'A tricky area of philanthropy': LA mayor solicits millions for his favored causes
Los Angeles Mayor Eric Garcetti — a longtime critic of big money in local politics — has set a surprising city record requesting large contributions, using a little-known and largely unregulated process called “behested payments,” KPCC has found.
Since his election as mayor, records show Garcetti has used the mechanism to raise $31.9 million in large donations to his favored causes from individuals, businesses and foundations, some of which have won sizable contracts and crucial approvals from the city in recent years.
That amount is a new record for the city of Los Angeles, which first began tracking the payments in 1997.
Garcetti has raised more than twice as much in behested payments as California Gov. Jerry Brown and more than 40 times the amount of Lt. Gov. Gavin Newsom over the same time period, according to a KPCC analysis of reports filed by the politicians.
Most of the donations Garcetti raised went to a charity he helped create after his election, the Mayor's Fund for Los Angeles, according to reports he filed with the Los Angeles City Ethics Commission.
Other contributions given at his request benefited other efforts, including two that are dear to his heart: L.A.'s Olympic bid and The GRYD Foundation, which runs a summertime park program Garcetti has supported for years.
“It strikes me that he’s taking advantage of the law more than anybody else has ever done,” said Bob Stern, a former California Fair Political Practices Commission general counsel who helped write the state's 1974 Political Reform Act.
Among Garcetti’s behested donors are telecommunication giants Verizon Communications Inc. and AT&T Inc. as well as entertainment behemoths Paramount Pictures and Universal Studios, all of which have had dealings with the city through contracts or key development approvals, public records show.
“Corporations or special interests will look for ways to throw money at the feet of the lawmakers,” said Craig Holman, a campaign finance and government ethics lobbyist for the nonprofit consumer rights group Public Citizen. A behested payment “provides an ideal opportunity for the very wealthy and the lobbyist to buy access to lawmakers.”
Charitable foundations and private individuals have also made donations large and small, according to Garcetti’s reports.
Image: Getty Images. Data: Los Angeles City Ethics Commission & California Fair Political Practices Commission. Maya Sugarman/KPCC. Garcetti’s press office scheduled an interview for this story, and then canceled it, but agreed to answer questions submitted by KPCC in writing. In an email sent by his press office, Garcetti defended the contributions as funding important civic causes. He dismissed concerns they raise ethical questions.
"Since I became mayor, we have raised tens of millions of dollars for philanthropic organizations, so that we can tackle those challenges together," one email read.
"Last year alone, we raised critical funding for programs like Summer Night Lights, Homes for Heroes, the L.A. College Promise, Hire L.A.’s Youth and our Welcome Home Project. These are programs that serve our city every day, and I am proud that my office has been able to help them make a difference in Angelenos’ lives," the email stated.
Behested payments and political contributions
The payments seem to contradict some of his public statements against money in politics.
In 2011, Garcetti pushed for a ban on campaign contributions from bidders for large city contracts. The measure, Charter Amendment H, passed by a healthy margin and barred contributions from bidders on city contracts of $100,000 or more.
Garcetti lent his name to the official argument for the measure in sample ballots, which declared “special interests are always trying to buy influence at City Hall. Charter Amendment H will help stop them.”
Then in 2013 during his mayoral bid, Garcetti criticized his opponent Wendy Greuel for benefiting from millions in outside spending.
“I've done things in this campaign that make me the independent candidate. I'm not the hand-picked candidate of the downtown power brokers … I’m not beholden,” he said during a debate.
He also pledged not to accept campaign contributions from retail giant Walmart, which he criticized during his campaign for paying workers low wages.
"Los Angeles loses if we run a race to the bottom in terms of wages and working conditions," he said.
At the end of the following year, city records show that Walmart made a $100,000 contribution to the Mayor’s Fund, at Garcetti’s behest.
Image: Fabrice Coffrini/AFP/Getty Images. Data: Los Angeles City Ethics Commission & Los Angeles City Clerk. Maya Sugarman/KPCC. Garcetti chafed at comparing campaign contributions to behested payments, insisting “they are completely different” in his written statement.
“The funding we raise through organizations like the Mayor’s Fund for Los Angeles benefits philanthropic organizations, so that they can do things like house veterans, send students to college, and keep kids safe from the violence on our streets,” Garcetti’s statement read. “Campaign contributions benefit political candidates and campaigns. The two forms of fundraising are not comparable.”
His press secretary added that Garcetti spends “virtually no time” fundraising for the Mayor’s Fund.
Giving at the Mayor’s behest
Reviewing Garcetti’s reports of behested payments, city contracts and other government documents, KPCC found at least two dozen donors also had business before the city including:
- AT&T: The telecom giant struck a contract worth as much as $30 million with the city in 2015 for an array of communications options. Over the following six months, the company laid down three separate behested payments, totaling $105,000.
- Paramount Pictures: The film studio made a $50,000 payment to the Mayor’s Fund in July 2015 as it was planning a huge expansion that had been in the works since they first announced the effort publicly back in 2011. In October 2016, the L.A. City Council approved the studio’s $700 million development plan, which added production facilities, parking structures and other amenities. The project is expected to span more than 20 years.
- Verizon: The company has made four payments at the mayor's behest since 2014, including a $100,000 donation to the Mayor's Fund in October 2015, a little over a month after the City Council voted to approve a contract for voice and data services worth up to $15 million.
“I think that that is normal for the beast,” said Craig Settles, a Bay Area broadband industry analyst.
He said telecoms who do businesses with big cities typically assign several lobbyists to help win and keep multi-million dollar contracts. One way they do that: huge contributions.
“If there’s anyone that’s paying attention, you realize that the company doesn’t have to give the money to the legislator directly,” Settles said. “You just basically funnel it into different activities where the elected official can get a great photo op and then, boom, there you go."
Data: Los Angeles City Ethics Commission & Los Angeles City Clerk. Maya Sugarman/KPCC. Heidi Flato, who handles external communications for Verizon on the West Coast, declined repeated requests for comment. Julia Cooksey, Verizon’s local lobbyist at the time of the $100,000 donation, also declined to be interviewed.
Verizon later transferred that $15 million contract to another company, but it still has plenty of business with the city: at least 11 contracts active since 2011, city records show, covering a wide variety of services, supplies and telecom equipment.
Garcetti did not sign the Verizon contract in question and had no veto power over it.
He did have approval power over the city ordinance involved in the Paramount studio expansion deal and could have vetoed it.
Jennifer Lynch, Paramount’s vice president of corporate social responsibility and internal communications — who oversaw the $50,000 donation to the Mayor’s Fund in 2015 — said that money went to support the Domestic Abuse Response Team initiative, a Los Angeles Police Department program.
“We are very proud of the local grants we make to support our Hollywood area community,” she wrote in an email, “and certainly providing the seed funding for a domestic abuse and response team at the Hollywood Police Station is a particular source of pride for Paramount, but we really do not seek to publicize the community investments that we make.”
Lynch declined KPCC's interview requests.
Paramount has been active in traditional political giving as well. Since 2015, the company has donated to 18 "officeholder accounts" held by L.A. politicians. That includes donations to politicians in each of L.A.’s 15 council districts and its three citywide offices: city attorney, controller and mayor.
Stern, the former general counsel for the FPPC, said regardless of whether he has a vote on contracts, Garcetti has clear influence over transactions in the city and that raises ethical concerns.
"People who have business pending in the city of Los Angeles shouldn’t be making payments at the behest of the mayor," he said.
‘Not considered gifts’
Other behested donations reported by the mayor include money from Disney and Goldman Sachs, the Los Angeles Dodgers, and the foundations of celebrities like “Star Wars” director J.J. Abrams and basketball great Kobe Bryant.
The list also includes wealthy philanthropists and their foundations: L.A.-based billionaire Eli Broad, former New York City Mayor Michael Bloomberg and Casey Wasserman, an entertainment executive and chairman of the committee to bring the Olympics to Los Angeles.
Garcetti has reported more than 400 behested payments since his first mayoral election. The median reported payment is $25,000, but the list includes dozens of five, six and seven-figure contributions.
Garcetti signs each report disclosing a behested payment. Some donors contacted by KPCC said Garcetti had not directly asked them for the behested donation, rather his staff did.
Unlike campaign contributions, which are limited — to $1,400 in the case of mayoral candidates in Los Angeles — behested payments can be made in any amount. California requires politicians to report them, but only when a donor gave $5,000 or more in a single year.
"They’re not considered campaign donations because they’re not going to the campaign, and they’re not considered gifts," said Jay Wierenga, communications director with the California Fair Political Practices Commission. "So there’s that in between area where lawmakers have come up with the term behested payments."
City records show many donors didn’t stop with hefty behested payments. Several also gave to Garcetti’s 2017 re-election campaign or his officeholder account. Some even donated all three ways — including Eric Smidt, CEO of Harbor Freight Tools, Geocities founder David Bohnett, Coca-Cola and Paramount Pictures.
No limits on behested payments
The unlimited nature of the behested payments at the request of a public official can create opportunities for influence buying, according to Brendan Fischer, an attorney with the Campaign Legal Center in Washington, D.C.
“Limits on the amount that a donor can give directly to a candidate are in place for a reason, and that’s to limit corruption,” he said. “By a donor being allowed to support a public official above and beyond the legal contribution limits undermines the law’s anti-corruption purpose.”
To be sure, Garcetti isn’t the only official behesting payments.
Verizon and Paramount, for example, have been making behested payments in Los Angeles for more than a decade, according to records kept by the Los Angeles City Ethics Commission.
Verizon has also been active at the state level. It donated another $225,000 at the behest of more than a dozen statewide politicians and state legislators since 2011, including Gov. Brown, according to reports filed with the FPPC.
Garcetti’s predecessor, Antonio Villaraigosa, also solicited behested payments. In his eight years in office, they totaled $22.8 million. Garcetti eclipsed that amount in his first four-year term.
Politician-branded charities like the Mayor’s Fund are fairly unusual, but Fischer, of the Campaign Legal Center, says nonprofits are increasingly viewed by both donors and public officials as a means of promoting an agenda and promoting policy.
“And for donors, nonprofits may increasingly be viewed as a means of influencing public officials and, perhaps, secretly influencing public officials,” he said.
L.A.’s Mayor’s Fund was modeled after a similar mayoral charity in New York created when Rudy Giuliani was mayor in the 1990s. Both organizations are 501(c)(3)s not 501(c)(4)s, so they aren’t allowed to advocate, participate in politics or spend money on influencing elections.
Deidre Lind of the Mayor’s Fund for Los Angeles declined an interview with KPCC, but said in an email that the fund is independent of the mayor.
“Our independent decision-making structure along with our commitment to transparency, collaboration and impact is critical to our ongoing success,” Lind wrote in a statement. She added paperwork is filed for every donation requiring a behested report “regardless of the level of engagement of the Mayor himself or his staff.”
Still, there are clear links between Garcetti’s mayoral administration and the Mayor’s Fund.
Garcetti’s press secretary said Mayor’s office staff are involved with the Mayor’s Fund. In addition, Garcetti’s former deputy chief of staff, Rick Jacobs, sits on the board of directors for the Mayor’s Fund. Jacobs did not return calls or emails for comment.
Tax records show the Mayor’s Fund has passed on millions of dollars of donations to local causes, including groups supporting immigrants, the city’s workforce development department, and efforts to reduce veteran homelessness through another nonprofit, United Way of Greater Los Angeles.
Money appears to have been coming in faster than it’s been spent. Tax documents from the Mayor’s Fund for its first two full years, the most recent available, show the nonprofit spent about 40 percent of the money it raised during that time.
David Callahan, editor of Inside Philanthropy, said he’s noticed a swell in local charitable giving and suspects that might be helping Garcetti. "I think the Mayor’s Fund has kind of caught the wave at a good moment," he said.
But he added that transparency is critical for an organization touting its connection to an elected official. “This is a tricky area of philanthropy,” he said.
Supporters: money goes to 'good causes’
A growing market is springing up around these contributions, according to attorney Nola Werren, who works for an Ohio-based company called State and Federal Communications Inc.
Werren advises corporate lobbyists on how to make behested payments legally — she said her company expanded services to cover the fundraising method when they started getting questions about it from clients a few years ago.
Werren said she cautions lobbyists and the corporations that employ them to keep in mind how the payments will appear to the public: “This is where you look before you leap.” She said she would never advise a company to go forward if she found an instance of ‘pay to play’ — where there's a demand for payment in exchange for governmental action.
But she argues the payments benefit society.
“You know, when you think of a 501(c)(3) charity, they’re for good causes,” she said. “It’s really a win-win situation. The lobbyist ingratiates themselves with the official, the public official appears as a very benevolent-minded person, and the charity gets money.”
Currently only two states, including California, require politicians to report some forms of behested payments. But other jurisdictions are moving to regulate the arrangement.
Behested payments are banned in New York and Maryland in certain cases, according to Werren. In New York State, public officials can’t direct these kinds of charitable gifts from an “interested source” — a person or group with business before the state.
Richard Briffault, Columbia University law professor and campaign finance expert, said New York’s limit on behested-style transactions “makes sense” given that the donations are ethically thorny.
“A true gift may come out of the blue, unasked-for, and may not even be something the covered person wants,” he said. “But a behested gift is one that the public servant has actually asked for. So the likelihood of actual gratitude is much higher.”