Another Colorado ‘social welfare’ nonprofit just got fined for improperly playing in elections

A state judge in Colorado has fined a nonprofit $23,000 for coordinating with local campaigns and not registering as a political committee.

The fine represents the largest campaign finance violation in the state, according to Matt Arnold, whose company Campaign Integrity Watchdog filed the complaint and prosecuted the case before an administrative law judge.

At issue were a half dozen flyers a group created and distributed during a May 2016 board election for the Woodmen Hills Metropolitan District in the small community about 15 miles northeast of downtown Colorado Springs. The five-member board is a quasi-municipal political subdivision that handles things like water and utilities for residents.

According to the ruling from Administrative Law Judge Matthew Norwood, during last year’s election season a nonprofit 501(c)4 “social welfare organization” called Citizens for Reasonable Rational and Responsible Governance (CRRRG), paid for the flyers that negatively targeted candidates for the board. “CRRRG also coordinated in producing the flyers with candidates,” the judge wrote.

The flyers were an example of the kind of bruising, bare knuckles campaigns for local government that can sometimes rage among the sidewalks and manicured lawns of sleepy suburbia.

Indeed, “There has been much feuding over the years regarding the elections to the Woodmen Hills Metropolitan District board of directors,” wrote Judge Norwood in his ruling.

Here’s the judge’s description of one of CRRRG’s negative flyers about two board candidates:

“Exhibit 5 is a flyer depicting [candidate 1] and [candidate 2] on a desert island in front of the ship “SS [candidate 1]” wrecked on a rock marked “Woodmen Hills.” Shark fins circle the island labeled “[Candidate 1’s] restraining orders,” “[Candidate 1’s] foreclosure,” “[Candidate 1’s] judgement,” “[Candidate 1’s] failed recalls” and “[Candidate 1’s] arrest record.” Exhibit 6 is a cartoon of [Candidate 1] flying a biplane with [Candidate 2] in the back seat. The biplane is bombing a pillbox-type fort that is labeled “Woodmen Hills” that is shooting back with multiple guns. The bombs from the biplane are labeled: “[Candidate 1’s] lawsuits,” “[Candidate 1’s] judgement liens,” “[Candidate 1’s] foreclosure,” “[Candidate 1’s] failed recalls,” “[Candidate 1’s] arrest” and “[Candidate 1’s] bankruptcy.”

Such flyers were created by the nonprofit CRRRG in coordination with other candidates for the board, the judge ruled. According to filings with the Secretary of State, CRRRG’s registered agent is former Colorado GOP chairman Ryan Call who is a lawyer in Denver. 

“I will leave it to your readers to decide whether the fine imposed on this small nonprofit group that spent approximately $11,400 to send out a few campaign flyers in a local special district election was appropriate, or whether Colorado’s complicated campaign finance rules and the private enforcement complaint process has a chilling effect on political activity and the exercise of First Amendment rights in our state,” Call said in a statement.

Nonprofit 501(c)4 groups, which include “social welfare organizations,” don’t have to disclose their donors. They can raise unlimited amounts from people, corporations, unions, and other nonprofits. Such groups can get involved in politics, but the major purpose of their work cannot be to support or oppose candidates in an election.

But Judge Norwood said CRRRG did just that, adding, “There was no significant evidence offered of any other purpose of the organization.” As to “avoid the expense of a hearing,” Norwood wrote, CRRRG would “admit liability.”

Hence the $23,000 fine.

In Colorado, enforcement of the state’s campaign finance laws is outsourced to private groups and individuals. In most states, if a politician or political group is believed to have run afoul of campaign finance law, a government panel or commission would screen an official complaint. An attorney general, an ethics agency, or the state police might investigate. In Colorado, anyone who lodges a complaint about a suspected campaign finance violation has to prove his or her own case against an alleged violator in a courtroom setting that at times can feel like a full-blown trial.

Colorado currently faces a pending federal lawsuit from a Washington, D.C.-area legal nonprofit that attacks Colorado’s private-party enforcement system as unconstitutional. The nonprofit law firm Institute for Justice claims such a system “empowers political insiders to silence any ordinary speaker they disagree with.” The law firm represents a Colorado mom who was sued twice by her local school board after she placed ads in her local newspaper to alert readers to the upcoming board elections.

Arnold, the person who brought the complaint against CRRRG, is a 50-year-old Army Reservist who is not an attorney and has filed more campaign finance complaints than anyone else in Colorado through his company Campaign Integrity Watchdog. He is hailed by his supporters as an altruistic ethics watchdog who fights for enforcement of the state Constitution and Colorado’s Fair Campaign Practices Act. His critics portray him as someone with an ax to grind who uses the state’s private-party enforcement system to settle personal scores in court. He said he was not paid to prosecute his latest case.

Arnold is on a winning streak.

In late April he won a case against a different 501(c)4 nonprofit, one operated by former GOP Congressman Bob Beauprez. A judge fined the Beauprez nonprofit $17,000 for not registering as a committee and said it must disclose its financial activity.  

Related: Judge says ex-Congressman Bob Beauprez’s group must pay $17,000 in campaign finance fines

The Colorado Secretary of State’s office unsuccessfully intervened in this latest case against CRRRG, attempting to get it dismissed. The office argued that since the flyers did not use the so-called magic words of “vote for,” “support,” or “elect,” they weren’t expressly advocating for or against a candidate. The Secretary of State also argued the group would have had to have coordinated with a candidate in an election to run afoul of its nonprofit status.

But the judge said CRRRG admitted it coordinated with candidates in the local election in Woodmen Hills, though it denied its major purpose was to support or oppose candidates. Around mid-April the nonprofit re-registered with the state as a political committee, according to state records.

Jim Miletich, a lawyer who argued the case on behalf of CRRRG, said he couldn’t comment without the consent of his client. CRRRG had no funds on hand as of May 1, according to filings in a state database.

Colorado’s deputy secretary of state, Suzanne Staiert, criticized the administrative law judge (ALJ) opinion in the Beauprez nonprofit case as a “bad ruling.”

After this latest ruling, asked if she would caution nonprofits in Colorado to be more careful in how they get involved in elections, she said she was unsure how to to answer because she doesn’t agree with how ALJ’s have ruled.

“I don’t want to encourage people to not speak because the ALJs are substituting their own judgement for tests that have been established in the law,” she says. “The reason these tests have been established is because you can’t have ambiguity when it comes to free speech.”

Arnold has a different take.

“I think the big message is, look, play it straight,” he says. “You can try to hide, you can try to run, but eventually the truth is going to come out. … You might be able to get away with hiding your activities at the federal level for a while, but there are other avenues to get at the truth. And in Colorado the avenue is the campaign finance complaint process.”

Photo by Hector Alejandro for Creative Commons on Flickr.