NUNEZ DENIES CHARGES SPEAKER: GROUP WAS NOT POLITICAL TOOL.

Byline: David M. Drucker Sacramento Bureau

Despite documents to the contrary, Assembly Speaker Fabian Nunez insisted Monday that a nonprofit group founded by Los Angeles union boss Miguel Contreras - for which Nunez works as a consultant - does not campaign on behalf of political candidates.

Formed by Contreras, secretary-treasurer of the Los Angeles County Federation of Labor AFL-CIO, the Voter Improvement Program used money received from the union to make cash donations and staff phone banks for state and local candidates, documents show.

But Nunez - who earns $35,000 annually from VIP for what he describes as nonpolitical, nonlegislative consulting - said during a news conference it would be wrong for VIP to promote or campaign for individual candidates. The speaker has worked for VIP since 1998, but earned nothing from the group in 2000 and 2001.

``It's a nonprofit group; it is not a political entity,'' said Nunez, D-Los Angeles. ``It is not allowed to give money to candidates. ... It does not do phone-banking for candidates.''

However, according to reports the Federation of Labor filed with the Los Angeles City Ethics Commission and California Secretary of State, VIP has staffed phone banks for members of Nunez's leadership team, including Assembly Majority Leader Dario Frommer, D-Glendale, and for Los Angeles City Councilman and mayoral candidate Antonio Villaraigosa.

Steve Maviglio, Nunez's deputy chief of staff, said the Federation of Labor contracted with VIP to conduct phone-banking on behalf of the union because the nonprofit group owns the phone banks.

``The Labor Federation paid VIP to conduct the phone-banking because they own the phone bank, so it's not a contribution by VIP,'' he said. ``They own it, and they're reimbursed for it.''

But others questioned whether VIP's activities complied with laws governing tax-exempt nonprofit organizations.

``That's clearly not something it's supposed to be doing as a part of its tax-exempt activity,'' said Sacramento election lawyer Chuck Bell, whose firm represents Gov. Arnold Schwarzenegger.

``If (the union) paid for VIP to engage in campaign activity, then VIP should have been treated (like) a campaign organization and filed the appropriate disclosure reports.''

Officials for both the union and the Voter Improvement Program declined comment, referring questions to VIP lawyer Bill Heine, who would only comment via e-mail.

Heine denied that VIP had spent money on candidates but acknowledged he had not reviewed the campaign finance reports filed by the Federation of Labor.

``VIP does not make contributions to candidates,'' Heine wrote in an e- mail.

Federal and state laws allow tax exempt groups like VIP - a 501(c)(4) nonprofit corporation - to advocate issues and ballot measures, as long as political activity does not become the organization's primary function. Promoting individual candidates, however, constitutes a more questionable practice that experts say that exploits a loophole in federal tax law.

Records show that VIP, using money funneled to it by the Federation of Labor, spent $4,061 on phone banks for Villaraigosa during his 2001 mayoral run and donated $2,500 to former Mayor Richard Riordan - now Schwarzenegger's education secretary - in the late 1990s.

Maviglio, Nunez' chief of staff, could not explain the Riordan contribution.

VIP also spent $1,001 on phone banks in 2000 for Frommer, now Nunez's second-in-command, as well as $3,277 on four other Assembly candidates that year, among them Assembly Education Committee Chairwoman Jackie Goldberg, D- Los Angeles, and Assembly Government Organization Committee Chairman Jerome Horton, D-Inglewood.

VIP also spent $546 on phone banks for City Councilman Martin Ludlow in 2003 and $8,117 on phone banks for unsuccessful council candidate Beth Garfield.

Ludlow, who once worked as political director for the Federation of Labor, said he was unaware of any work the Voter Improvement Program on his behalf.

``I know the County Fed did a lot, and it was a big help. As for the Voter Improvement Program, I didn't know there were limits on what they could do or if they even did anything for me.''

VIP has come under scrutiny lately as businesses recently discovered that their donations may have gone to fund campaigns for issues and candidates. Some of VIP's businesses donors say they might not have contributed had they known the money would be used to the advocacy of issues and candidates, as opposed to simply the education and registration of voters.

Jim Anderson, a spokesman for Kaiser Permanente, said the health care giant was unaware of VIP's advocacy on behalf of candidates. The company has donated around $335,000 to VIP since 1999, Anderson said.

``Obviously, candidate advocacy is something we not only don't do, but can't do, and certainly that would not have been the intention of any money we contributed. Our knowledge of the group is they did good work in voter registration on a nonpartisan basis, and that's why we were supporting them.''

Officials for the Los Angeles Department of Water and Power, which has also donated to VIP, declined to comment.

VIP pledges in its articles of incorporation not to ``expend funds to influence or attempt to influence the action of voters,'' but campaign finance documents show it has been actively campaigning for and against ballot measures.

Among them: Yes on Measure A, a county initiative to increase the sales tax; Yes on Proposition 56, a state measure to make it easier for the Legislature to raise taxes; and No on 4-A, an Inglewood city initiative to prevent the building of a new Wal-Mart.

VIP's bylaws also state it will adhere to the rules governing nonprofit corporations under the IRS and state taxation code and not ``expressly (advocate) for or against the nomination or election of a candidate or candidates for public office.''

Nonpartisan election-law and tax experts concurred that the VIP had violated the spirit, if not the letter, of the IRS regulations with its activities.

``I haven't heard very much about a 501(c)(4) doing a lot of political activity,'' said attorney Steve Levin, political reform project manager for the Center for Governmental Studies in Los Angeles. ``A 501(c)(4) should not participate or intervene in political campaigns.''

Staff Writers Harrison Sheppard and Rick Orlov contributed to this report.

David M. Drucker, [phone]

david.drucker(at)dailybulletin.com