Laundered Campaign Contributions Appear to Have Been Made to the Yes on Measure L Campaign by West Davis Active Adult Community
In previous articles pertaining to the financial disclosures of the Yes on Measure L/West Davis Active Adult Community campaign on the November 2018 ballot in Davis, I provided evidence showing:
- About $70,000 of campaign expenditures that were made by the Yes on Measure L campaign for attorney’s fees were probably illegal under FPPC campaign finance regulations as set forth in the FPPC Disclosure Manuals that provide guidance and requirements for such campaign expenditures.
- The Davis Vanguard ran daily ads from the inception of the campaign until voting day and for a substantial period beforehand. The payment for these ads is not disclosed on any financial statements filed by the Yes on Measure L campaign which may be a violation of FPPC regulations.
- A disclosed financial filing expenditure of $3,000 was made to "Froggy's" for food service for a Vanguard fundraising event. This is probably not an allowable campaign expense for the Yes on Measure L campaign under FPPC guidelines.
- Over $64,000 of non-monetary contributions to the Yes on Measure L campaign for “salaries” have been disclosed in campaign filings but the recipients of these salaries have been kept secret. Further, it is not known if these payments were for personal gain, which is prohibited by FPPC regulations, or may be otherwise disallowed under FPPC guidelines.
This information is more fully disclosed in the BACKGROUND section attached to the end of this article and referenced in previous articles I have written as disclosed therein.
In this article I report how the primary financial contributor to the Yes on Measure L campaign is the West Davis Active Adult Community entity itself, totaling $164,500. In 2017, West Davis Active Adult Community was formed as a Fictitious Business Name business under the charter of Doug Arnold Real Estate Inc. Doug Arnold Real Estate Inc was a California Domestic Stock Corporation whose Agent for Service of Process was David Taormino. However, Doug Arnold Real Estate Inc was dissolved in 2018, thus apparently rendering West Davis Active Adult Community as an orphan company without legal status in California.
If true, this potentially makes ALL of the campaign contributions made by West Davis Active Adult Community to the Yes on Measure L Campaign Committee illegal or “laundered” by concealing the true identity of the campaign donor(s). “Laundered” funds so received by a campaign committee are the most serious of campaign financing violations according to California’s Fair Political Practices Commission (FPPC) and all such funds are required to be deposited in the State’s General Fund by the recipient campaign committee.
Let me explain.
THE NAME “WEST DAVIS ACTIVE ADULT COMMUNITY” HAS BEEN USED IN MANY DIFFERENT WAYS FOR DIFFERENT PURPOSES INCLUDING AS A CONDUIT FOR CAMPAIGN CONTRIBUTIONS
The name “West Davis Active Adult Community” has seemingly been used interchangeably for many different purposes:
- To identify the proposed development itself for purposes of describing the project;
- To identify the election campaign entity for purposes of identifying the supportive election/ballot committee; and
- To identify a business entity for purposes of identifying a campaign donor.
As previously described in earlier articles (see BACKGROUND section for references and links), the phrase “West Davis Active Adult Community” (or “WDAAC”), has clearly been used to both identify the development project itself and interchangeably with the campaign committee, Yes on Measure L.
Most recently, investigations of the Form 460 campaign financial disclosures submitted by Yes on Measure L indicated that West Davis Active Adult Community is used to identify the primary financial contributor to the Yes on Measure L campaign committee where it is identified under Contributor Code as “Other” (“Other” is defined further by the FPPC as “e.g. a business entity”).
The West Davis Active Adult Community was by far the largest contributor to the Yes on Measure L campaign, and its donations totaled $164,500 as shown below.
Other than these $164,500 monetary contributions to the Yes on Measure L campaign committee, the only other monetary contribution received was for $1,000 from a currently active California Domestic Stock Corporation, Davd-Mar Inc, that lists David Taormino as the Principal Agent for Service of Process. There appear to be no violations of California FPPC regulations surrounding this particular $1,000 donation. However, there are no other known business purposes or functions of the supposed business entity, West Davis Active Adult Community, other than serving as a conduit for the campaign donations to the Yes on Measure L campaign committee.
WEST DAVIS ACTIVE ADULT COMMUNITY APPEARS TO NO LONGER BE A LEGALLY-FORMED BUSINESS ENTITY IN CALIFORNIA
Given the widely varying ways the name “West Davis Active Adult Community” is used, efforts were made to determine the formal business structure of West Davis Active Adult Community to determine its legal business status in California.
First, a search was conducted using the California Secretary of State’s search engine at https://businesssearch.sos.ca.gov/ for “West Davis Active Adult Community”. As of 2/13/19, it is not registered as a domestic or foreign Corporation, Limited Partnership, or Limited Liability Corporation in California.
Next, a search was made for a Fictitious Business Name registration under the same name in Yolo County. This determined that the name “West Davis Active Adult Community” was indeed duly registered on 5/18/2017 as a Fictitious Business Name by Doug Arnold Real Estate Inc.
As shown below, Doug Arnold Real Estate Inc was formed in 1982. Although its most recent agent for service of process was David Taormino, it is believed that Doug Arnold, a deceased prominent former real estate agent in Davis and father of current Davis City Councilmember Will Arnold, was the majority shareholder until his passing in May 2015 whereupon that interest was purchased by David Taormino. However, that corporation was dissolved on 6/27/2018 as shown below.
Fictitious business names do not create separate legal entities. Because of the fact that the parent company that filed the Fictitious Business Name statement on behalf of the West Davis Active Adult Community—Doug Arnold Real Estate Inc—had already dissolved renders the West Davis Active Adult Community as an orphan entity without any legal status. In extensive research of official records, I was unable to find any other references to the West Davis Active Adult Community as an independent legal entity.
DONATIONS MADE BY WEST DAVIS ACTIVE ADULT COMMUNITY TO THE YES ON MEASURE L CAMPAIGN COMMITTEE ARE THUS SUSPECT AND POTENTIALLY ILLEGAL
Because West Davis Active Adult Community does not appear to be a viable legal entity, donations to the Yes on Measure L are potentially illegal. The following are excerpts from the Campaign Disclosure Manuals pertaining to campaign contributions and proper disclosure of such (see http://www.fppc.ca.gov/learn/campaign-rules/campaign-disclosure-manuals.html - Manual_3_Ch_3_Contributions.pdf and Manual_3_Ch_4_Contribution Restrictions.pdf).
“Chapter 3 Contributions
- Reporting the Intermediary of a Contribution
An intermediary is a person or entity that makes a contribution on behalf of another person and has been or will be reimbursed for the contribution. For each contribution of $100 or more from an intermediary, the name, address, and, if applicable, the occupation and employer information must be disclosed for both the true source of the contribution and the intermediary.
Failure to disclose the true source of a contribution is considered one of the most serious violations of the Political Reform Act
Committees are required to check, and, if necessary, correct any information regarding the true source of a contribution that a person of reasonable prudence would question based on all of the surrounding
circumstances. If there is reason to believe the information contained on the contribution check does not contain the name of the person who is actually making the contribution, the donor should be asked if he or she is acting as an intermediary for the true source of the contribution.”
“Chapter 4 Contribution Restrictions
- Restrictions on Contributions
Reporting the True Donor
Failure to disclose the true source of a contribution is often referred to in media reports as campaign money laundering, which is a serious violation of the Act. Campaign reports are often the only means for the press and the public to determine who is supporting or opposing a ballot measure.
One type of common violation is when an entity reimburses individuals for contributions so that the committee receiving the contributions discloses the individuals rather than the true donor on campaign disclosure reports.
Another occurrence is when a person (e.g., organization, business, or individual) makes a contribution to another person, with the condition, agreement or understanding that the payment will be subsequently used for political purposes, such as a contribution to another committee. It is a violation for persons to conceal their identities by contributing through another person without proper disclosure.
If it is discovered that a committee received a contribution and the donor and intermediary were not properly identified, the contribution must be paid to the Secretary of State for deposit in the State General Fund. A local agency may deposit laundered funds into its general fund when the action is brought under its local campaign finance law.”
I believe that it can be shown that contributions were made to West Davis Active Adult Community—which is not a viable legal entity—with the express understanding that these monies would be donated to the Yes on Measure L campaign and that this mechanism was used to intentionally hide the true identities of the donors. This meets is the classic definition of “money laundering” in the FPPC Disclosure Manuals. If so, the full amount of the “laundered money” should be deposited in the State’s General Fund as prescribed by FPPC Regulations
David Taormino is the principal promoter of the West Davis Active Adult Community (WDAAC) which was recently approved by the voters of Davis on the November 2018 ballot as Measure L. During this campaign, a federal lawsuit was filed by the well-known Sacramento civil rights attorney, Mark Merin, against David Taormino and the City of Davis. This lawsuit alleged that a preferential “Davis-Based Buyers Program” in the Development Agreement signed between the Davis City Council and David Taormino was discriminatory and exclusionary in nature.
Readers can get more information on the specifics of this lawsuit by referring to the following articles – “Planned West Davis Adult Community, if Approved, Would Perpetuate Racial Imbalance in the City of Davis” and “Measure L discriminates Against Blacks and Latinos”.
Mr. Taormino as defendant is represented in this matter by Stephen Boutin of the Sacramento law firm Boutin Jones. After the election, Mr. Taormino and Mr. Boutin have both made ambiguous but inflammatory allegations of nefarious behavior and improper reporting of campaign expenses by the No on Measure L campaign related to this lawsuit. In particular, they have claimed that legal expenses incurred in the prosecution of the Merin lawsuit should have been paid for directly by the No on Measure L campaign and subsequently reported as a campaign expenses by the campaign.
Most recently, the Davis City Council was petitioned by Mr. Taormino and Mr. Boutin and then agreed to send a letter to the Yolo County District Attorney and California Fair Political Practices Committee (FPPC) requesting investigations of these alleged wrongdoings by the No on Measure L campaign and to determine whether any campaign expenditure or finance reporting violations have occurred.
In an article I authored and published on February 12th in both the Davisite and Davis Vanguard, I vehemently disagreed with and disputed allegations that the No on Measure L campaign committed expenditure or finance reporting violations (see Background below). I noted, to the contrary, that California election law specifically disallows campaign monies to be used for the types of litigation expenses that were otherwise alleged we omitted from disclosing.
Further, I also disclosed that about $70,000 of campaign expenditures which were made by the Yes on Measure L campaign for attorney fees were illegal under FPPC campaign finance regulations as written in the FPPC Disclosure Manuals that provide guidance and requirements for such campaign expenditures.
In subsequent articles published on February 14 in the Davisite and Vanguard In the course of investigating such expenditures and in recent commentary on-line by different observers, it was noticed that there were other areas of campaign expenditures that are inconsistent with financial disclosure standards of the FPPC. In particular, the Davis Vanguard ran daily ads since the inception of the campaign until voting day and for a substantial period beforehand. The payment for these ads is not disclosed on any financial statements filed by the Yes on Measure L campaign which is a violation of FPPC regulations
Further, over $64,000 of non-monetary contributions to the Yes on Measure L campaign for salaries have been disclosed in campaign filings but the recipients of these salaries have been kept secret and it is not known if these payments were for personal gain which is prohibited by FPPC regulations or were otherwise disallowed under FPPC guidelines.
Together, the lack of disclosure of how Davis Vanguard ads were paid and the secrecy surrounding the payment of salaries supposedly associated with campaign raises serious questions as to whether or not the Yes on Measure L is compliant with campaign reporting requirements with respect to these matters.