Sometimes a mistake is just that. And that’s what Council Member Pat Kolstad’s Mission City Community Fund (MCCF) raffle ticket win seems to be. Despite the journalistic catnip of bumpy road metaphors and whiffs of malfeasance by public officials, no evidence or first-hand testimony has been provided to The WEEKLY showing that anything happened beyond Kolstad’s failure to report the win correctly the first time around, or consider the PR fallout of his wife winning the grand prize at a charity raffle.
As many know, on Oct. 31, Kolstad bought seven tickets ($100 each) for the Mission City Community Fund car raffle on Nov. 1, and paid for them with a check from his 2014 re-election campaign funds. One of those tickets was the winning ticket, and was in the name of Terri Kolstad, the candidate’s treasurer and wife.
Winning a raffle with tickets purchased with campaign funds isn’t described in California’s Fair Political Practices law, so there’s no guideline on reporting. However, the law does address “receiving prizes or awards” by individual candidates and elected officials.
Such winnings are considered income, and thus reportable at fair market value on the Form 700 statement of economic interests. (This was the FPPC’s 2002 advice to Monterey Park Mayor Pro Tem David Lau when he won a trip to China in a raffle sponsored by the National American and Chinese Business Association.)
Kolstad says that by the end of October, he had effectively finished campaigning and intended to donate the balance of his campaign treasury to the MCCF. California political committees are allowed to donate surplus campaign funds to charitable organizations – it’s a common way of spending any leftover money after an election and before the Dec. 31 deadline.
Money isn’t legally surplus until after the election, and may only be donated “where no substantial part of the proceeds will have a material financial effect on the former candidate or elected officer, any member of his or her immediate family, or his or her campaign treasurer.” In other words you can’t donate surplus campaign funds to an organization where your relatives or treasurer are collecting salaries.
Kolstad reported the Infiniti Q50 win on his campaign financial reports (Form 460) as an in-kind donation from the Mission City Community Fund (MCCF), and then wrote a check to the MCCF, categorizing it as a Civic Donation for the roughly $32,000 dealer price of the car.
In mid-November, seeing pictures of Terri Kolstad’s win on web, Santa Clara resident Robert O’Keefe looked up Kolstad’s campaign filings and noted what looked like an illegal donation from the non-profit. O’Keefe says he emailed Kolstad twice to question him about its appropriateness, but received no reply.
Kolstad says he was on a three-week vacation in Europe with his wife after the election, and wasn’t following email. O’Keefe also came to November Council meetings to raise the question about the appropriateness of the transaction, but Kolstad was absent.
O’Keefe sent his email to the City Council in November, he says, and received a confirmation of receipt from the City. However, Council Members Debi Davis and Teresa O’Neill, both on City’s Ethics Committee, say that they didn’t receive copies at that time. (The third Committee Member, Dominic Caserta, wasn’t on the Council at the time.) O’Keefe then filed a complaint with the Fair Political Practices Commission (FPPC).
The FPPC ruled that the transaction was a violation because Terri Kolstad, as campaign treasurer, wasn’t allowed to receive the “substantial personal” gains that resulted from buying the tickets. In addition, “since the Committee’s raffle ticket won the car, the car is required to be reported as an asset of the Committee on its campaign statements,” said the FPPC. When he was contacted by the FPPC, Kolstad paid the campaign committee for the car.
The FPPC ruled that since Kolstad had paid the campaign fund for the car, ultimately no one unduly benefitted.
“There appears to be no intent to deceive the public since the donation to the non-profit was disclosed on the Committee’s campaign statement,” wrote Galena West of the FPPC enforcement division. “Neither Kolstad has a history of violating the Act and cooperated with the inquiry. Therefore, this case is being closed with this warning letter.” And that’s “the end of it” as far as the FPPC is concerned, says FPPC spokesman Jay Wierenga.
However, $32,000 of income to his campaign pushed Kolstad over Santa Clara’s fund-raising limits. The City fined Kolstad, and that matter, too, is a closed book says City Attorney Ren Nosky.
But that wasn’t the end of it as far as the MCCF was concerned, when its board became aware of the FPPC complaint in mid-February, according to MCCF spokesman Justin DeRollo. Kolstad’s campaign reports set off alarms among MCCF board members that the organization’s 501(c)(3) status might be compromised because (501(c)(3) non-profits can’t donate to political campaigns or committees.
“Within a week the board voted to return the funds,” says DeRollo. “The board has chosen to return the funds [including the price of the raffle tickets], making it clear that in no way are we supporting any candidate.” Further, the Fund asked Kolstad to change how the winning was reported.
The MCCF’s check created a new problem, because closed campaigns can’t accept donations. After consulting the FPPC (again) and filing an amended Form 460 that reports the car as income to the campaign, Kolstad returned the MCCF’s checks, saying that if the MCCF felt it couldn’t accept the money, it should be given to another charity.
This year’s MCCF raffle would have been a loss. Only 248 of the $100 tickets were sold, netting $24,800 for a car that that cost the Fund $31,000.
In a postscript, the “sound and fury” has moved to focus on Kolstad’s attorney, James Harrison of San Leandro-based Remcho Johansen & Purcell. RJ&P represented 2010’s pro-stadium Measure J committee (Santa Clarans for Economic Progress); as well as the Santa Clara Stadium Authority in a 2012 lawsuit against Santa Clara Plays Fair, which attempted, unsuccessfully, to force a second referendum about the Levi’s Stadium project.
RJ&P is well-known for its political law practice; as is the firm that defended SCPF in 2012, San Francisco-based Shute, Mihaly and Weinberger. A web search on RJ&P shows it’s the go-to firm for FPPC law.