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Tuesday, Sept. 19, 2006 | The city of San Diego’s Ethics Commission issued fines Monday to three organizations that supported Mayor Jerry Sanders’ election campaign last year after they admitted to violating election laws.
The commission issued the largest fine of its four-year history – $17,000 – to Continuing the Republican Revolution, an Orange County political group that wrongfully posed as a slate-mailer committee. The designation allowed the group to send mailers to approximately 39,000 San Diego residents without publicly disclosing the sources of its campaign contributions.
Two companies doing business in the San Diego area also settled with the commission, admitting to having laundered campaign money by wrongfully reimbursing employees for their contributions to the Jerry Sanders for Mayor Campaign.
Stacey Fulhorst, Ethics Commission executive director, said investigators found no evidence that the violations occurred with the knowledge of the mayor or his campaign.
Sukut Construction, Inc., which is based in Santa Ana and has an office in Oceanside, and its division president, Mike Zanaboni, agreed to a settlement with the commission and to pay a $5,000 fine for reimbursing three employees who made a total of $900 in contributions to the Sanders campaign.
Likewise, the commission struck a settlement with Grubb & Ellis/BRE Commercial and its president and CEO, John Frager, fining them $3,000 for a similar violation.
Under San Diego election laws, only individuals can give to political campaigns. Businesses are forbidden from directly contributing to candidates’ campaigns – and from paying employees for their contributions.
Under the city’s election laws, campaigns generally must disclose their contributions and expenses. However, a 1987 loophole allowed what’s known as “slate mail campaigns” – in which campaigns pay to be featured in a mailer along with other Election Day material – to be exempted from the disclosure law.
Continuing the Republican Revolution falsely posed as a slate mailer and didn’t publicly report its expenses or the source of its $18,000 in contributions, according to the settlement released Monday. Its mailer didn’t feature the requisite four campaign advertisements – it only contained three – and the ads weren’t paid for by the campaigns. Instead, the commission said, the mailer featured Sanders. Two other ads for ballot measures were tacked on to give the ad the appearance of a slate mailer.
“For someone in the business of slate mailers, they should have known that this didn’t qualify,” Fulhorst said. “Instead, [principal Scott Hart] ignored the requirements and circumvented the law.”
As a result, the mailer violated a number of campaign laws. The four individuals and eight organizations that financed the mailer with contributions of between $1,000 and $5,000 should have instead been held to the election laws that cap individual donations at $300 and forbid companies or organizations from donating. Additionally, the contributions and expenditures should have been disclosed, the settlement states.
The campaigns contributors were: Access Nurses, Inc., $5,000; Richard Gulley, $1,000; Horton Fourth Avenue Ltd., $1,000; Mesa Distributing Co., Inc., $3,000; OliverMcMillan Bernardo Industrial, $1,000; OliverMcMillan, LLC, $1,000; Jeffrey Silberman, $1,000; Withers, Mann & Lamanna, LLP, $1,000; OliverMcMillan Market Street LP, $1,000; OliverMcMillan Gaslamp Theaters, LLC, $1,000; Morgan Dene Oliver, $1,000 and Dick Parrent, $1,000.
The commission did not take action against the contributors. Commission officials said they are worried that the slate mailer exemption, created to allow businesses to sell advertising, is instead being abused to avoid campaign laws.
Additionally, Ethics Commission officials said employees of Sukut Construction and Grubb & Ellis admitted to their actions and didn’t attempt a cover-up of the campaign money laundering. In fact, the settlements state, the companies publicly disclosed making contributions of $900 to the Sanders campaign in disclosures made to the Secretary of State and the City Clerk’s Office.
According to the settlement, three Sukut employees contributed to the Sanders campaign on Sept. 20, 2005 and days later submitted expense reports for the contribution to the company, which reimbursed the employees. Local election law forbids companies from giving to campaigns and from reimbursing employees. The employees’ reimbursements caused the company to, in effect, make a $900 donation to the Sanders campaign, which is also a violation, the settlement states.
The same holds true for Grubb & Ellis, which reimbursed Frager for two contributions and his wife, Kristen, for one contribution to the Sanders campaign. (Frager contributed to both the primary and the general campaigns.)
Sanders has made ethics a central pillar of his administration. Fred Sainz, his spokesman, said Monday that the mayor believes the Ethics Commissions’ actions were entirely appropriate, and reiterated that the commission found that neither he nor his campaign had any knowledge of the violations.
Last month, the city entered into a $150,000 contract with Grubb & Ellis to help revamp its Real Estate Assets Department. Grubb & Ellis/BRE Commercial is an affiliate of Grubb & Ellis.
Only the mayor, Sainz and top aide Kris Michell were aware of the investigation, Sainz said. He said the mayor’s land-use czar, Jim Waring, chose the company for the contract and was unaware of the investigation.
(Correction: The original version of this story referred to John Frager as the “then-president and CEO” of Grubb & Ellis/BRE Commercial. In fact, he is still the company’s president and CEO. It also failed to note that Grubb & Ellis/BRE Commercial is an affiliate of Grubb & Ellis. We regret the error.)