CA Watchdog Proposes $27,000 Campaign Finance Fine on Newport Council Members

JESSICA RUIZ, Voice of OC

The Newport Beach Civic Center.

Four current and former Newport Beach City Council members, including a current candidate for state Assembly, have agreed to a $27,000 total fine with their political consultant and treasurer for failing to properly disclose campaign money that helped them get elected several years ago, according to state records.

They have accepted and agreed to pay the fine, according to the California Fair Political Practices Commission (FPPC), which enforces state and local campaign finance laws.

The proposed settlement – up for final approval by the commission on March 19 – alleges violations by campaign consultant Dave Ellis, treasurer Lysa Ray, and Newport Beach City Council members Kevin Muldoon, Duffy Duffield, Diane Dixon, and former Councilman Scott Peotter — who all ran on a slate together called “Team Newport” in 2014.

Dixon, a Republican, is now running for state Assembly against Democrat Cottie Petrie-Norris in the November runoff election for the 74th District. 

“This matter arose from the activities of my campaign consultant during the 2014 campaign when I was an unopposed first-time candidate,” said Dixon in a statement through a representative after this story was initially published. “I have been fully cooperative with the FPPC.“

The settlement says the council members failed to properly report non monetary contributions during their campaigns, and also worked with Ellis — a candidate himself for a separate public office. The settlement says Ellis violated state law after receiving contributions and making payments from multiple campaign bank accounts of controlled committees.

[Click here to read the FPPC’s findings]

In a phone interview Tuesday, Peotter denied a coordinated effort to purposefully violate campaign finance law.

“I would say that evidently the committees were set up in a way that FPPC didn’t agree with. But even though we reported everything, because the committees were different than we thought, it was a violation,” Peotter said.

He also said litigation would be too costly to fight the commission’s stipulation. 

Attorney Steve Baric, representing Ellis and the Councilmembers, echoed what Peotter said.

“It’s somewhat convoluted. But the long and the short of it is that you have a situation in 2014 where all the filings and all the efforts were done pursuant to the rules of a slate committee,” said Baric, adding it was modeled after former Irvine Mayor Larry Agran’s campaigns.

“However, unfortunately in this case, they (FPPC) disagreed with their prior findings … they determined no, no — the way this should’ve been handled is these are independent expenditure committees, not a slate committee,” Baric said.

He said there were no efforts to hide spending or fundraising.

“Sadly, the way it works in these things is the opponents got beat, had sour grapes, filed a complaint with the FPPC and subsequent to the election, the FPPC determined the set up should’ve been filed pursuant to the independent expenditure rules — and because it wasn’t, there were violations,” Baric said.

The other respondents in the stipulation contend that they did not intend to hide or mislead the public by evading the reporting requirements in the stipulation. 

“Much of the subject activity [of the committees], although mischaracterized, was otherwise reported on other statements and reports, thereby providing the public with some disclosure they knew Ellis was involved with multiple committees, they did not understand that such overlapping roles would result in violations by the candidate-controlled committees,” reads the proposed settlement.

The current and former council members – along with Ellis and Ray – have agreed to the findings and have paid the fine, according to FPPC spokesman Jay Wierenga. That payment is set to be finalized by the commission in a vote at their meeting on March 19.

Ellis consulted two committees set up to support the candidates — Residents for Reform (RFR) and Neighborhood Preservation Coalition (NPC), according to the settlement. Both committees “made, and the candidates received as contributions, coordinated expenditures that were not properly reported by Respondents on campaign statements, in violation of the Political Reform Act,” the proposed settlement states.

Peotter said the state should simplify the regulations so people can more easily follow them. 

“It’s a shame the state can’t simplify these regulations in a way that you don’t need an attorney to comply,” he said. 

The FPPC found one of Ellis’ assistants was named the principal officer of the residential reform committee, though Ellis was the actual officer of the committee – something officials wrote wasn’t discovered until July 2014.

“Despite the fact that RFR was primarily formed to support Team Newport and controlled by Ellis, the committee failed to amend its statement of organization to reflect this, or change its name to include Ellis’ name, as required under [state law],” the proposed settlement states.

The FPPC also found issue with the Neighborhood Preservation Coalition, a supposed slate mailer organization.

“Since Ellis controlled NPC, and a candidate-controlled committee cannot qualify as a slate mailer organization, NPC, by definition, could not be a slate mailer organization,” the proposed settlement stated.

While FPPC commissioners usually approve proposed settlements, they have the option to reject them. If they reject the settlement, commissioners can instruct enforcement staff to seek a higher or lower penalty, which would trigger renegotiations with those accused of wrongdoing.

Like Peotter, Baric said it’s often too costly to fight cases like the $27,000 fine in administrative court.

“You can decide, ‘Do I really wanna fight this and spend hundreds of thousands of dollars in an administrative law court or just settle?’ Most people just settle,” Baric said. “The election was almost six years ago now and they wanna resolve it and move on with their life.”

The commission is scheduled to vote on the proposed Newport settlement at their March 19 meeting in Sacramento, which starts at 9 a.m.

This story was updated to add a quote Dixon’s representative sent after the story was initially published.

Voice of OC news intern Hosam Elattar contributed reporting.

Brandon Pho is a Voice of OC reporting fellow. Contact him at [email protected] or on Twitter @photherecord.