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How Political Consultants Use The California Initiative Process -- And A Non-Profit Organization -- To Fool the Voters and Make Themselves RichIntroduction
For people with long memories, it's an odd sight: the non-profit started by Harvey Rosenfield and Ralph Nader in 1987 to take on the big insurance companies, now working with those same insurance companies. "Voter Revolt," which Rosenfield and Nader led to prominence in their successful campaign to lower auto insurance rate in 1988, was considered back then the industry's strongest critic.
Today, Voter Revolt has become a mouthpiece for the insurance industry, as well as a who's who of multinational corporate enterprises. A few examples:
In each case, documents filed with state authorities show that the individuals claiming to work for Voter Revolt were not employed by the organization, but rather by for-profit political consulting and public relations firms. These firms, in turn, were paid by insurance companies, utilities, politicians or other business groups who want to hide behind whatever vestiges of credibility the name Voter Revolt can bestow upon them.
The documents show that Voter Revolt itself is largely defunct, a shell operated by the private firms. Though it has received money directly from insurers and other business interests, the amount is small by comparison to the millions of dollars raked in by the private consultants using its name.
How did this happen? Both Nader and Rosenfield - now the head of FTCR - have been asked that question many times by journalists and members of the public.
Because of the use of the Voter Revolt name to defraud the public and frustrate citizen reforms, FTCR has extensively investigated this conduct. We present the detailed results of our research here. (The same information has been turned over to state and federal law enforcement agencies, which are in turn investigating).
This is the story of how a handful of political consulting and fundraising firms transformed a legitimate nonprofit organization once known for fighting for lower insurance premiums, into an extremely lucrative business enterprise. This cynical exploitation - designed to fool voters - is fast becoming standard practice among business groups.
Table of Contents:
1. The Birth of Voter Revolt
2. The Death of Voter Revolt
3. The Resurrection of Voter Revolt
4. 1996: The "Terrible 200's"
5. 1996: With the HMOs & Medical Marijuana
6. 1997: With the HMOs and Politicians
7. Back to Insurance
8. 1998: Voter Revolt Joins The Utility Companies
9. 2000: Back with the Insurance Industry
10. What We've Done to Stop the Voter Revolt Fraud
1. The Birth of a Voter Revolt
The year was 1986. Insurance premiums were skyrocketing - for homeowners, business and motorists. It was the midst of the "insurance crisis" (a topic addressed elsewhere on this web site), and consumers were caught in the middle.
Harvey Rosenfield, a consumer advocate who had worked for Ralph Nader in Washington, D.C. during and after law school, asked Nader for his support for a new consumer advocacy organization that Rosenfield was starting. Called "The Access to Justice Foundation," the group would work for changes in California's insurance laws that would lower premiums and prohibit abusive insurance practices. (Rosenfield is now the President of FTCR). Nader was enthusiastically in support.
Between July, 1986 and August, 1987, Access to Justice and a coalition of other organizations Rosenfield organized, propelled reform of the insurance industry to a highly visible issue in Sacramento. But the state legislature, dominated by insurance company lobbyists, refused to act on two modest reform bills sponsored by consumer groups.
"It was clear that the only way we'd get protection from the industry's abuses was through a ballot measure," Rosenfield recollects. Rosenfield had already begun drafting the initiative, and in summer of 1987, began the process of putting together a campaign to run a ballot initiative. "It was a daunting task. I'd never done an initiative before," Rosenfield says. "You have to get about 650,000 signatures to put the measure on the ballot, and I had no money to do it." His plan was to use mailings and door-to-door canvassing to get the measure on the ballot.
Rosenfield interviewed a handful of political consultants, including the firm that had put Howard Jarvis's Prop.13 on the ballot, raising the necessary money largely through mailings to the public asking for signatures and donations. Ultimately, they weren't interested. But Rosenfield interviewed another consultant, William Zimmerman, who was interested, and thought he could raise the necessary start-up money. Zimmerman, a former aide to Tom Hayden, was a mid-level political consultant who did advertising campaigns for liberal Democratic activists. Rosenfield retained Zimmerman and his firm, signing his standard consulting contract for $50,000 in advance, $15,000 per month, and 15% of the media buy, contingent upon advertising funds being available to pay him.
Rosenfield also hired a canvassing expert he had worked with at the California Public Interest Research Group: Angelo Papparella.
It was Ralph Nader who came up with the catchy name for the campaign: Voter Revolt to Cut Insurance Rates.
Rosenfield drafted and filed what became known as Proposition 103 in November, 1988. The 2,320 word proposal provoked four other competing ballot measures (the story of Prop.103 is told elsewhere on this site), and spurred an $80 million war that resulted in the passage of only Proposition 103.
Unfortunately, the group's success at the ballot box came at a high price. The direct mail firms hired by Rosenfield to collect the signatures had issued a final pre-election mailing that would have brought the campaign out of debt. But it literally disappeared; and on Election Day, November 8, 1988, Voter Revolt was over $500,000 in debt. William Zimmerman, who had signed on assuming that there would be money for television advertising -- and to pay him -- had never received either. Voter Revolt never raised sufficient funds to purchase advertising and Zimmerman received little compensation for his work on the 103 campaign.
Rosenfield now says: "Zimmerman got virtually no money for all the advice he had given on how to run the campaign and fight the unprecedented battle against the insurance industry. And while we all were ecstatic at our victory, most of the media attention fell upon me, as the author and Chair of the campaign. In retrospect, that's where the trouble began."
2. The Death of Voter Revolt
Between 1988 and 1993, Rosenfield focused principally on Proposition 103's implementation. The organization, which now referred to itself by the name Voter Revolt rather than Access to Justice, dabbled in other issues. But it was hampered by extremely limited resources, as well as over $200,000 in debt from the Proposition 103 campaign and subsequent activities, including the consulting fees owed to Zimmerman.
During most of that period, Rosenfield and an assistant were the only individuals employed by Voter Revolt, other than the paid door-to-door canvassers managed by Paparella. Rosenfield hired and worked with outside law firms to mount the necessary defenses against over one hundred lawsuits filed by insurance companies to overturn Proposition 103.
Phone fiasco. In 1992, Zimmerman approached Voter Revolt Chair Harvey Rosenfield with a proposed fundraising scheme in which citizens would subscribe to a "Voter Revolt Long Distance Telephone Service," with Zimmerman and Voter Revolt each splitting a percentage of the revenues that resulted. Rosenfield was skeptical, and concerned about endorsing a phone service. But he saw it as a way to repay Zimmerman for his work in the 1988 campaign.
At Rosenfield's insistence, the proposed arrangement was negotiated between Voter Revolt and Zimmerman's new firm (Phone Funders) through an independent law firm to protect the non-profit if anything went wrong.
As required by Voter Revolt's lawyers, Papparella and Zimmerman also set up a separate company, called Progressive Campaigns, to solicit customers to sign up for the long distance service. The service itself was to be offered by a company called Telecare.
Progressive Campaign canvassers working in Voter Revolt's name approached customers at supermarkets and solicited their support. According to the Phone Funders' sales brochure, customers could "support Voter Revolt With Every Long Distance Call You Make ...money that now goes to the phone company will go to Voter Revolt," and with the money Voter Revolt purportedly "can work even harder to lower the cost of health care in California."
But things went wrong. The problem was that Phone Funder's operatives were paid $5 or more for every "sign-up" they made in Voter Revolt's name. This was apparently too much of a temptation for the solicitors -- individuals recruited off the street by Progressive Campaigns from classified ads in newspapers. According to court documents filed in subsequent litigation:
Some LOA's [letters of agreement] submitted to Telecare by Phone Funders bear forged signatures of the purported customers. Others have been determined to be executed by minors, or persons who did not have authority to order a change in long distance service for Customer's telephone number....Phone Funders knew, or should have known that representatives of Voter Revolt were obtaining Customers through misrepresentations and omissions of material facts."1Indeed, tens of thousands of people were duped into signing agreements to change their telephone service. Unaware that their long distance service had been changed from another carrier to Phone Funders, most of these customers refused to pay the bills Phone Funders sent to them, and demanded that their original long distance carrier be reinstated.
This effectively bankrupted Telecare, according to court documents in litigation against Phone Funders2. According to Telecare's lawsuit:
"Phone Funders knew, or should have known, of the pattern of fraud perpetuated by representatives of Voter Revolt in its solicitation and canvassing activities; Phone Funders is therefore liable itself for the fraud."The Judge in the case agreed:
".... customers were lead to believe that they were signing a form merely requesting information. Others signed LOA's after being told by Phone Funders'' (sic) agents or sub-brokers that they were contributing money or seeking information that would 'help the environment' or aid in other civic or social causes advanced by a group known as Voter Revolt. Many LOA's were submitted to Telecare by Phone Funders in the names of customers who did not speak English..."Telecare took a loss of $234,694 in revenue for uncollected bills. Two months later, only 3,000 of the original 30,000 customers still had accounts with Telecare. Phone Funders collapsed as well, then initiated a lawsuit against Telecare to get paid commissions for their fraudulent sales. In his decision in the case, the judge sided with Telecare. He found "a pattern of fraudulent practices by Phone Funders."
Although Voter Revolt's contract with Phone Funders, negotiated by the law firm under Rosenfield's direction, protected Voter Revolt from any liability for the catastrophic results of the scheme, the group suffered indirectly. It's door-to-door canvassing arm had in effect gone "private," becoming Progressive Campaigns. When the Phone Funders project collapsed, so did Progressive Campaigns, and Voter Revolt was left with no fundraising options.
The Phone Funders disaster convinced Rosenfield that neither Zimmerman nor Paparella were competent to raise money for the organization, and that without fundraising, the organization would be unable to meet its commitment to protect consumers' interest in the implementation of Proposition 103. Voter Revolt was headed inexorably toward collapse. But both Zimmerman and Paparella were intent upon continuing to raise money in Voter Revolt's name.
The relationship between Rosenfield and both Zimmerman and Paparella eroded into a bitter dispute that ended with Rosenfield leaving the organization in June of 1993, to form FTCR. "I told the other three members of the Board of Directors of the organization that it had been irreparably injured by the financial mishaps of Zimmerman and Paparella, and that it was improper to solicit money for an organization which consisted of only one policy advocate - myself," Rosenfield said later.
At that point, the organization was, in effect, defunct: it had no staff, and no program services. However, it continued to enjoy public recognition it had achieved as a consumer advocacy organization associated with Nader and Rosenfield in the preceding years. This reputation, created and maintained in part by the non-profit status accorded by the state of California, constituted the organization's only asset.
Two years later, Rosenfield remarked: "If I had known that these people were going to sell the credibility and reputation of Voter Revolt to benefit themselves, I would never have left without dissolving the organization."
3. The Resurrection of Voter Revolt
In the summer of 1995, petitions to place three initiatives on the California ballot began circulating on the streets of the largest cities in the state. One measure would have established a "no fault" auto insurance system, strongly advocated by insurance companies. The second, backed by Wall Street investment firms and high tech companies, would have required victims of financial fraud to pay the defendant's legal fees if the investor sued but got less from the jury than the defendant had offered to pay to settle the case. The third initiative was intended to prevent injured consumers from filing lawsuits by cutting their attorneys fees by 50%.
Insurance companies and other big corporations have long advocated such restrictions on the right of consumers to seek redress through the civil justice system. However, what was unusual about the proposed initiatives was their chief sponsor: "Voter Revolt," the organization familiar to the news media as the group founded by consumer advocate Harvey Rosenfield and backed by Ralph Nader to sponsor Proposition 103.
At a press conference in September of 1995 announcing the campaign for the three measures, people claiming to be the leaders of Voter Revolt announced that the group was promoting the measures to "bring a measure of prosperity back to California...saving consumers billions of dollars...."
Attending the conference was William Zimmerman, who identified himself as the "Political Director of Voter Revolt"; Michael Johnson, who told reporters he was a former assistant to Ralph Nader, and described himself as the "Policy Director" of Voter Revolt; and William Westermeyer, whose title was "Executive Director" of "Voter Revolt."
The three initiatives were to be qualified, they told reporters, by the "grassroots activists" at Voter Revolt who had put Prop. 103 on the ballot six years earlier. The campaign would be supported by a coalition comprised of Voter Revolt and the business community, to be known as "The Alliance to Revitalize California."
The Sacramento press corps was puzzled. After all, the Voter Revolt organization, led by Harvey Rosenfield and backed by Ralph Nader, had fought no fault, along with other "tort reform" measures, in 1988 and for many years thereafter. Indeed, the Articles of Incorporation of the Access to Justice Foundation organization, as drafted by Rosenfield, stated the group's purpose as "to preserve, protect and expand the legal rights of the People of this state, particularly the right of access to the courts and full justice for those who seek legal redress for their grievances..."
Zimmerman, Johnson and Westermeyer acknowledged to reporters that the Voter Revolt organization had previously opposed as anti-consumer the very proposals the group was now sponsoring. But, repeatedly referring to their credentials as consumer advocates and leaders of "Voter Revolt," they told reporters that they had changed their minds.
As for Voter Revolt now working with the business and financial interests it had often combated, this, William Zimmerman explained, was the new model for the "90s." "It's time to overcome the worn-out polarization between consumer groups and business leaders, and find ways to work together for the benefit of all," the press release stated.
The petition drive for the three measures continued through the summer of 1995. As signature-gatherers approached voters at grocery stores and other public places asking them to sign the petitions, they routinely identified themselves as members of "Voter Revolt, the grassroots group founded by Harvey Rosenfield and Ralph Nader."
Once the initiatives were qualified for the ballot, the campaign for their passage began in earnest. During the months preceding the election, the Voter Revolt name was at the forefront of the highly visible campaign for the measures:
But it was not until state campaign disclosure reports were filed that the explanation for the role of Voter Revolt in the election became apparent.
It was money. Lots of money.
4. 1996: The "Terrible 200's"
The campaign disclosure reports filed with California authorities, along with other legal documents, revealed that the use of the name Voter Revolt was an elaborate fraud which enriched several private political consulting firms. By offering the use of the Voter Revolt name and reputation, these firms won the lucrative contract to mount the initiative campaigns.
The materials show that Zimmerman, Johnson, Westermeyer and the "grassroots activists" all lied about their identities -- none were employed by "Voter Revolt."
During 1995 and 1996, when he claimed to be Voter Revolt's "Political Director," William Zimmerman's Santa Monica-based political consulting firm, Zimmerman and Markman, received $515,402.15 for public relations and media production services from the Alliance to Revitalize California (the campaign committee established by the corporations funding the three measures) (see disclosure form). In a subsequent deposition, Zimmerman admitted that he had not been an employee of Voter Revolt in 1995 and 1996. He described himself as "an unpaid advisor to the organization," (copy of deposition).
Nor was Mike Johnson employed by "Voter Revolt," as he had told reporters. Johnson had once worked briefly for Rosenfield as a staff person at Voter Revolt after the 1988 election. But, like Zimmerman, during the period when Johnson pretended to be "Voter Revolt's" "Policy Director," he was actually employed by the Alliance to Revitalize California and other insurance and business groups, which paid him a total of $107,115.48 during 1995 and 1996. In a later deposition, Johnson identified himself as a "political consultant" employed by an offshoot of the Alliance to Revitalze California (deposition). 4
Westermeyer -- the ostensible leader of the Voter Revolt organization -- turned out to be a fund-raising functionary who was usually to be found soliciting contributions on the streets of Sacramento on behalf of "Progressive Campaigns," another private, for-profit political firm, based in West Los Angeles. This company played a key role in the initiative campaigns.
The much-vaunted Voter Revolt "grassroots activists" were in fact employees of Progressive Campaigns. They were paid up to $1 a signature to qualify the measures for the ballot. When approaching citizens to get signatures on the petitions to place the measures on the ballot, they used the name "Voter Revolt." As a group of them later wrote in a letter to a national magazine,
"We must point out that the 'consumer group Voter Revolt'...is not even real. It is an old name that Nader actually coined a while back which is being used as a front for the for-profit 'Progressive Campaigns, Inc.' We went out to the public as Voter Revolt, but our paychecks said Progressive Campaigns." ( Copy of Letter )Campaign records show that Progressive Campaigns received $3,525,053 from the Alliance to put the measures on the ballot and, later, to conduct a door to door fundraising drive -- not that the sponsors of the measures needed the money, but rather desired the appearance of small donations from the general public (Table of Money Paid to Progressive Campaigns ).
Zimmerman, Paparella, Johnson and Westermeyer were simply hired by the corporate giants, part of what became a $19 million campaign, funded by donations averaging $30,000. (Donors).
And, records show further that Voter Revolt itself was an empty shell during most of the campaign waged in its name. During the time when Zimmerman and Progressive Campaigns were receiving tens of millions of dollars for their services using the name Voter Revolt, the organization itself reported receiving only $84,583 in campaign contributions. But even that amount was dwarfed by the $116,747 in expenditures it made -- mostly for payroll for staff apparently provided by Progressive Campaigns to raise the $84,583. (Table of Payments to Voter Revolt).
The insurance industry's role. The sole purpose of using the name Voter Revolt was to hide the insurance industry's role in the campaign, starting with the drafting of the initiatives themselves. While Johnson insisted he was the author, the ballot measures were identical in their specifics to proposals published by insurance industry-funded lobbying groups and think tanks on the East Coast.
During most of the campaign, Zimmerman, Johnson and other backers of the initiatives vociferously insisted that the insurance industry was not involved in their campaign and was not backing the measures. However, during the campaign, reports showed a total of $118,750 in insurance donations.
The big insurance money came, as expected, after the election, when the truth would be too late to affect the outcome.
Exhaustive research into post-election campaign reports showed that the insurance industry funneled over $700,000 to the three initiatives through a separate campaign committee, Taxpayers Against Frivolous Lawsuits, established by insurers and other business organizations to fight yet another round of ballot measures on the November, 1996 ballot.
Here's how the money moved after the 1996 election:
Insurance Company Donations to "Taxpayers Against Frivolous Lawsuits"
Donations from "Taxpayers Against Frivolous Lawsuits" to Alliance to Revitalize California (Propositions 200, 201, 202, March 1996)
Largely because of the scrutiny of the news media, the cynical attempt to hide behind Voter Revolt failed miserably. In addition to the campaign disclosure reports, the following revelations exposed more of the history of Zimmerman, Paparella, etc.:
5. 1996: With the HMOs & Medical Marijuana
Fighting patients' rights. In 1996, FTCR joined with the California Nurses Association to draft and place on the ballot a measure to give consumers greater protection against abuses by HMOs.
Though the strategy had failed in March, 1996, the HMO and the insurance industry tried to employ it again: insurance companies gave money, this time directly to Voter Revolt, to oppose Proposition 216. Disclosure reports later showed that Voter Revolt received $205,000 from insurance companies and other big corporations via "Taxpayers Against Frivolous Lawsuits," a political campaign committee.
Payments by "Taxpayers Against Frivolous Lawsuits" to Voter Revolt
As part of the insurance industry's attack on Proposition 216, several individuals, claiming to be representatives of "Voter Revolt," attempted to disrupt a series of rallies held by the California Nurses Association and other groups backing Prop. 216. Police were called on two occasions, once in Bakersfield when these individuals attempted to run 216 supporters off the road, and in Fresno, where they charged the crowd at a rally, sending one woman to the hospital (Attachment #13).
Medical Marijuana Initiatives. In mid-1996, a newspaper reported that William Zimmerman of Voter Revolt would direct the campaign for Prop. 215, the medical marijuana initiative on the November 1996 ballot. As in the March, 1996 initiatives, the signature-gathering for what became Proposition 215 on the November ballot was done by paid professionals from Progressive Campaigns who identified themselves to the public as Voter Revolt workers. Progressive Campaigns received $669,095.60 to collect the signatures; Zimmerman's firm received $213,777.27 in fees.
In the aftermath of 215's passage, both firms are taking the lead in promoting similar measures in other states. Indeed, they have created a new non-profit group to act as an alternative front for their for-profit operations, much like Voter Revolt does. "Americans for Medical Rights," incorporated in California, lists its address in the same suite as the offices of Zimmerman and Markman in Santa Monica. And Zimmerman now describes himself as a medical marijuana activist, rather than a for-profit political consultant.
With two front groups in operation, it is probably not surprising that Progressive Campaigns' own employees sometimes get confused. In the state of Washington, Zimmerman and Progressive Campaign have been hired to run a medical marijuana initiative campaign. According to documents filed in a lawsuit by a local retailer, Progressive Campaigns' employees are using the name Voter Revolt in that effort (lawsuit).6
6. 1997: With the HMOs and Politicians
Mayor Riordan and the Los Angeles City Charter Amendment. Progressive Campaigns was hired to collect the signatures for the proposed City Charter Amendment voted on by Los Angelenos in April, 1997; once again, its employees used the name Voter Revolt to solicit signatures.
California and other states have enacted laws requiring the people who circulate petitions for signatures be registered voters of the county in which the signature-gathering is done. Reports that Progressive Campaigns was using individuals not properly registered in Los Angeles to solicit signatures for Mayor Riordan's Charter Amendment Initiative led the Prop. 103 Enforcement Project to notify the City Attorney (Attachment #16). An investigation by city and county officials determined that, in fact, individuals not properly registered in the city had circulated the measure, and the local authorities refused to certify the measure for the ballot (Attachment #17). A subsequent settlement permitted the measure to go forward.
On the weekend before the April election, a slate mailer ostensibly cosponsored by Voter Revolt arrived at many homes of registered voters in Los Angeles. One side of the mailer displayed the Voter Revolt logo and a list of Prop. 103's accomplishments, for which Voter Revolt takes credit. On the other side, the mailer endorsed Mayor Riordan's re-election, as well as a candidate for City Attorney. The slate-mailer's co-sponsor is listed as "LA Voter Guide," a group apparently run by pro-Charter Amendment people associated with the Mayor and Ted Stein.
It appears that use of the Voter Revolt name in the mailer may have been part of the deal made when the Charter Amendment campaign supporters hired Progressive Campaigns to put the measure on the ballot using "Voter Revolt's" name.
Recall in Ventura. In Ventura, California, Progressive Campaign petitioners were hired to recall a local "slow growth" politician. Again, the signature gatherers claimed they were working for Voter Revolt and routinely suggested they were operating with the blessing of Ralph Nader and Harvey Rosenfield ( letter from a concerned citizen). The individuals were also found to be engaged in questionable signature gathering practices and the signatures gathered were disqualified, invalidating the recall (Read the article.)
Arizona Petition Drive. Similarly, an Arizona ballot petition drive conducted by Progressive Campaigns was invalidated by an Arizona judge in May after it was determined that Progressive Campaigns employees -- including Voter Revolt's ostensible "Executive Director," William Westermeyer -- were falsely registered in Arizona for the purpose of collecting signatures. Once again, the improperly obtained signatures were invalidated and the initiative was disqualified (Court decision).
7. Back to Insurance
Using the name "Voter Revolt," individuals apparently employed by Progressive Campaigns continue to solicit donations from the public by direct mail, by telephone and by door-to-door canvassing. Their mailers, for example, suggest that Voter Revolt continues to work on insurance reform legislation. (copy of mailer ) However, it sponsored no such legislation in 1997.
But Michael Johnson did come to the aid of the insurance industry in 1997, again using the Voter Revolt name, on a low-profile but highly important issue for consumers and the insurance industry.
Reacting to pressure from FTCR, Consumers Union and other consumer groups, California Insurance Commissioner Chuck Quackenbush agreed to hold hearings on regulations which would require insurance companies to exclude certain expenses when requesting rate increases under Proposition 103. 103 mandated the regulations, but Commissioner Quackenbush, an opponent of 103 whose pro-industry record is discussed elsewhere on this web site, had stalled. Insurance companies obviously wanted no regulations that would limit their ability to pass through excessive executive salaries and other forms of waste and inefficiency to the ratepayers.
In October, 1997, Johnson petitioned the Department of Insurance to be considered eligible to participate in the hearings. Using the Voter Revolt name, he requested that he be treated as a "consumer advocate" for purposes of receiving compensation under Proposition 103, which allows consumer groups to request compensation for their time and expenses when they actively participate in insurance matters on behalf of consumers. As justification , he relied on litigation brought against insurers when Rosenfield was the leader of the organization.
At a subsequent meeting in San Francisco convened by the Commissioner to discuss the specific proposals under consideration, Johnson appeared. Johnson's presence as a consumer advocate was challenged by attorneys for the Proposition 103 Enforcement Project as an insurance industry ruse, pointing out that in a recent deposition in a lawsuit, Johnson had stated that he was a political consultant employed by an offshoot of the Alliance to Revitalize California.
Johnson's position on the issues before the task force was, of course, in line with the insurance industry's position: he supported the insurance industry's proposal, which was to issue regulations that would allow insurance companies to pass through any or all expenses they chose. In other words, the industry approach was a fraud, under it, there would be no regulation covering the rate approval process. (Memo from Johnson and Allstate, other Insurance Companies Explaining their Proposal).
The Quackenbush Administration ruled that Johnson represented consumers, and allowed him to participate.
Months later, in 1998, Quackenbush stood for re-election. Along with contributions from the insurance industry, Voter Revolt did its part: it sent an elaborate mailer to voters which endorsed Quackenbush's reelection. (Copy of MailerCopy of TV script).
But campaign records filed by Quackenbush revealed that the Quackenbush campaign had paid Voter Revolt $34,300 to put out the mailing to voters. (Quackenbush, whose opponent raised virtually no money, was narrowly re-elected). (Copy of state disclosure reports).
And, several months after Quackenbush was re-elected, state records show that the Department of Insurance paid Johnson $13,095 for his "participation" on behalf of insurers in the proceeding, a rate of $150 an hour (Johnson is not a lawyer and has no training in insurance matters). (Copy of DOI decision).
Interestingly, the Access to Justice tax return for 1998 shows only $17,471 in receipts for 1998, even though state campaign disclosure reports show the group was paid a total of $85,550 for campaign mailings. (Tax Return). FTCR has written Johnson a letter asking him to explain this discrepancy. (Copy of Letter dated 1/25/00).
This obvious conflict of interest, involving payments from Quackenbush to Voter Revolt and endorsements by Voter Revolt, has gone unnnoticed by the news media.
Finally, Voter Revolt's 1998 tax return shows that, once again, people who claim to work for Voter Revolt are not employed by the organization. According to the return, Voter Revolt paid Johnson only $1,000 in 1998.
8. 1998: Voter Revolt Joins The Utility Companies
In 1998, FTCR joined with other California consumer advocacy groups in drafting and sponsoring a ballot measure to lower utility rates by rewriting anti-consumer legislation, passed by the California Legislature in 1996, that forced ratepayers to pay off the bad debts of the state's three private utility companies: Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. More details of that issue can be found elsewhere on this web site. (Utilities)
A key part of the utilities' strategy to defeat the measure, Prop. 9, was to employ other individuals to speak to the media and the public while the utilities spent $40 million in negative ads on television and radio. Michael Johnson was paid $15,896 by the utility companies to act as their spokesperson. (Disclosure Report). For reasons unknown, he did not identify himself as representing Voter Revolt during that campaign. However, Voter Revolt was paid $15,000 by utility companies to urge the public to vote against Proposition 9 in its 1998 mailing. (Disclosure report).
9. 1999: Back with the Insurance Industry
When FTCR testified before the California Senate and Assembly Insurance Committees in support of insurance consumer protection legislation, Michael Johnson, spoke, as the executive director of Voter Revolt, in favor of he insurance industry position.
The consumer protection position supported by FTCR and opposed by Johnson prevailed. The law, signed by Governor Davis, provides innocent accident victims with the right to sue an insurance company that unfairly denies, delays or low-balls an insurance claim. Although all of the state's major consumer groups supported the legislation, Johnson claimed that, despite testifying side by side with insurance industry representatives, his testimony was on behalf of consumers.
After the legislation passed, a few out-of-state insurance companies, funded a petition drive to place the new laws on a statewide ballot as referenda (Propositions 30 and 31 on California's March 7, 2000 ballot). Mike Johnson, listed as the Executive Director of Voter revolt, became one of proponents and ballot signers of the referenda. He became one of the insurance industry's spokespeople for the campaign.
The first campaign reports made available to the public indicate that Voter Revolt received $20,000 from the insurance industry's $44 million campaign (as of 10 weeks prior to the election) to defeat the reform laws. Read FTCR's analysis of Propositions 30 and 31.
10. What We've Done to Stop the Voter Revolt Fraud
The activities undertaken by various firms and individuals using the name Voter Revolt raise serious questions of compliance with the laws governing non-profits. Non-profits, unlike private firms, are operated for and on behalf of the public.
The fact that a non-profit group joins with powerful special interests such as the insurance industry to sponsor ballot measures may be a startling turn-about, but it is not illegal. Indeed, it is not uncommon for non-profit organizations to join with special interest groups to support or oppose legislation or initiatives. (However, non-profits are generally prohibited from endorsing or opposing political candidates unless the organization is actively pursuing programs and issues and making the endorsement furthers the organization's purposes).
The Voter Revolt situation is much different. Here, private political consulting firms and individual consultants are simply merchandising the asset of a non-profit group -- its goodwill -- to further their own commercial business purposes. In turn, the public is misled. Various state and federal laws and regulations prohibit the misuse of non-profits in such a manner.
State and federal laws applicable to non-profits focus on the independence of the members of the Board of Directors which controls the non-profit. The laws prohibit those who control the organization and its assets from misusing them for their own personal benefit. Board members are considered "trustees" of the non-profit organization and must be scrupulous in exercising their responsibility to protect the public. "Self-dealing" by board members is unlawful if it is not properly disclosed and approved by the Board, or if it is done as part of an arrangement to benefit private parties.
One question is whether the Board of Directors of the organization -- The Access to Justice Foundation -- approved of the use of the organization in the manner described above. Board members can be held personally liable by the government for misuse of the non-profit assets. However, such information is not required to be made public.
Consider the following information on the Board of Directors of Voter Revolt, drawn from Access to Justice Foundation tax returns:
Members of the Board
A brief review of the role of these individuals reveals that the majority of the board of directors of Voter Revolt operate companies or engage in activities that have used the Voter Revolt name:
William Westermeyer - an employee of Progressive Campaigns, the paid signature gathering firm owned by Angelo Paparella, according to campaign reports filed with the California Secretary of State.
Gary Horowitz - a long-time friend of William Zimmerman; Horowitz separately received $2,500 from the Alliance to Revitalize California for unspecified services in connection with the Propositions 200, 201 and 202 campaign in 1996. (Disclosure report).
Michael Johnson - Public relations spokesperson employed by insurance and other business interests to oppose insurance, HMO, utility and other reforms. Johnson has been paid over one hundred of thousands of dollars by them directly, but describes himself publicly as Director of Voter Revolt.
Angelo Paparella - Owner of Progressive Campaigns, a private, for-profit petition signature gathering firm. Paid by insurance companies and other business interests to place Propositions 200, 201 and 202 on the ballot in 1996 and to place the referenda -- Propositions 30 and 31 -- on the 2000 ballot. Its employees have often presented themselves to the public as employees of "Voter Revolt."
William Zimmerman - Like Paparella, owner of a private political consulting firm. Works for business interests, often claims to speak as an officer of Voter Revolt. Now runs campaigns to legalize medical marijuana throughout the United States; non-profit group that hires him to conduct these campaigns housed in his Santa Monica offices.
Mario Valasquez - The director of a non-profit founded by William Zimmerman many years ago, Medical Aid for El Salvador, "which provides supplies and funds for medical relief in rural El Salvador," according to documents filed with the government. Zimmerman served as President and Chairman of the board of directors. Zimmerman's telemarketing company, Frontline Campaigns, also received a lucrative fundraising contract during 1993 - 1994 equal to one quarter of Medical Aid For El Salvador's gross receipts that year. Zimmerman's for-profit Frontline Campaigns Inc. received a $188,313.75 contract from the Medical Aid For El Salvador Board to do their telemarketing during 1993 - 1994. (Tax return). But the year after Zimmerman received this telemarketing contract, in 1995, the Medical Aid for El Salvador Board voted to dissolve the non-profit corporation. According to the resolution of the board of directors to wind up and dissolve, "The corporation holds as of April 30, 1995, $18,063 in cash." (Tax Return)
Steve Sims - former employee of Progressive Campaigns.
Jennifer Frank -- former employee of Voter Revolt.
The political firms and consultants using the "Voter Revolt' name have been paid millions for the campaigns they have worked on since 1995.
In California, initiative sponsorship is a matter of great concern to voters, who are justifiably suspicious when special interests back ballot measures. The effort to wrap a political campaign in the disguise of a non-profit consumer organization is a strategy designed to defraud both voters and contributors to the organization.
In effect, the firms and consultants have used the reputation of "Voter Revolt," based on Ralph Nader and Harvey Rosenfield's association with it years ago, to enhance their attractiveness as consultants to the potential sponsors of ballot initiatives or other political activities. By merchandising the name to corporations and individuals whose own identities would win little sympathy from the voters, these consultants have won lucrative contracts.
Voter Revolt receives little or nothing for this use of its principal asset -- its name. Nor has the group employed any full-time public policy staff, issued any reports or studies or played any role in legislative consideration of insurance matters.
Because the Voter Revolt name has been deployed in recent years against the interests of consumers in a variety of public policy issues, including those FTCR has focussed on, FTCR has extensively investigated this conduct, the results of which have been presented here. We have publicized the information as we obtained it. Finally, with the 1998 Voter Revolt endorsement mailer, FTCR attorneys wrote to the California Attorney General and the U.S. Internal Revenue asking that the misuse of the non-profit be investigated. (October 29, 1998 letter requesting investigation). The documentation presented here was provided.
On June 11, 1999, the California Attorney General's office wrote back, stating that "the allegations appear to be credible." However, it concluded that the Internal Revenue Service had jurisdiction over the issues involving whether the laws governing non-profit tax exempt status have been violated; the matter was referred to the IRS in Washington, D.C. (June 11, 1999 letter).
1. Phone Funders, Inc. Vs. Telecare Inc., United State District Court Central District of California, Case NO. 93-4112-TJH(Sx), Affirmative Defense IV, Factual Allegation 20.
2. Phone Funders, Inc. Vs. Telecare Inc., United State District Court Central District of California, Case NO. 93-4112-TJH
3. In the argument in favor of no-fault to be published in the official ballot pamphlet, Johnson went so far as to imply that Ralph Nader and Public Citizen were in support of the initiatives. Johnson wrote: Prop 202 is "no different from the consumer protection policies I fought for while working for Public Citizen, the consumer group founded by Ralph Nader." But in December of 1995, a Sacramento Superior Court judge acting in response to a legal petition by Nader and Claybrook, agreed that the statement was false and misleading and ordered Johnson's statement reworded. Associated Press, "Changes Ordered In Ballot Argument," Los Angeles Times, December 28, 1995.
4. During the campaign, Johnson frequently described himself as a "former Nader Raider," insisting that he had worked for Nader in Washington, D.C. That, too, was a distortion at best. Records from Nader's office -- The Center for the Study of Responsive Law -- show that Johnson had been rejected by Nader's office after applying for a job. He later obtained employment as a researcher at one of the numerous citizen groups in Washington that Nader had founded.
5. Associated Press, "Changes Ordered In Ballot Argument," Los Angeles Times, December 28, 1995.
6. When the company, Costco, sought to serve Voter Revolt at the Santa Monica address listed in California's non-profit records for service of process, the service was refused by an employee of Progressive Campaigns, who said that Voter Revolt was not at that address.
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