Seattle attorney Knoll Lowney scores a hit with one of his trademark political lawsuits.
OLYMPIA, Oct. 21.—They laughed a month ago when Seattle attorney Knoll Lowney filed one of those lawsuits that has made his reputation – a headline-grabbing attack against the big-spending campaign to defeat Initiative 522. Lowney demanded the ads against the food-labeling ballot measure be yanked from the air.
The whole thing seemed so silly. The litigious liberal was alleging a campaign-finance violation in the gazillions of dollars. He was suing on behalf of an organization that really didn’t exist, except for the purpose of filing the lawsuit, and if you followed the money you could see that the courtroom assault was being financed by the other side. And Lowney was doing it in a way that fit the pattern of his previous political lawsuits, seemingly calculated to generate a spate of nasty news stories just before the election but not necessarily much else. A Thurston County judge not only dismissed the case on procedural grounds, he fined Lowney’s clients $10,000.
Nobody is laughing now. The state attorney general’s office followed up last week with a lawsuit that found merit in at least one of Lowney’s claims – that the national Grocery Manufacturers Association had funneled money from big food manufacturers to the No-on-522 campaign in such a way as to avoid public disclosure. And get this – the association at least technically could be at risk of a heart-stopping fine of $22 million.
As the implications begin to sink in and the jaws begin to fall open, the aggressive progressive can do a little crowing. “We were right,” Lowney says. “…The state of Washington has evidence that this was an intentional effort to conceal. At this point I think it is beyond a situation where the GMA and the No-on-522 campaign can say this is just about politics. It is about money laundering and an attempt to steal an election.”
Money laundering? Stealing an election? That might be a bit strong, and the facts still are in dispute. But it is a tangled mess of a case and it certainly did trigger a scramble last week by the grocery trade association to file new campaign-disclosure paperwork. What many missed was that it all started with Lowney, the attorney Republicans and business interests love to hate. He’s the one who forced the Building Industry Association of Washington to spend millions defending itself against charges of campaign-finance hinkiness, who forced Republican gubernatorial candidate Dino Rossi to parade before the TV cameras on the way to a deposition just before the 2008 election, and who aimed for the same embarrassment value with a rather thin lawsuit against gubernatorial candidate Rob McKenna in 2012. For all the snarling Lowney generates from his opponents whenever he takes political fights to court, this time it appears he managed to hit paydirt.
A $22 Million Fine?
Attorney General Bob Ferguson.
First things first – no one has admitted guilt, and any talk of a $22 million fine is of course hypothetical. That simply is the maximum fine that could be levied against the Grocery Manufacturers Association under state law. And it ought to be noted that the lawsuit filed by Attorney General Bob Ferguson has nothing to do with the No-on-522 campaign or the arguments about the labeling of genetically modified foods that are being battled back and forth right now on the television airwaves. Ferguson says there is no evidence that the No-on-522 campaign committed any wrongdoing.
Instead Ferguson’s lawsuit concerns the way the grocery group raised the money that it contributed to the No-on-522 campaign — the biggest-ever accusation of a campaign-finance violation in this state. “We believe it is actually the largest amount that we have dealt with in the AG’s office in a case like this,” Ferguson said last week in announcing the lawsuit. And indeed it is – the record for an alleged violation in a campaign-enforcement case is $584,000. A fine of that amount was levied against the BIAW in 2010 as an indirect result of Lowney’s litigation – and $342,000 of that was suspended.
This one started with a complaint filed last month by a curious group calling itself Moms for Labeling. Curious because the group really didn’t exist in any normal sense of the word, and it appears to have been formed through Lowney’s law office for the sole purpose of pressing litigation. The first indication of its existence came when it sent a letter of complaint to Ferguson Aug. 26, making rather vague charges that the Grocery Manufacturers Association was deliberately trying to conceal campaign contributions that had come from its members. The grocery trade group, representing the biggest brand names in the biz, is the single largest contributor to the No-on-522 campaign — $7.2 million of the $17.1 million the campaign has raised so far.
The hitch was that on its campaign reports, the Grocery Manufacturers Association never mentioned where its money was coming from. Thus the complaint letter alleged the No-on-522 campaign wasn’t reporting its top five donors in campaign advertising, as is required by law. “You need to file a lawsuit against these organizations,” the letter said.
Triple Damages Possible
A No-on-522 ad featuring former Attorney General Ken Eikenberry identifies the largest contributors to the opposition campaign — that’s the fine print you see. Among them is the Grocery Manufacturers Association, but not its members.
That’s essentially what Ferguson did last week when he announced the suit against the grocery group, though not the campaign. Ferguson’s office asked the state Public Disclosure Commission to investigate the charges, and the GMA turned over its documents without a fight. The documents showed the money came from the organization’s members, of course — 34 companies out of its roster of 300-odd firms, big ones like Coca-Cola and Pepsi-Cola and Nestle. Among the documents obtained by PDC investigators was a February 2013 memo from association CEO Pamela Bailey describing the political fund-raising effort — what it called a “Defense of Brand Strategic Account.” Participating members would be assessed for contributions, but the GMA would make the spending decisions. That “would allow for greater planning for the funds to combat current threats and better shield individual companies from attack that provide funding for specific efforts.”
In other words, Ferguson explained to reporters last week, the memo made it appear that the organization conducted its finances in such a way to ensure the donors’ names would never show up in campaign-finance reports. That’s a clear violation of state law – the statutes say the identity of contributors cannot be concealed by channeling money through third parties. Ferguson said the GMA should have formed a political action committee and filed campaign-finance reports showing the contributions. When you consider the size and scope of the operation – one of the biggest political fund-raising efforts in state history – Ferguson said it is a little hard to treat it as a paperwork goof. “This is a sophisticated organization, and this was a process put in place over many months.”
Though the GMA scrambled to file new paperwork last Friday and some have described its new filing as a settlement or a deal, it is not. Fines have yet to be determined. State law says the penalty for improperly reported contributions can run as high as triple the amount in question. That’s where the case enters the nosebleed zone. Three times $7.2 million is $21.6 million.
Worst-Case Scenario
Attorney Rob Maguire of Davis Wright Tremaine.
It is hard to believe it will come to that, says Rob Maguire of Davis Wright Tremaine, who represents the No-on-522 campaign. Triple penalties usually come in cases where the violation is blatant and parties battle to the finish – and in this case GMA cooperated with investigators and corrected its filings immediately after Ferguson hauled it into court. “I think there is zero chance of a fine of that magnitude, and I would suspect that that we’re talking about a very small dollar number,” he says. “It is my understanding that GMA still disagrees with the state on the law, but it has voluntarily disclosed anyway just to be cooperative, and it is hard to imagine in that context the state taking a position that a significant fine is appropriate.”
The grocery group says it didn’t think it was doing anything wrong. It released a statement saying it “takes great care to understand and comply with all state election and campaign finance laws and is surprised to learn that Washington state authorities viewed the association’s actions as improper.”
For its part, the GMA saw the Defense of Brand account as a broader-ranging fund that might be used in other states as well as Washington, and it raised far more than the $7.2 million spent in this state – a total of $13.4 million. State officials say things might have been different if the organization had the money sitting in the bank and simply decided to spend some of it in Washington – but by mounting a concerted fund-raising effort clearly directed at the Washington ballot measure, it crossed the line. Queried by reporters last week, Ferguson did his best not to talk about potential fines. Wait for the settlement phase, he said.
Struggling Moms?
In the only indication that Moms for Labeling had an existence beyond the lawsuit, members announce their lawsuit at a Seattle news conference.
One element of the story doesn’t quite pass the straight-face test. Moms for Labeling? Far from being a group of beleaguered mothers with any sort of independent existence, the group – if it can even be called that – was incorporated Sept. 10, according to Department of Revenue records. Its address is 2317 E. John St. in Seattle, the address of Lowney’s law firm. It filed as a political committee with the state Public Disclosure Commission on Sept. 25, and it has reported just one contribution – $26,095 for “legal services” from Dr. Bronner’s Magic Soaps, an organic soap company that is one of the biggest contributors to the Yes-on-522 campaign. Though Moms for Labeling hasn’t reported any expenditures yet, a note from Lowney in the PDC file says it “anticipates that its only activity during this election cycle is to hire my law firm to take certain legal actions to enforce campaign laws.”
The rather insubstantial nature of his client aside, Lowney says the key point is the failure of the other side to fully report its contributions. It seemed clear something was amiss even before the PDC investigators found the memo, he says. The Washington food-labeling measure is a repeat of a similar campaign in California last year, and by September 2012, during the campaign for Prop. 37, some 42 food manufacturers had contributed money to the no campaign. Yet none of them had shown up in campaign finance reports in this state – just the whopping contributions from their trade association. “While our evidence was circumstantial, it was as good as you could get at that time without the power of subpoena,” Lowney says.
One episode of the case pretty well tells the whole story in a paragraph. Lowney filed his lawsuit against the No-on-522 campaign Sept. 17 and immediately his firm fired off letters to television stations throughout the state demanding that they pull the campaign ads. “Not only are the ads illegal, they also severely harm the voters of Washington state,” the letters said. “The ads conceal the true funders of the No-on-522 campaign.” None of the TV stations did as suggested, and Maguire retorted in a court brief that the letters demonstrated the case had nothing to do with disclosure and everything to do with “politics and publicity.” He said Lowney’s litigation aimed “to stifle political speech just as the campaign enters its most critical period.”
Lowney’s original lawsuit against the No-on-522 campaign went nowhere. Only the attorney general can file such a lawsuit during the first 55 days after a complaint is filed. So the moment the suit got a hearing Judge Christopher Wickham ruled Lowney had no chance of winning, he bounced the case and he handed Moms for Labeling the $10,000 fine. Things might be different, Lowney says, now that the PDC investigation has turned up the GMA’s internal memo. He has moved for reconsideration – and on Monday, the 56th day after the complaint was filed and after Ferguson declined to sue No-on-522, Lowney filed a new lawsuit against the campaign. This one takes issue with the way the campaign’s new ads identify the top five contributors. The litigation just keeps coming.
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