Grocery lobby must pay $18M for laundering campaign money

Photo: SOFIA JARAMILLO, SEATTLEPI.COM Tom Stahl, a local farmer and member of the Farmers and Friends of...

The Washington, D.C.-based Grocery Manufacturers Association (GMA) has been slapped with a $6 million civil penalty, which will be trebled due to its "intentional violations of state law" for laundering money in a 2013 Washington state initiative campaign.

If the $6 million civil penalty, or $18 million in total damages, holds up on appeal, it may be the highest fine for campaign finance violations in the history of the United States.

"We believe it is; we've done a good bit of research and we have never found a penalty this high," said state Attorney General Bob Ferguson.

Washington voters were asked to require the labeling of genetically modified foods and seeds. The Grocery Manufacturers Assn. spent massively to defeat the initiative, but hid sources of money.

Washington voters were asked to require the labeling of genetically modified foods and seeds. The Grocery Manufacturers Assn. spent massively to defeat the initiative, but hid sources of money. Photo: Mihajlo Maricic Photo: Mihajlo Maricic Image 1 of / 3 Caption Close Grocery lobby must pay $18M for laundering campaign money 1 / 3 Back to Gallery

In her ruling, Thurston County Superior Court Judge Anne Hirsch was blunt, writing:

"The totality of the record establishes under a preponderance of evidence, as well as the higher clear, cogent and convincing standard, that the GMA intentionally violated Washington state public campaign finance laws."

The grocery lobby group poured more than $11 million into the "No on 522" committee, which fought and narrowly defeated an initiative to require labeling of genetically modified foods and seeds sold to consumers in the state.

The GMA did not report its individual contributors until threatened with legal action late in the campaign by Ferguson. The agribusiness giant Monsanto had reported its $4.5 million expenditures to the "No on 522" committee.

Ferguson said Judge Hirsch's penalty award carried a message: "Play by the rules. Do not expect to settle the case and chalk it up to the cost of doing business."

What prompted the massive award? The GMA established what it called a "defense of brands account." It collected money to defeat the Washington initiative while shielding the identities of major food manufacturers (e.g. Pepsico, Coca-Cola, General Mills, General Foods) who were putting up millions of dollars in support.

The GMA, its members and other sources had spent $43 million in 2012 to defeat California's Proposition 37, which would have required all packaged food products to identify genetically modified organisms.

"While successfully defeating Prop. 37, certain individual member companies of GMA and some GMA staff received negative responses from the public because of their opposition to Prop. 37, including threats and boycotts," Judge Hirsch wrote in her ruling.

Hence, an elaborate scheme was hatched -- and approved by the GMA's board -- to conceal individual donors.

Ferguson announced legal action against the GMA even before the 2013 campaign ended. He charged the grocery manufacturers with violating Washington's venerable I-276, a campaign disclosure law passed by voters 40 years ago.

Judge Hirsch had already ruled, earlier in the year, that the GMA was a political committee and obligated to disclose contributions, and that it concealed the true sources of the money it was spending against Initiative 522.

On Wednesday, she handed down the punishment.

The GMA failed to "timely and properly file 60 reports of contributions it received from its members and expenditures it made from GMA's Defense of Brands Account" in violation of state law, the judge wrote.

A leading supporter of Initiative 522, state Sen. Maralyn Chase, D-Shoreline, cheered the ruling.

"With so much corruption and so much secrecy in campaigns, we finally won one," said Chase. "I feel really vindicated. I am so proud of my state. Yes, we have laws. And they will be enforced."

Collin Jergens of Fuse Washington, the state's largest progressive organization, which backed I-522, praised Ferguson for a dogged pursuit of one of the nation's most influential trade groups.

"The ruling sends a clear message that out-of-state corporations and their shady PACs can't thwart our state's election laws," said Jergens. "The people of Washington have voted for some of the strongest campaign finance laws in the country and we expect everyone to follow the law, no matter how much money they have."

Roger Lowe, senior vice president at the GMA, said the association will "vigorously pursue its legal options to correct this injustice."

"GMA believes that there is no basis in law or fact to support this unprecedented, inequitable and clearly excessive penalty -- nearly 18 times higher than any other Washington State public disclosure fine," Lowe added in a statement.

The damage ruling, and Judge Hirsch's finding that the GMA violated the law, is certain to be appealed.

The grocery lobby has been represented by the law firm of K & L Gates, where Bob Ferguson once practiced.

A final note, the enduring language of Initiative 276, which was the basis of Judge Hirsch's ruling on Wednesday:

"The public's right to know of the financing of political campaigns ... far outweighs any right that these matters remain secret and private.

"The provisions of this chapter shall be liberally construed to promote complete disclosure of all information respecting the financing of political campaigns ... and full access to public records so as to assure the continuing public confidence of fairness of elections and the governmental process."

To which a satisfied Ferguson added: "The Grocery Manufacturers Association was arrogant. They were arrogant in how they conducted business. They were arrogant in court."