Prop. 21 Backers File Lawsuit Over Money Laundering by Opponents of Rent Control Measure

The ‘Yes on 21’ campaign committee (‘Yes on 21, Homeowners and Tenants United to Keep Families in their Homes, sponsored by AIDS Healthcare Foundation’), a November California ballot measure which would allow cities to enact or expand policies that limit rent increases, has filed a lawsuit against three political committees created to finance efforts to defeat Proposition 21, asserting serious violations of California’s Political Reform Act, including possible money laundering by wealthy donors and corporations to oppose Prop. 21 and another ballot initiative Proposition 15, the split roll tax overhaul proposed on commercial properties.

The complaint, filed Tuesday, September 29th in Superior Court of California County of Los Angeles (Case No. 20ST CV 37190), seeks to compel the defendants, the three political committees funding opposition to Proposition 21, “… to follow the state’s laws that govern disclosure of political contributions and the disclaimers placed on political advertising.” The Yes on 21 campaign also seeks “… a preliminary injunction to prevent these activities from continuing during the remainder of the 2020 election cycle.”

Yes on 21’s lawsuit asserts that multimillion-dollar contributions were made to one committee, the California Business Roundtable Issues PAC (CBR), by several deep-pocketed donors including Blackstone Property Partners, L.P., a well-known real estate investment entity headed by Stephen Schwarzman; Michael K. Hayde, CEO and chairman of Western National Group, which manages apartment communities throughout California and Geoffrey Palmer, a Los Angeles real estate developer of rental apartments. In turn, CBR then contributed millions to two other committees opposing Prop. 21—Californians to Protect Affordable Housing (CPAH1) and Californians for Responsible Housing (CFRH2).

Yes on 21’s lawsuit asserts that those two campaign committees named violated the Political Reform Act by ‘earmarking’ their multimillion-dollar contributions in order to hide the true source(s) of the contributions and then failing to disclose such earmarked contributions. The Political Reform Act prohibits earmarking of contributions.

The numbers are significant: CPAH has raised roughly $7.5 million to oppose Prop. 21; CFRH has raised over $32 million for the same purpose.

The Yes on 21 campaign’s lawsuit also compares and contrasts previous donation patterns by several of the same major donors to similar political committees formed in 2018 to oppose Proposition 10, a prior and similar ballot rent control measure mounted by the Prop. 21 team. Yes on 21’s lawsuit alleges:

“In 2018, when Proposition 10 was on the ballot, Blackstone, Hayde, and Palmer collectively contributed close to $12 million to one committee primarily formed to oppose Proposition 10. Blackstone and Hayde were both listed as major funders on that committee’s advertising disclaimers.

Because Blackstone and Hayde made their contributions (opposing Prop 21) to Defendant CBR, rather than to Defendant CPAH, they are not listed as major funders of Defendant CPAH on its disclaimer.

These significant donors appear likely to have earmarked their contributions to Defendant CBR for contribution to Defendant CPAH and to the Proposition 15 opposition.”

“As a result of this shell game, the names of donors actually bankrolling the opposition to Prop. 21 are NOT appearing in the required ad disclaimers in TV, radio, print, online and other campaign advertising,” said René Christian Moya, campaign director, Yes on 21 campaign. “California voters are being duped by wily billionaires who want to keep a grip on the status quo by misleading the public about Prop. 21. We are asking the court for a temporary restraining order and both preliminary and permanent injunctions enjoining Californians to Protect Affordable Housing and the California Business Roundtable from violating the Political Reform Act with regard to disclosure of earmarked contributions—and to do so immediately for the remainder of this election cycle.”

A second cause of action in the lawsuit asserts violations of the Political Reform Act with regard to the Californians for Responsible Housing committee’s failure to disclose true source(s) of contributions regarding the aggregation of contributions made by related entities. The Political Reform Act requires the aggregation of contribution by entities under a variety of circumstances, including when an individual directs or controls an entity’s contributions and when two or more entities make contributions that are directed or controlled by a majority of the same persons.

The Yes on 21 campaign found a pattern of questionable donations from LLCs in the same cities or zip codes and/or on the same dates (22 contributions totaling $52,900 from the same zip code in San Diego on Aug. 17; 12 contributions totaling $60,950 from Hayward, CA on Aug. 5) as well as similar suspicious contributions from Boca Raton, FL.

Proposition 21 is sponsored by Yes on 21 – Renters and Homeowners United to Keep Families in Their Homes, Sponsored by AIDS Healthcare Foundation. To learn more, visit yeson21ca.org and housinghumanright.org.

1 (Defendant committee’s full name) NO ON PROP 21 - CALIFORNIANS TO PROTECT AFFORDABLE HOUSING - A COALITION OF HOUSING ADVOCATES, RENTERS, BUSINESSES, TAXPAYERS, AND VETERANS (“CPAH”), a California political committee primarily formed to oppose Proposition 21

2 (Defendant committee’s full name) NO ON PROP 21: CALIFORNIANS FOR RESPONSIBLE HOUSING, A COALITION OF SENIORS, VETERANS, AFFORDABLE HOUSING ADVOCATES, LABOR & SOCIAL JUSTICE ORGANIZATIONS, SPONSORED BY CALIFORNIA APARTMENT ASSOCIATION (“CFRH”) is a California political committee primarily formed to oppose Proposition 21

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