek more than $5,000, he said.

Commissioner Jennifer Lombardi said in response to De Leon’s remarks that the FCPC had voted in previous meetings – before De Leon took office – not to hold hearings on the violations but to try and reach a negotiated settlement. The FCPC has appointed a subcommittee to examine the laws surrounding SMOs, she said. Lombardi, who was appointed by Susan Wengraf, also said that the matter has been referred to the state, which has much more jurisdiction over SMOs than Berkeley does.

“I don’t believe this is going to end in this room,” said Lombardi. “I believe it has legs beyond us.”

Commissioner Brad Smith said he thought the SMO had made mistakes, but not intentionally.

“I think the people involved in this are not as evil as they are being characterized,” said Smith, who was appointed by Gordon Wozniak. “They thought – I believe – they were operating within the laws. They thought they had gotten expert opinion. The people were doing the best they could. They took advantage of a tremendous hole in the system that needs to be changed. Our commission should spend its time on how to block that hole in Berkeley.”

The SMO and the four Rent Stabilization Candidates will pay their fines into Berkeley’s general fund.

The violations all centered on state and local laws regulating Slate Mailer

One of the mailers sent out by the Tenants United For Fairness slate mailer organization during the 2012 election.
One of the mailers sent out by the Tenants United For Fairness slate mailer organization during the 2012 election.

Organizations. SMOs are unusual organizations. They are often for-profit companies that solicit funds to place candidates on targeted mailers. They cannot be controlled by any candidate, party committee, or committee formed specifically to support or oppose a candidate or measure. Any mailing done by an SMO is not considered a direct donation to a candidate, but an in-kind donation that must be listed on a candidate’s campaign spending form.

The SMO supporting the TUFF slate was formed Oct. 5, 2012 to collect funds to send out mailers in opposition to Measure U (a proposed open-government ordinance) and in support of Drake, Hunt, James, and Shenoy, who were perceived to be more landlord friendly then their opponents.

Lakireddy was one of the driving forces behind the fundraising, according to a staff report, although the SMO did not list him as one of its officers and should have. He helped the SMO raise $45,520 to finance five mailers. The East Bay Rental Housing Association Political Action Committee donated $31,000, Diablo Holdings, an Alamo property management company run by John Lineweaver, donated $5,000, and Premium Property Development and Management donated $1,000. Ellis Street Properties, Stuart Street Properties, and Lower Carleton Properties also donated smaller amounts as did some individuals. According to state law, those donations must be allocated to a specific cause, like a mailer.

However, a staff investigation into the SMO, started after Planning Commissioner Patti Dacey filed a complaint in October, determined that $6,000 donated by Diablo Holdings and Premium Property was not allocated to anything specific. When that happened, according to a staff report, the SMO was instantly “converted” into a campaign committee. While the state has jurisdiction over SMOs, Berkeley has jurisdiction over local election committees. Consequently, the SMO should have filed campaign contribution reports, which it did not, according to the staff report. That was a violation of the law.

If Diablo Holdings and Premium Property had allocated the funds and directed them to go to the mailer, however, no laws would have been broken, according to the staff report.

In addition,  when Ellis Street Properties, Stuart Street Properties, and Lower Carleton properties made donations to the SMO, they indicated they wanted those funds to go directly to the candidates, not to the mailer. Berkeley election law prohibits businesses from donating to candidates. The SMO refunded $1,440 to those businesses in November.

The four TUFF candidates collectively received in-kind donations of $6,980 from the SMO but all failed to report those donations on their campaign contribution forms covering from July to October 2012, according to the staff report.  The attorney for the SMO informed the four candidates on Oct 30 that they had to report the contributions. Hunt filed an amended campaign report on Nov. 5, before the election. The other three candidates reported the donations after the election.

The FCPC also voted on a stipulation agreement worked out between the city and the committee, Stand Up for the Right to Sit Down. The group worked successfully to defeat Measure S, which would have made it illegal to sit on the sidewalk in commercial districts from 7 a.m. to 10 p.m.

The committee failed to report a number of late donations made for more than $100, according to a staff report.

The fines amounted to $700, but city staff reduced the amount to $500 in the stipulaton, according to Assistant City Attorney Kristy van Herick.

Commissioner De Leon echoed the feeling of many of the speakers from the audience who felt the fine was too steep, especially compared with the the fine levied against the TUFF group. The commission agreed and voted unanimously to reduce the fine to $50.

Read a draft of the stipulation agreements.

Commission to consider alleged campaign violations [12.13.12]
Late money flows into Berkeley election campaigns [11.02.12]
Rent Board candidate accuses Capitelli aide of trespassing [11.06.12]

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Frances Dinkelspiel, Berkeleyside and CItyside co-founder, is a journalist and author. Her first book, Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California, published in November...