SACRAMENTO — Assembly Speaker Fabian Nunez used a small charity as a conduit to funnel almost $300,000 from companies and organizations with business in the Capitol to events that helped him politically.
By giving to the charity, the donors whom Nunez solicited earned tax deductions for which they would not have qualified had they given directly to Nunez's campaign accounts. They were also able to donate more than the $7,200 maximum allowed under California's campaign fundraising rules.
Those donors include Zenith Insurance Co., AT&T, Verizon Communications Inc., the California Hospital Assn., the state prison guards union, Pacific Gas & Electric Co. and Blue Cross of California -- all groups with high stakes in legislation.
The money was used for events including "Assembly Speaker Fabian Nunez's Toy Drive," "Assembly Speaker Fabian Nunez's Soccerfest 2006," "Assembly Speaker Fabian Nunez's Inaugural Legislative Youth Conference" and airplane flights for 50 children from Nunez's district for "Assembly Speaker Fabian Nunez's Sacramento Student Summit," according to state documents.
That arrangement may have violated federal tax laws, according to experts. The Internal Revenue Service has a strict policy against charities serving as a pass-through for funds.
In addition, experts say, a plan under which a politician solicits a donation to a charity and then directs how it can be used may violate state ethics rules.
"It raises the question of whether these donors are making a contribution to a charity or simply currying favor with a politician -- and getting a tax deduction for it," said Jack Siegel, a lawyer and accountant who advises nonprofits nationwide through his Chicago firm, Charity Governance Consulting.
Records Nunez filed with the state show that donations to the charity, Collective Space Inc., ranged from $2,500 to $50,000 in 2005 and 2006. The last year in which the charity served as a conduit for Nunez was 2006.
Nunez directed the donations to the charity, and his staff told the charity where to spend the money. No mention was made of the charity in the toy giveaway fliers posted around Nunez's downtown district.
Indeed, the charity, based in the MacArthur Park neighborhood of Los Angeles, was not supposed to be operating at all at the time. State tax authorities suspended it two years ago -- before the donations -- for failing to file tax returns.
