California Can’t Have Donor Info

April 22, 2016       Mark Hrywna      

A California judge is “unconvinced” that the state Attorney General’s Office has procedures in place to prevent disclosures of confidential donor information, which has been used in less than 1 percent of investigations during the past decade anyway.

Those were among the arguments made by Judge Manuel L. Real in granting a permanent injunction to the Americans For Prosperity Foundation (AFP), ruling that Attorney General Kamala Harris cannot demand details on major donors as part of state filings.

The Attorney General’s Office has “systematically failed to maintain the confidentiality of Schedule B forms,” Real wrote in his 12-page ruling, filed yesterday in the U.S. District Court for the Central District of California. The 92-year-old judge – appointed in 1966 by Lyndon B. Johnson – also said there was “ample evidence” that AFP employees, supporters and donors faced threats, harassment, intimidation and retaliation once their support is publicly known.

AFP Foundation Chief Executive Officer Luke Hilgemann said the ruling is an important victory for free speech and for everyone who believes in the importance of the First Amendment. “Donors to organizations, regardless of their views on public policy matters, should be free to support causes they believe in without fear of retaliation, harassment, or intimidation by powerful government figures,” he said.

“We are disappointed in Judge Real’s ruling and intend to appeal to the 9th Circuit Court of Appeals. The filing of the Schedule B is a long-standing requirement that has helped attorneys general for more than a decade protect taxpayers against fraud,” Kristin Ford, deputy communications director for the AG’s office, said in a statement.

Real also issued a preliminary injunction in February 2015 that was reversed by the 9th Circuit this past December.

“Once AFP’s donor information is disclosed, it cannot be clawed back,” Real wrote in his decision. The attorney general has offered “no evidence that she will suffer injury if AFP does not produce its Schedule B,” he added.

Schedule B includes all names and addresses of individuals who have donated more than $5,000 to a charity during the tax year. Schedule B is included when a nonprofit files its Internal Revenue Service (IRS) Form 990 but is not made public. In 2013, Harris sent a letter to AFP declaring its 2011 filing incomplete because it did not include an unredacted Schedule B.

During the course of litigation, the Arlington, Va.-based foundation identified almost 1,800 confidential Schedule B forms that the attorney general’s office had publicly posted on the registry’s website. The documents were removed within 24 hours, according to the ruling.

AFP is backed by conservative billionaires Charles and David Koch. Harris is among the Democrats running for U.S. Senate this year to replace the retiring Barbara Boxer.

The AG’s registry receives more than 60,000 renewal filings each year, 90 percent of which are paper filings, according to the ruling. The registry is supposed to scan and then electronically store the documents, tagging confidential items like Schedule B. Human error can sometimes be unavoidable but the “amount of careless mistakes made by the registry is shocking.”

The judge said he was “left unconvinced” after a bench trial earlier this year that the charity regulator actually needs Schedule B forms to effectively conduct investigations. AFP had registered with the office since 2001 and never included Schedule B with its filings. “The only logical explanation for why AFP’s ‘lack of compliance’ went unnoticed for over a decade is that the attorney general does not use the Schedule B in its day-to-day business.”

Real cited testimony by a supervising investigative auditor for the attorney general, who said that of the 540 investigations in the Charitable Trusts Section in the last decade, only about five involved the use of Schedule B. In those five cases, investigators could not recall whether they had unredacted forms on file before initiating the investigations, according to the ruling, and in cases where Schedule B was relied upon, relevant information could have been obtained elsewhere.

David Keating, president of the Center for Competitive Politics (CCP), was unsure how much the decision would affect his organization’s case but what came out during the trial might. Arlington, Va.-based CCP has fought similar battles against the AG’s office in recent years.

“Representations the government made in our case turned out to be false,” Keating said, claiming they need the information to enforce the law and audit information. “In trial, it was pretty clear that they don’t use the information at all. If they need it, they can easily get it just by asking organizations for it. They haven’t had to issue a subpoena to get that information,” he said.

The office is “totally incompetent” in keeping information confidential, Keating added. “Every Schedule B was available to the public on their website if people knew how to find them,” he said. The Form 990s were scanned in sequential numbers and uploaded online but were never coded to require that the Schedule B needed a password to access it. Keating said anyone could build a tool to scrape the AG’s website to get all the information, which AFP likely did.

The U.S. Supreme Court in November declined to a hear a case brought by CCP that challenged California’s Schedule B requirement. The 9th Circuit also ruled in favor of Harris in that case. The Citizens United Foundation has filed a similar suit against the New York Attorney General’s office.