Los Angeles, CA

Details on the 'hidden' $1-million donation from Gov. Newsom

Josue Torres

The $1 million contribution arrived while the COVID-19 crisis was happening, and it was made on Gov. Gavin Newsom's behalf last year. However, unlike most so-called behested donations, which are philanthropic gifts made at the invitation of an elected official, the source of the gift was withheld in public disclosures mandated under a state statute intended to promote accountability and curb improper interference in government.

The seven-figure donation was made by a donor-advised fund, a form of charitable giving account provided by several nonprofit organizations and for-profit investment companies that offers more generous income tax deductions as well as confidentiality.

Photo by Jorge Maya.Unsplash

The method of filtering behested donations through such accounts is little understood, except among the most experienced political insiders, but it is growing questions among government watchdogs, who complain it helps anonymous contributors to escape oversight while making charitable gifts on behalf of policymakers for whom they might be currying favor.

The Silicon Valley Community Foundation made a $1 million contribution to Newsom's office in April 2020, according to mandatory disclosures with the California Fair Political Practices Commission. The foundation reported to The Times that the funds came from a donor-advised fund at the organization, rather than from the charity itself.

Public charities may provide groups, households, and people with the right to open donor-advised accounts, which qualify for instant tax write-offs, similar to a bank plan approach to charitable donations. Donor-advised funds are the fastest-growing charitable contribution platform, but they have been criticized for providing very limited control about how and where the funds are spent, with investments permitted to accumulate forever.

Assemblywoman Buffy Wicks (D-Oakland) and nonprofit groups who depend on contributions have been lobbying for improvements to state legislation that would expand disclosure standards for foundations that sell donor accounts. However, the usage of donor-advised funds to include anonymity for behested payments poses additional concerns over whether it violates the Fair Political Practices Act.

If a public official or someone working on their behalf requests that a gift of $5,000 or more in cash or resources be made to a nonprofit or government organization, the grant is called a behested expenditure and must be disclosed to the FPPC. Another part of the practice that has sparked outrage from transparent government advocates is that there is no cap on the amount of money that may be contributed by organizations or people at the request of a public official.

Though behested donations are intended for charitable purposes, the businesses who are required to contribute often have multimillion-dollar contracts or other companies with the state, giving the impression of a pay-to-play scheme. Since state legislation does not address the usage of donor-advised funds in making behested donations, nor does it impose additional transparency restrictions for anyone who uses them, the public is unable to decide if contributors whose names are concealed by such accounts stand to profit from charitable contributions made on behalf of a candidate.

It is unknown to what degree donor-advised funds have been used to render behested contributions to Newsom and other state elected leaders. When a donor-advised fund is used, no notation is rendered in state filings.

Last year, Newsom earned $226 million in behested payments, an extraordinary sum fueled by the COVID-19 pandemic and a desire among corporations and philanthropists to contribute to government and charitable services. Newsom diverted the funds to projects that aided Californians through the pandemic, such as grants for hunger and a public awareness initiative emphasizing the value of wearing masks.

According to state filings, the biggest contributor of behested donations to Newsom in 2020 happens to be tech firm Facebook, which donated $27 million towards gift cards to front-line healthcare employees and public health advertising.

However, a closer examination of state records by The Times reveals that the top donor was, in fact, Kaiser Permanente, with $34.5 million donated on behalf of Newsom in 2020, a total that includes a $9.75-million gift mentioned under Kaiser's name and a further $25 million given on behalf of Newsom using donor-advised funds held by the California Community Foundation and the East Bay Community Foundation.

Both Kaiser and Newsom's offices promoted the $25 million gift through press releases and news conferences, with the money going to the governor's initiative that assists people who are homeless. When The New York Times questioned Kaiser why the donation was not represented in state filings, a spokeswoman for the healthcare giant directed The New York Times to the charity groups that received the donation.

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