62411 Washington Federation of State Employees
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January 3, 2020 Public Disclosure Commission 711 Capitol Way S. #206 P.O. Box 40908 Olympia, WA 98504 Public Disclosure Commission Staff, In accordance with RCW 42.17A.755(1) and RCW 42.17A.775, I would like to bring to your attention systematic violations of the Fair Campaign Practices Act (FCPA), Chapter 42.17A RCW, by the Separate Segregated Fund (SSF) operated by the Washington Federation of State Employees/American Federation of State, County and Municipal Employees Council 28 (WFSE).1 In short, the SSF regularly receives tens of thousands of dollars in political contributions and makes tens of thousands of dollars in political expenditures without registering with and reporting its activity to the Public Disclosure Commission (PDC) as a political committee, in violation of at least RCW 42.17A.205, 210, 215, 225, 235, and 240. Further, recent developments indicate the SSF previously provided false information about its funding source(s) to the PDC as part of Case No. 14266 in order to defend its continued failure to report as a political committee. Specifically, the SSF’s attorney told the PDC in February 2017 that all of its funds come from WFSE and that it receives no funding from other sources. However, in PDC Case No. 54145, the attorney for the Special Account operated by the American Federation of State, County and Municipal Employees (AFSCME) headquarters in Washington, D.C., informed the PDC that the Special Account contributed $200,000 to the SSF in September 2016, just a few months before the SSF claimed it was only funded by WFSE. The SSF’s receipt of this political contribution (and possibly others) removes any doubt as to its status as a political committee and, if the SSF intentionally misled the PDC about its funding sources in Case No. 14266, it could constitute criminal conduct on the part of the SSF. 1 Contact info for the SSF: Address: 1212 Jefferson St. SE, Ste. 300, Olympia, WA, 98501. Greg Devereux, WFSE executive director: [email protected]. Susan Hughes, “custodian of records” listed on Form 8871: [email protected]. 1 1. Factual background A. The SSF’s status and activities The “Washington Federation of State Employees SSF” was established on February 1, 2011 as a “political organization” under 26 USC § 527. See Appendix pages 2-9, a copy of the SSF’s Form 8871 filed with the Internal Revenue Service (IRS). Subsection (e) of the statute defines “political organization” as, “…a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, … [for] the function of influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office…” Accordingly, the SSF describes its purpose to the IRS as providing “[f]inancial support for candidates responsive to the interests of working people.” See App. 3. Its formation paperwork lists the “Washington Federation of State Employees WFSE Cn28” as the SSF’s related/connected entity. WFSE employees and board members comprise the totality of the SSF’s “officers, directors and highly compensated employees.” See App. 4-9. Precisely because the SSF has refused to register as a political committee with the PDC and report its contributions and expenditures, it is difficult to document the extent of the SSF’s electoral political activity. Nevertheless, a search of the PDC’s database turned up 545 instances from 2015 through 2019 in which a political candidate or committee reported receiving a contribution from WFSE/the SSF.2 Recipients use dozens of different names to describe the source of the contribution — i.e., “WA Federation of State Employees,” “WFSE Council 28,” etc. Some recipients specifically note that the contribution came from WFSE’s SSF, but most are not so specific. Nonetheless, presumably most or all of these contributions reported by recipients were expenditures made by the SSF and not WFSE itself. All told, the contributions total $2,170,230.32. See App. 10-17, a list of contributions political candidates and committees told the PDC they received from WFSE/the SSF/affiliated entities since 2015. On Forms 8872 filed with the IRS, the SSF disclosed making $1,846,350 in expenditures from January 1, 2015 through June 30, 2019 that exceeded the $500 threshold for itemization. See App. 18-117, Forms 8872 filed by the SSF with the IRS. Presumably, the SSF itself received contributions totaling similar amounts during this 2 Political committees and candidates began reporting receiving contributions from WFSE/the SSF prior to 2015, but this period corresponds to the five-year statute of limitations established by RCW 42.17A.770. 2 period in order to be able to sustain these expenditures.3 B. PDC Case No. 14266 On January 12, 2017, the Freedom Foundation filed a citizen action notice with the Attorney General’s Office (AGO) alleging the SSF’s failure to report as a political committee violated the FCPA. The AGO referred the matter to the PDC on February 8, 2017 for its review and the PDC designated the complaint Case No. 14266.4 In its response to the Freedom Foundation’s complaint provided to the AGO and PDC, the SSF, through its attorney, Dmitri Iglitzin,5 wrote: “…[T]here is no dispute that WFSE’s SSF is managed, operated, funded and directed entirely by WFSE itself. Greg Devereux, WFSE’s Executive Director, makes all final approvals of monies provided to and spent from the SSF. Regarding expenditures, Mr. Devereux receives requests from WFSE’s Legislative and Political Action Department and then decides whether certain moneys should be spent. Mr. Devereux has the final say for all expenditures that are made from the SSF, as well as for all of the day-to-day expenditures involved in running WFSE and all contributions of money from WFSE to the SSF… [F]or the last five years, and longer, all of WFSE’s SSF’s funding has come to it from WFSE.” (emphasis added). See App. 118-121, the SSF’s February 8, 2017 response to the Freedom Foundation’s complaint in PDC Case No. 14266. At a public hearing on March 23, 2017, PDC staff recommended the Commission find that the SSF was not a political committee and, therefore, had not violated the FCPA by failing to report as one. However, during the course of the hearing, staff acknowledged a failure to review applicable caselaw.6 Accordingly, on March 28, 2017, the PDC referred the complaint back to the AGO without reaching any legal conclusion regarding the SSF’s status as a political committee and without any recommendation about whether the AGO should file an enforcement action. See App. 122-123, the PDC’s letter to the AGO in Case No. 14266. The AGO never filed such an action. C. PDC Case No. 54145 On July 3, 2019, the Freedom Foundation filed a complaint with the PDC alleging the “Special Account” operated by the American Federation of State, County and Municipal Employees (AFSCME) headquarters in Washington, D.C. had violated RCW 42.17A.250 3 The SSF has failed to disclose the contributions it receives to the IRS on Schedule A of its Forms 8872 and, as it refuses to report as a political committee, has failed to disclose its contributions to the PDC as well. 4 The complaint and associated documents are available online at: https://www.pdc.wa.gov/browse/cases/14266 5 Mr. Iglitzin is a partner at Barnard Iglitzin & Lavitt, LLP. http://www.workerlaw.com/People.aspx 6 Specifically, the PDC staffer handling the case stated: “I’m not an attorney and I didn’t look at all at the VEC case [Voters Education Committee v. Deborah Senn, 166 P.3d 1174 (2007)] to prepare for this.” Footage of the hearing is available online at: https://youtu.be/wdslfAthFYs?t=7932 The staffer makes the comment at 2:40:15. 3 as an out-of-state political committee by failing to report making three expenditures totaling $250,000 and receiving hundreds of contributions totaling more than $80 million. The PDC processed the complaint as Case No. 54145.7 Like the SSF, the Special Account is registered with the IRS as a “political organization” under 26 USC § 527. See App. 124, the first page of the Special Account’s IRS Form 990 for 2017. The PDC ultimately determined the Special Account should have reported the contributions and expenditures at issue and, pursuant to a stipulated agreement, imposed a $5,250 penalty on the Special Account.8 See App. 125-132, the PDC’s final order in Case No. 54145. The unreported expenditures at issue in the case involved: • A $25,000 expenditure to AFSCME Council 2 on August 25, 2015 • A $25,000 expenditure to AFSCME Council 2 on November 24, 2015 • A $200,000 expenditure to AFSCME Council 28 (WFSE) on September 9, 2016 While these expenditures have now been disclosed in various government reports, the distinctions between AFSCME and its Special Account, WFSE and its SSF, and AFSCME Council 2 and its political committee are consistently ignored or blurred.9 However, in statements before the September 26, 2019 meeting of the PDC, the Special 7 The complaint and associated documents are available online at: https://www.pdc.wa.gov/browse/cases/54145 8 The Special Account’s compliance with the FCPA remains in doubt, however. The PDC is currently investigating additional allegations against the Special Account in PDC Case No. 59678. The complaint and associated documents are available online at: https://www.pdc.wa.gov/browse/cases/59678 9 In its Form LM-2 filed with the U.S.