What’s Behind The Arizona Dark Money Group Spending Millions In California?

Kirk Adams, former Arizona Speaker of the House, speaks at a campaign rally during his run for Congress in August. Adams is now a part of the dark money group Americans for Responsible Leadership.
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Update: October 25, 2012, 5:56 PM

A political group tied to a handful of mostly small-time Arizona Republicans has made a splash in California, by dropping $11 million into the fight over a pair of ballot initiatives in the Golden State.

The Arizona group, called Americans for Responsible Leadership (ARL), is registered as a 501(c)4 “social welfare” organization, which allows it to keep its donors secret. That, along with the $11 million donation it made on October 15 to a California group called the Small Business Action Committee, has attracted attention and criticism from California Democrats and progressive groups.

“Eleven million dollars doesn’t just drop out of the sky — this doesn’t pass the laugh test that suddenly this level of money appears in California from an organization with no track record here, without the knowledge of the donors who put that money into the organization,” Derek Cressman, Common Cause’s regional director, told The Bay Area News Group last week.

The Arizona group’s donation was made to bolster efforts opposing California’s Proposition 30, Gov. Jerry Brown’s tax-hike initiative, and supporting Proposition 32, which would prohibit labor unions’ from raising political money from payroll deductions. Tens of millions of dollars have been poured into the battles over both propositions. Charles Munger Jr., the GOP activist and son of Warren Buffett’s business partner, has donated nearly $23 million against Prop. 30 and for Prop. 32. On the other sides of both issues, the California Teachers’ Association has lead the way with well over $20 million of its own.

Late last week, Common Cause of California called on California’s Fair Political Practices Commission to order ARL to reveal its donors. While the odds of that actually happening may be long, dark money groups this size don’t drop out of the sky, either. There is much that is known about the individuals associated with the group. And a review of campaign finance disclosures and other documents suggests that ARL’s big spending actually began back in August, and that the money really started moving — not just in California — after a recent reorganization of the group.

The group was formed in July 2011. In its incorporation documents in Arizona, the group’s stated purpose is “to further the common good and general welfare of the citizens of the United States of America by educating the public about concepts that advance government accountability, transparency, ethics and related public policy issues.”

Three men were listed as members of the group’s board of directors at the time: Robert Graham, Eric Wnuck, and Steve Nickolas. Graham is the founder of a wealth management firm, RG Capital, and the author of an anti-union book called “Job Killers: The American Dream in Reverse.” In 2009, Graham made a brief run for Arizona governor, and he is currently running to be chairman of the Arizona Republican Party. Wnuck, the founder of a medical imaging company, ran unsuccessfully for Arizona’s 5th Congressional District seat in 2010. Nickolas, meanwhile, is the founder of several companies in the beverage industry, according to his website.

The incorporation document was signed and submitted by Cathleen West, a partner at the Washington D.C. and Virginia-based law firm HoltzmanVogelJosefiak PLLC, home to some of the most prominent Republican lawyers working today. The firm’s name partners include Jill Holtzman Vogel and Tom Josefiak, both former chief counsels of the Republican National Committee, and Alex Vogel, who used to serve as chief counsel to former Senate Majority Leader Bill Frist (R-TN).

Americans for Responsible Leadership did not exactly storm out of the gate. A report filed with the Federal Election Commission in April 2012 listed $5,3211.15 spent for get-out-the-vote telephone calls made in support of Sen. Orrin Hatch (R-UT) during his primary battle. In July, the group chipped in $25,000 to oppose Arizona’s Prop. 121, which would do away with party primaries. In August, the group spent another $35,000 to oppose Arizona’s Prop. 121, and gave $57,000 combined to two Arizona groups, Republican House Victory and Republican Victory Fund. It also paid $11,502.60 for mailers supporting Andy Tobin, Arizona’s current House Speaker.

An annual report received by the Arizona Corporation Commission just this past weekend shows that two men were added to ARL’s board of directors on Sept. 13, and that one of those men, Kirk Adams, is now the group’s president. Adams, a former Speaker of the Arizona House of Representatives, ran for Congress in Arizona’s newly redrawn 5th District this year, and picked up endorsements from Sarah Palin, and Sens. Jon Kyl (R-AZ) and John McCain (R-AZ), before losing to former Congressman Matt Salmon in the Republican primary in late August. Just a few weeks later, Adams joined ARL. A few weeks after that, Adams was signing the group’s annual report. The second of the group’s new directors, Taylor Searle, is a CPA who works for The Wolff Company, a Scottsdale, Ariz.-based real estate private equity firm.

In the days and weeks after Adams and Searle joined the group, its spending skyrocketed. On Sept. 18, it gave $40,000 to oppose Arizona’s Prop. 121, and $500,000 to oppose the state’s Prop. 204, which would enact a one percent sales tax to fund education, transportation projects and human services. On October 16, the day after it gave $11 million to the Small Business Action Committee in California, ARL contributed another $350,000 to efforts against Prop. 121. And expenditure reports filed with the FEC between Oct. 18 and Oct. 23 show the group has paid two firms, Headway Workforce Solutions in North Carolina and Angler, LLC in Washington D.C., more than $576,000 over the last eight days for “voter contact phones: personnel” and “voter contact phones: system” in opposition to President Barack Obama. (One puzzling wrinkle: the expenditure reports, which cover dates from Oct. 16 to Oct. 22, all list Oct. 23 as the date the payments were made.) The FEC documents were filled out and signed by Chris Winkelman, an associate with HoltzmanVogelJosefiak.

It is unclear what motivated the Arizona group to start spending in California, and what strategy ties all of ARL’s spending together. Adams, Wnuck, and Nickolas did not respond to requests for comment, and neither did West or Winkelman, the lawyers whose names appear on the group’s documents. Graham said in an email that he is in New Delhi, India until next week, with limited email and phone access.

TPM reached Searle at his office on Tuesday. He said that Adams had recruited him to join Americans for Responsible Leadership, but that he had only been to one meeting so far, and could not speak to the group’s political spending activities. Searle said he does not consider himself a partisan person, and he hopes to use his role at the group to promote his educational ideas, which he described as “true education” and “community education.” Asked if there were any milestones he was looking for ARL to meet in pursuit of his educational ideas, Searle replied: “I would say the only milestone right now is figuring out our milestones. This is the very beginning stages of planning this stuff out.”

There is another player in Arizona politics who has recently attracted attention for using a dark money group to funnel millions of political dollars.

Earlier this month, Bloomberg reported on the activities of Sean Noble, a former congressional aide who now helms the Arizona-based Center to Protect Patient Rights (CPPR). In 2009 and 2010, Noble’s group contributed $55.4 million to other nonprofit political groups. (The CPPR is also a 501(c)4.) One of the groups that has received millions from the CPPR is the Iowa-based American Future Fund, which itself has spent more than $4 million opposing Prop. 32 in California. FEC records show that Kirk Adams’ congressional campaign paid $44,000 to Noble’s political consulting firm, DC London, during his run.

Noble did not respond to a request for comment.

Late update: California’s Fair Political Practices Commission filed a lawsuit against the group on Thursday morning demanding to see the names of its donors.

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