Most big campaign spenders are billionaires, corporations, political action committees or unions. Think George Soros, the Koch brothers, the NRA. But the biggest L.A.-based spender on the 2016 election is a nonprofit — the AIDS Healthcare Foundation.
The nonprofit 501(c)(3), which runs a network of healthcare clinics around the world, has spent more than $22 million on a pair of statewide ballot measures it authored — as well as more than $1 million on local ballot measures. The next biggest spenders in L.A. are Haim and Cheryl Saban, who've given more than $11 million to a pro–Hillary Clinton super PAC, Priorities USA; and Sean Parker, who's given more than $7 million to the campaign for Proposition 64, which would legalize marijuana in California.
“It is unusual for a 501(c)(3) nonprofit to spend multiple millions of dollars,” says Kathay Feng, executive director of California Common Cause. “Even large organizations like the ACLU don’t have funds set aside for campaign purposes that can match the money major corporations or unions put into a campaign.”
AIDS Healthcare Foundation, or AHF, has spent $4.6 million on Proposition 60, which mandates that performers in all pornographic videos wear condoms, and $17.7 million on Proposition 61, which forbids California to pay any more for the prescription drugs it purchases than does the federal Veterans Administration. Prescription drug companies have spent more than $100 million to defeat Proposition 61.
As of Oct. 13, according to the Sacramento Bee, AHF ranked fifth in ballot measure spending in California, about the same as the California Teachers Association, and well ahead of big donors such as Charles Munger and Tom Steyer (though Steyer has eclipsed AHF with spending on national races, according to Open Secrets).
Donations to 501(c)(3) nonprofits are tax-exempt, and the organizations themselves are exempt from paying most taxes. They are prohibited from supporting political candidates and are not allowed to spend a “substantial” amount of money or time on lobbying. Under California law, ballot measures are considered part of lobbying.
“There’s no bright line for 'substantial,'” says Arthur Rieman, managing attorney with the Law Firm for Nonprofits. “It’s a subjective standard. For most purposes, when the term 'insubstantial' is used, it’s between 5 and 15 percent of revenue.”
By that math, most nonprofits could get away with spending only a few million dollars on campaigns. But AHF takes in somewhere around $800 million a year in revenue, according to the foundation's most recently available 990 form, which is from 2014 (AHF spokesman Ged Kenslea said, in an email, the foundation's 2015 form will be released days after the November election). AHF's $22 million in 2016 election spending amounts to less than 3 percent of its 2014 revenue.
Kenslea did not return phone calls seeking comment for this story. Garry South, a political consultant hired by AHF to run the Proposition 61 campaign, says his client's spending isn't unusual.
“I don’t think it’s unprecedented,” South says. “501(c)(3)s have the ability, under federal law, to spend money on advocacy, and many of them do. This is not unusual or unprecedented at all.”
When asked to name an example of another 501(c)(3) that had spent as much as AHF, South couldn't think of one. He did point out: “Ninety-six cents of every dollar earned by AHF goes right back into patient care. It’s a nonprofit organization. It’s a little ironic for the drug companies to attack AHF, the largest health care provider for AIDS patients in the world.”
AHF also has given $10,000 to the campaign against Measure M, which would increase sales tax by half a cent to pay for the construction of more public transit. Measure M is on the Nov. 8 ballot. And AHF sending out campaign flyers urging voters to vote no on Los Angeles city Proposition JJJ (which allows developers to build denser projects in exchange for building affordable housing and paying higher wages) and to vote yes on Proposition HHH, which raises property taxes to build permanent supportive housing for the homeless.
AHF has spent an additional $1 million on its own local initiative, set for the March 2017 ballot. The Neighborhood Integrity Initiative seeks to drastically curb large-scale development in L.A. by placing limits on zoning variances and General Plan amendments that the city council can give out.
While AHF's statewide ballot measures are fairly close to their stated mission, its local initiatives have raised eyebrows. The foundation's stated purpose, according to its articles of incorporation, is “the provision of hospice and health care services to AIDS, HIV and other patients, and engaging in related educational activities.” How exactly does limiting development and public transit fit into that?
The website for the Coalition to Preserve L.A. — the campaign, paid for almost entirely by AHF, to pass the Neighborhood Integrity Initiative (and run by former L.A. Weekly managing editor Jill Stewart) — says AHF “takes on social justice and fairness issues unrelated to AIDS.”
When we spoke with AHF president Michael Weinstein in March, in his offices in Hollywood, he said development and housing issues affected both AHF's patients and employees, and that no donations to AHF would be spent on the initiative (80 percent of his foundation's revenue comes from its U.S.-based pharmacies).
When asked why AHF was spending money on a ballot measure to curb development, he answered: “We’re a corporate citizen. This is our international headquarters. Why not? Why are we being asked the question and not all the business groups and the people who want to build anything they want? Why is it somehow less valid for us to be concerned about what happens in a community that we’ve invested in?”
But Lloyd Mayer, a professor of law at Notre Dame Law School, whom we talked to March, said, “The foundation appears to be acting beyond its authorized purposes if it supports ballot measures that are unrelated to the foundation's stated specific purpose.”
Rieman says that the attorney general or the IRS could take action in the event that a nonprofit spends money on campaigns that stray too far from the nonprofit's stated purpose.
“They could be prosecuted,” Riemen says. “Or they could lose their tax-exempt status for not being closer to their mission.”