St. George Secession Campaign In Baton Rouge Is Led By For-Profit Corporation And Likely Invalid

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Update: I’m told the Louisiana Ethics Administration apparently believes that a corporation attempting to place something on the ballot is not engaging in “political activity” unless and until the item is on the ballot. This should be troubling to anyone who believes in the importance of transparency and accountability in our political process. Under this interpretation of the law, it seems entirely possible for a multinational company with an entrenched interest in reducing its tax liability, for example, or a foreign government interested in incrementally changing US domestic policy to wholly subsidize a petition campaign without ever disclosing their involvement. Once the petition reaches the threshold necessary to trigger an election, then and only then would they need to organize a political committee, and only the expenditures of the newly-formed political committee would be subject to disclosure. At this point, of course, half of the game is already over; most of the money has already been spent. For some reason, the Ethics Administration does not treat recall campaigns against elected politicians with the same flexibility. It’s worth noting: A couple of years ago, when a group of citizens launched a recall petition against Governor Bobby Jindal, they were fined by the Ethics Administration for failing to report their expenditures. To be sure, the thresholds are different, but there does seem to be some discretion built into the law. La. R.S. 18:1486 (bold mine):

These requirements shall be applicable only if the aggregate amount of contributions, loans, and transfers of funds received and accepted or expenditures made equals or exceeds two hundred dollars at any time during the aggregating period; except that, with regard to expenditures made in support of or in opposition to a proposition or question submitted to the voters by a person who is not a candidate or a member of the principal campaign committee of a candidate or of a political committee, these requirements shall be applicable only if the aggregate amount of expenditures made equals or exceeds one thousand dollars.  “Aggregating period” for purposes of this Section shall mean the period from the date on which the first contribution is received or the first expenditure is made by the person or political committee, whichever is earlier, through the closing date for the last report required to be filed in accordance with this Chapter.  

Yesterday, the spokesperson for the St. George campaign told me on Twitter, “Funders… LOL You want the $20 check receipts? When we start running a campaign we’ll file with ethics.” Maybe some folks believe that they’ve only raised $20 and agree they’re not “running a campaign,” but I think there’s a mountain of evidence that suggests otherwise.

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Supporters of a campaign in East Baton Rouge Parish to create a new municipality named St. George claim that they have collected more than half of the signatures needed to trigger a ballot initiative.

Yesterday, the news went viral, and the headlines were priceless:

“Affluent, white residents of south Baton Rouge propose seceding from city’s poor, black northern areas,” read Raw Story.

Richer White People In Greater Baton Rouge Seek To Secede From Poorer Black Neighbors,” proclaimed Huffington Post.

Residents split over proposed division of metropolitan Baton Rouge,” reported Al-Jazeera.

Salon was straight to the point: “White, affluent residents of south Baton Rouge want to secede from the rest of the city: The proposed new city would be called St. George and would remove 40 percent of Baton Rouge’s sales tax revenue.”

But because the effort has been led and primarily organized by a for-profit limited liability company, the petition will likely be considered invalid, and the company’s campaign will likely not be allowed to proceed. From the Louisiana Secretary of State:

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On September 4, 2013, Joshua Hoffpauir and Norman Browning registered Committee for the Incorporation of St. George, LLC with the Louisiana Secretary of State. Since then, Hoffpauir, Browning, and others have launched a website, signed on a political consultant as a spokesperson (who claims to be working “pro bono“), established a presence in social media, solicited economic impact studies from professionals, printed campaign materials, fabricated yard signs, and, of course, passed around a petition.

They claim to be a “grass roots (sic) movement,” and therefore not subject to campaign finance and campaign disclosure laws. But Louisiana law is abundantly clear: Because the Committee for the Incorporation of St. George, LLC was created to “put a question before the voters,” it should have been incorporated as a political committee. It cannot shield itself from campaign disclosure laws simply by presenting itself as a limited liability corporation.

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Here is the most recent case on point, In re Jefferson Alliance, Inc. (And I’m quoting the entire opinion) (bold mine, not block quoting):

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This appeal challenges a ruling of the Louisiana Board of Ethics decreeing that Jefferson Alliance, Inc., a citizen group organized for the primary purpose of endorsing candidates for political office and taking positions on ballot issues, is a “political committee” subject to the registration and reporting requirements of the Campaign Finance Disclosure Act, La. R.S. 18:1481 et. seq. Jefferson Alliance argued that it did not meet the statutory definition of a “political committee” because it did not directly contribute money to a particular campaign, nor had it advertised on behalf of a candidate or participated in door-to-door campaigning. Instead, it urged, funds it received from its members in the form of dues, and profits it received from its annual awards banquet were used only to operate the organization, and these funds and expenditures fell outside the scope of the Campaign Finance Disclosure Act.

The Board of Ethics disagreed, finding that Jefferson Alliance was a political committee because it was primarily organized to support or oppose political candidates and issues, and the organization had made expenditures and received contributions in excess of the statutory requirement in order to influence the outcome of elections in Jefferson Parish. The group, the Board concluded, was therefore subject to the reporting and disclosure requirements of the campaign finance law. The Board further imposed a $10,000.00 penalty for Jefferson Alliance’s failure to file the necessary documents, but suspended that penalty upon the condition that Jefferson Alliance file the documents within 30 days of the finality of the Board’s decision.

Jefferson Alliance contends the Board of Ethics erred in finding its operations fit the statutory definition of a political committee. Judicial review of rulings of the Board of Ethics is conducted in accordance with the Louisiana Administrative Procedure Act. Schmitt v. Louisiana Board of Ethics, 2001–0341, p. 2 (La.App. 1 Cir. 3/28/01), 808 So.2d 524, 525. A **3 reviewing court may reverse or modify the Board’s decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are (1) in violation of constitutional or statutory provisions; (2) in excess of the agency’s statutory authority; (3) made upon unlawful procedure; (4) affected by other error of law; (5) arbitrary, capricious, or an abuse of discretion; or (6) not supported and sustainable by a preponderance of evidence *17 as determined by the reviewing court. La. R.S. 49:964 G; Schmitt v. Louisiana Board of Ethics, 808 So.2d at 525.

Employing this standard of review, we conclude that the findings of fact and conclusions of law set forth in the Board’s written reasons for judgment are correct. We adopt these reasons as our own and attach a copy thereof to this opinion. Furthermore, we find no merit to Jefferson Alliance’s challenge to the penalty imposed by the Board, as that penalty will be suspended if the group files the requisite documents within 30 days of the finality of the Board’s decision. Should Jefferson Alliance refuse to file the document within that time period, there would be a knowing violation of the law which would clearly subject Jefferson Alliance to penalties under La. R.S. 18:1505.4 A(1).

Based on the foregoing, the judgment appealed from is affirmed. All costs of this appeal are assessed to appellant, Jefferson Alliance.
In re Jefferson Alliance, Inc., 2002-0335 (La. App. 1 Cir. 2/14/03), 841 So. 2d 15, 16-17 writ denied, 2003-1136 (La. 6/20/03), 847 So. 2d 1233

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And here is the relevant portion of the opinion of the Louisiana Board of Ethics (bold mine):

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It is the opinion of the Board that Jefferson Alliance, Inc. violated La. R.S. 18:1491.1 and 1505.1 D by failing to register as a political committee for the years 1999 and 2000.“Political committee” is defined in the Campaign Finance Disclosure Act as: a corporation;

….the primary purpose of supporting or opposing one or more candidates, propositions, recalls of a public officer, or political parties; and which accepts contributions in the name of the committee or makes expenditures from committee funds or in the name of the committee. La. R.S. 18:1483(14)(a)(i)

A “political committee” is required to file a statement of organization if it knows **13 or anticipates that it will receive contributions in excess of $500 in the calendar year or make expenditures in excess of $500 in the calendar year. La. R.S. 18:1491.1 A.

A “contribution” includes any payment, deposit of money or anything of value, made for the purpose of supporting, opposing, or otherwise influencing  the nomination or election of a person to public office, or for the purpose of supporting or opposing a proposition or question submitted to the voters La. R.S. 18:1483(6).

An “expenditure” includes a purchase, payment, or deposit of money or anything of value made for the purpose of supporting, opposing, or otherwise influencing the nomination or election of a person to public office, or for the purpose of supporting or opposing a proposition or question submitted to the voters.

Jefferson Alliance, Inc. admitted through the Joint Stipulation of Facts introduced at the public hearing of this matter that (1) it is a corporation; and (2) its primary activity consists of conducting candidate and proposition forums and issuing endorsements of candidates.

Moreover, the Joint Stipulation of Facts and supporting exhibits show that Jefferson Alliance, Inc. received contributions in excess of $500 for the years 1999 and 2000 through its acceptance of membership dues and payments for ticket sales to its annual banquet as its primary purpose was to influence candidate and proposition elections.

Additionally, the Joint Stipulation of Facts and supporting exhibits establish that Jefferson Alliance, Inc. made expenditures in excess of $500 for the years 1999 and 2000 through payments for its daily operations its primary purpose was to influence candidate and proposition elections.

As Jefferson Alliance, Inc. was a political committee, it is the opinion of the Board that Jefferson Alliance, Inc. violated La. R.S. 18:1505.1 A and B by failing to file campaign finance disclosure reports for the years 1999 and 2000 *24 as required by the provisions of La. R.S. 18:1491.6, including, but not limited to, reports required for the October 1999 election based **14 upon its endorsement of candidates participating in that election.

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For-profit corporations are not allowed, by law, to be created to run political campaigns. Sure, they can contribute to political campaigns, but they can’t operate them.

The Committee to Incorporate St. George, LLC should have properly registered as a political committee. It did not, and even if it decided to do so right now, every single signature it has collected thus far on its petition is invalid.

If this is a serious campaign, then its organizers need to take the law seriously, disclose their finances to the public, and start over.