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Appeals Court sends lawsuit over BIAW money for Rossi in 2008 campaign back to trial court

Post by Brad Shannon / The Olympian on Oct. 29, 2012 at 6:41 pm with No Comments »
October 30, 2012 10:27 am

A legal dispute over the Building Industry Association’s support for Dino Rossi’s gubernatorial campaign in 2008 got a bit of new life today. The state Court of Appeals handed down a split decision that orders additional judicial review in a four-year-old case that alleged improper campaign finance activities by the BIAW and its failure to register as a political action committee.

At issue is whether the BIAW needed to register as a PAC, due to its use of members’ insurance rebates to support Republican Rossi in the 2008 governor’s race. BIAW at the time was a hard-hitting political group which since has ousted and replaced its top leaders, and it is taking a lower profile in this year’s gubernatorial race (spending about $500,000 through a subsidiary instead of $6 million-plus).

In the majority opinion announced today, Acting Chief Judge Michael Spearman and Judge Ronald Cox in the Court of Appeals Division I said the evidence submitted in the King County case “created a genuine issue of material fact that the BIAW was a political committee under the expenditure prong” of state campaign finance law. The judges  found there was arguable evidence that electing Rossi was BIAW’s No. 1 priority as an organization in 2008.

But Judge Kenneth Grosse, who wrote the dissent, concluded that in order to require BIAW to report as a PAC “it must be shown to have electoral activity as one of its primary purposes.’’

Grosse also said the law needs to be clarified to avoid this kind of litigation, which he saw as a kind of electioneering never intended by the initiative that created the campaign finance law.

Grosse noted a similar case involving the Washington Education Association; the former Evergreen Freedom Foundation fought WEA in court for a decade over the teacher union’s spending on two education initiatives filed in 2000.

Rob Maguire, a Seattle attorney who has represented BIAW in the case, said the builders have not decided which course to take. But he thinks the majority opinion raises important questions around the First Amendment right of speech that the Supreme Court ultimately needs to review. He said the ruling suggests an organization with a political arm or function needs to register itself as a PAC.

“If a primary purpose, not the primary purpose, of the entity is to engage in electoral politics they would have to register as a PAC, too. That could affect a lot of groups,” Maguire said, suggesting that trial lawyers, the state Labor Council, the WEA, and other organizations on the left end of the political spectrum also could be considered PACs. “Whether you are a Democrat or a Republican, that doesn’t make sense to me,’’ Maguire said, adding that he thinks Judge Grosse got the case right.

The original case was brought by Seattle lawyer Knoll Lowney on behalf of two former state Supreme Court justices, Robert Utter and Faith Ireland, in 2008. Both retired jurists had made campaign contributions to Democrats and supported Gov. Chris Gregoire’s re-election in 2008, and their suit initially looked into whether Rossi had coordinated with builders to raise money for an independent expenditure campaign.

Lowney has filed many suits over the years against Republican candidates in election years without a lot of success. He said this ruling offered some vindication.

Lowney said it shows McKenna did not go far enough in prosecuting BIAW in a similar, but separate case filed in Thurston County Superior Court. In the latter case, the Attorney General’s Office sued BIAW over its concealment of the funds earmarked for Rossi.

And in a major settlement worth $584,000, BIAW agreed to pay a $242,000 fine over its failure to report until August 2008 that it had collected more than $580,000 that was earmarked for Rossi in 2007. As part of the settlement, BIAW agreed to have its Member Services Corp. register as a PAC for that campaign year.

But McKenna did not try to get the entire BIAW organization registered as a PAC. During negotiations for an out-of-court settlement, McKenna’s office lawyers suggested sanctions of $900,000, but a BIAW lawyer said at the time that $10,000 was more appropriate. And some staff at the builders group spoke disparagingly about McKenna.

In fact, at one point BIAW’s staffers posted items to their blog, The Hammer, saying that McKenna was no different than Gregoire and that Democrat Jay Inslee would make a better governor than McKenna.

In the 2012 elections, BIAW is taking a much lower profile than it did in 2008 – when it spent more than $6 million to support Rossi and attack Gregoire. But it is supporting Republican McKenna for governor. Its executive vice president, Art Castle, said its subsidiary, BIAW-MSC, gave $500,000 to the Republican Governors Association, which is hammering Inslee in television ads.

In a twist of irony, McKenna’s campaign for governor brought its RV to Olympia today and held a rally with local supporters in the parking lot of the BIAW’s headquarters.

That would seem to suggest that things have changed at the BIAW, although Lowney says the organization still faces significant liability for its actions in 2008.

Update on original Oct. 30 post fixes wording error.

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