Gray area

When it came to light last summer that Insurance Commissioner Chuck Quackenbush was using the authority of his office to pressure insurance companies into making donations to nonprofit organizations under his control, there was little question that what he had done amounted to an abuse of power, and Quackenbush was hounded out of office. Now, Gov. Gray Davis is engaged in a similar scheme to squeeze companies with business before the state for donations to nonprofits controlled by Davis supporters, and the Democrat-controlled Legislature should not just look the other way.

Unlike Quackenbush’s scam, what the governor is doing is probably not illegal. It is, however, clearly unethical. Davis is presiding over a system that circumvents campaign finance laws and promotes the impression that those who hope for favorable state policies toward their businesses had better have their checkbooks ready when the governor’s fund-raisers come calling.

According to a recent Los Angeles Times investigation, Davis’ campaign fund-raisers established the nonprofits, solicited companies such as Pacific Telesis, Chevron and BP Amoco and came away with more than $2 million. Of this, $234,000 was targeted for repair and upkeep of Davis’ Sacramento residence, $664,000 for his travel expenses and in-state events, and more than $1.5 million for a party at the Democratic Convention in Los Angeles. Because these funds were paid to nonprofits, they were not subject to public disclosure, and the donations were tax deductible.

The legality of this arrangement is questionable. Nonprofits are prohibited from engaging in political campaigning, and to spend money in support of a specific cause or candidate could violate their nonprofit status with the IRS and void the tax-exempt status of the contributions. Yet one Davis nonprofit bankrolled a party at the Democratic Convention at which both Davis and President Clinton spoke—an event that was arguably part of Al Gore’s campaign for president.

Even more disturbing is that Davis’ fund-raisers solicited hundreds of thousands of dollars from companies with business before the state, creating the impression that these companies were buying favorable treatment. For example, Pacific Telesis, which gave $320,000 to Davis nonprofits, is petitioning the Davis administration to be allowed to enter the long-distance telephone market in California. At the very least, the impression has been created that the $320,000, together with the $100,000 the company gave to Davis’ campaign, could influence the decision.

That’s unacceptable. The Legislature should move to close the loopholes that allow high-ranking state officials to conduct fund-raising campaigns through nonprofits. If Davis can’t stop himself from venturing into this legal gray area, then the law should be spelled out in black and white.