One of the largest single contributions to the campaign for a November ballot measure to suspend California's greenhouse gas reduction law has come from an obscure, Missouri-based conservative organization that ended 2009 with just $109.

Yet four months later, the Adam Smith Foundation made a $498,000 contribution to the campaign to pass Prop. 23, prompting some Sacramento officials to call for a federal investigation into whether it was a legal move for the designated nonprofit.

The Democratic leaders of the Legislature sent a letter this week to U.S. Attorney General Eric Holder asking him to investigate the matter. A spokeswoman in Washington, D.C., said the Justice Department is reviewing the request.

Opponents working for the campaign against the ballot measure say the large donation amounts to money laundering.

"We have no idea who in the state of Missouri or anywhere on the planet has given half a million dollars to our opponents," said Steven Maviglio, a spokesman for the campaign against Prop. 23.

The head of the Adam Smith Foundation, which states its purpose is to promote "conservative principles and individual liberties in Missouri," said that aggressively limiting greenhouse gas emission regulations in California could eventually push Congress to take similar actions.

'Take it head on'

"People are getting fed up, and they know the best way to stop this kind of stuff is to take it head on," said John Elliott, president and director of the foundation.

Prop. 23 would suspend the implementation of regulations that result from AB32, the state's landmark emissions law, until unemployment falls to 5.5 percent or lower for a year. Opponents say it is a thinly veiled attempt to permanently kill the law, which attempts to lower the state's emissions to 1990 levels.

Elliott would not disclose the names of the people who gave his foundation the money to make the campaign contribution. He said the money came from about 10 individuals and described them as "an alliance of like-minded individuals who had this issue as an interest." He said the money did not come from a corporation or an industry group.

So far, the other major contributors to the campaign to pass Prop. 23 are the Valero and Tesoro oil companies, which have spent $5.025 million on the campaign. Valero donated $3 million Friday, bringing its total contributions to $4.5 million. Some of the largest U.S. coal companies are headquartered in Missouri.

The legal issue is whether the foundation, which is named for the 18th century economist, violated its status as a 501(c)4 organization under IRS rules. Such nonprofits are supposed to exist "only to promote social welfare," but they can have some political involvement, according to the IRS.

Political activities

However, the IRS guide for such states, "in order to retain tax-exempt status ... an organization must ensure that its political campaign activities do not constitute the organization's primary activity."

The foundation, created in 2007, has received $93,500 in contributions over the past three years, according to its tax filings. It has made some small donations to conservative groups in Missouri during that time. It consists of a president, treasurer, two directors and an unpaid executive director, Elliott said. He said the group meets either monthly or quarterly.

When first contacted by The Chronicle, Elliott said he did not recall who contributed the money or who had argued for spending the money on California's Prop. 23.

Later, he said, "We saw this as an issue that affects Missouri, and so then we said we'd be interested in helping if there were a financial interest."

He said they "let folks know we were interested" in the issue, and then the contributions came in. "When you want something done you go to somebody who can do something quick. That's why we exist," Elliott said.

He said he would not be surprised if Holder investigated the foundation, adding, "We've got a good attorney, so I'm not worried."

Elliott said the organization is well known in conservative circles. But neither the spokeswoman for the campaign to pass Prop. 23 nor a lawmaker leading the effort said they had contact with the group, and they did not know any of its leaders.

Assemblyman Dan Logue, R-Linda (Yuba County), spearheaded the Prop. 23 campaign and said he has no problem accepting money without knowing exactly who contributed it. He said his opponents were "trying to intimidate businesses from supporting our cause."

"Everything the campaign has done is above board and we have nothing to hide," Logue said.

He pointed out that the anti-Prop. 23 campaign also accepted a $500,000 contribution from a 501(c)4 organization - the Green Tech Action Fund. But that money came entirely from that group, which is based in San Francisco, Maviglio said.

Contributions from such organizations make it difficult for the public to know who is spending money to influence elections, said Roman Porter, executive director of the Fair Political Practices Commission, the state's watchdog for campaign spending.

He said the commission, "is aware of the issue; however, we don't have an open investigation." He said state laws and judicial decisions prevent the commission from doing so.

"In all instances we want to have the most appropriate and robust disclosure possible to have an informed electorate," Porter said. "However, there are certain limits to what we are able to do."