Watchdog Cracks Down on Lobbyist Shell Games

SACRAMENTO, Calif. (CN) - California lobbyists will no longer be allowed to conceal millions in expenditures after state regulators voted Thursday to force interest groups to itemize expenses in quarterly state reports.

The Fair Political Practices Commission unanimously approved stricter reporting rules that require interest groups to breakdown the specifics of "shadow payments" listed under a category known as "other payments to influence."

Since the 1970s, lobbyists have been able to channel money spent on advertising and consulting under the "other category." According to commission statistics, the top ten Sacramento lobbyists listed $24.5 million in "other category" expenditures in 2014 - 69 percent of their total reported spending.

Commission chair Jodi Remke said light needed to be shone on the "catch-all category" and that lobbyists were abusing the reporting loophole.

"There are two main goals behind the regulation, to increase transparency and promote compliance," Remke said in statement. "As for transparency, the public is entitled to know who is trying to influence public officials and how they are doing it. As for compliance, lobbying is largely a self-regulated industry and requiring more detailed reporting is the most effective tool to promote compliance and facilitate enforcement against improper activity."

The new rules were supported by Sen. Ben Allen, D- Santa Monica , and the California Newspaper Publishers Association, and take effect July 1. The commission will give an update on the new rules after the first lobbying reports are filed this fall.

The nonprofit Consumer Watchdog said Thursday that while it supports more stringent reporting laws, it's worried lobbyists will simply take advantage of another loophole surrounding the disclosure of vendors used by the industry. The group detailed a scenario under the new rules where the lobbyist could contract and pay a third party to conduct advertising or consulting, list the payment under "public affairs" and avoid explaining which policy or election they were attempting to influence.

"The FPPC's failure to close a loophole could make the rules moot by allowing companies to funnel those funds through a middle man and continue keeping most of their spending in the dark," Carmen Balber, executive director of Consumer Watchdog, said in a statement.

In a letter to the commission before the vote, the group noted that during the third quarter of 2015 the Western States Petroleum Association listed $6.1 million - 91 percent of its spending - under the "other category." The nonprofit asked the commission to update the new rules because an "almost endless array of activities to influence lawmakers through their constituents could fall under this [public affairs] broad umbrella."

The updated rules are the latest attempt by the regulator to curb dark spending and shrouded donations by political action committees, lobbyists and nonprofits.

Last year, the commission approved rules that aim to stop out-of-state groups from donating to California politicians and ballot measures, and redefine legal communication between candidates and PACs.

In 2014, an estimated 160 outside groups spent over $80 million on various California races, including a combined $26 million on the race for the state's superintendent of public instruction.

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