Page 1 of 14 IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON COUNTY OF THURSTON WASHINGTON EDUCATION ASSOCIATION, NO. 96 2 04395 5 Plaintiff, ANSWER vs. STATE OF WASHINGTON, d/b/a PUBLIC DISCLOSURE COMMISSION, Defendant. STATE OF WASHINGTON COUNTERCLAIM ex. rel. WASHINGTON STATE PUBLIC DISCLOSURE COMMISSION Plaintiff, vs. WASHINGTON EDUCATION ASSOCIATION, WEA-PAC, and COMMUNITY OUTREACH PROGRAM Defendants. Defendant, Washington State Public Disclosure Commission (PDC, in answer to Plaintiff's Complaint, admits, denies and alleges as follows: required. 1-2. Defendant admits the allegations contained in paragraphs 1 and 2. 3. Paragraphs 3 and 4 are conclusions of law to which no answer is 5. Defendant admits that Washington voters passed Initiative 134 in November, 1992, by a 72% affirmative vote and that the law imposed limitations on campaign contributions. Otherwise, the Initiative speaks for itself. To the extent plaintiff's characterization of the law differs from the Initiative, the allegation is denied. 6. RCW 42.17.680 speaks for itself. To the extent defendants's
Page 2 of 14 characterization of the law differs from the statute, the allegation is denied. 7. Defendant admits that prior to the passage of Initiative 134 some members of the WEA voluntarily executed payroll deduction forms that continued in effect until revoked. Defendant admits that these payroll deduction forms authorized a deduction from each employee's wages of one dollar ($1.00 per month to be paid to their political committee, Political Unity of Leaders in State Education (PULSE. Defendant denies the remaining allegations in paragraph 7. 8. Defendant admits the WEA made a number of changes in its dues and organizational structure in response to the passage of Initiative 134. Defendant admits the WEA disbanded PULSE and created WEA-PAC and the Community Outreach Program (COP. Defendant admits that WEA-PAC is a registered political action committee which makes contributions to candidates and ballot propositions. Defendant admits the WEA changed its contractual arrangements with school districts to establish annual payroll deduction authorization by WEA-PAC. Defendant denies the remaining allegations contained in paragraph 8. 9. Defendant admits that in April, 1994, the WEA Representative Assembly amended its Bylaws by adopting Article II, Section 2 which authorized a dues assessment of $12 per year to be placed in COP. Defendant admits that approximately one-half of this dues assessment is rebated to the WEA's regional entities, called Uniserv councils. Defendant denies the remaining allegations contained in paragraph 9. 10. Defendant denies the allegations contained in paragraph 10. 11. Defendant admits that PDC staff conducted a limited scope audit of WEA-PAC for the 1994 election cycle, August 1, 1994, through December 31, 1994. Defendant admits that this audit was concluded in April, 1996. Defendant further states that PDC staff did not do a comprehensive audit. They reviewed WEA-PAC's PDC reports and bank
Page 3 of 14 records for the 1994 election cycle, but did not compare those reports and records to the reports and records previously filed by PULSE. Defendant admits that PDC staff determined on the basis of its limited audit that WEA-PAC was in substantial compliance with RCW 42.17 for the 1994 election cycle. Defendant denies the other allegations contained in paragraph 11. 12. Defendant admits that on November 15, 1996, PDC staff recommended to the PDC that it refer a case involving the WEA, WEA-PAC and COP to the Attorney General for appropriate action. Defendant admits that one of the matters referred was PDC staff's contention that COP is a political committee and that COP failed to register and report as a political committee. Defendant denies the other allegations contained in paragraph 12. 13. Defendant admits the allegations contained in paragraph 13. 14. Defendant admits the allegations contained in paragraph 14. 15. RCW 42.17.020(33 speaks for itself. To the extent plaintiff's characterization of the law differs from the statute, the allegation is denied. 16. RCW 42.17.020(30 speaks for itself. To the extent plaintiff's characterization of the law differs from the statute, the allegation is denied. 17. Defendant admits that the Courts and the Attorney General's Office have opined that an organization is a political committee if the primary or one of the primary purposes of the organization is to affect, directly or indirectly, governmental decision making by supporting or opposing candidates or ballot propositions. Defendant denies the remaining allegations in paragraph 17. 18. RCW 42.17.020(14 speaks for itself. To the extent plaintiff's characterization of the law differs from the statute, the allegation is denied.
Page 4 of 14 19. Defendant denies the allegations contained in paragraph 19. 20. Defendant denies the allegations contained in paragraph 20. COUNTERCLAIM Defendant makes the following Counterclaim pursuant to CR 13: PARTIES 1.1 The PDC is an agency of the State of Washington, established by RCW 42.17.350. The PDC is charged by RCW 42.17.360-.370 with, inter alia, the responsibility to enforce RCW 42.17.040,.050,.080,.090,.170, and.180. The PDC investigated and referred the substance of this counterclaim to the Attorney General for appropriate action. The Attorney General, pursuant to RCW 42.17.400, has authority to bring this action. 1.2 The Washington Education Association (WEA is a labor organization representing approximately 65,000 public school employees and is the state affiliate of the parent National Education Association. Within the WEA there are 22 Uniserv Councils and 330 Local Education Associations. The WEA is registered with the PDC as a lobbyist-employer and, in that capacity, is required to submit certain reports to the PDC. 1.3 The Washington Education Association-Political Action Committee (WEA-PAC was created by the WEA and became effective September 1, 1994. WEA-PAC is registered with the PDC as a political committee. WEA-PAC is funded, in-part, by voluntary one dollar per month WEA member contributions. 1.4 The Community Outreach Program (COP was created by the WEA and became effective September 1, 1994. COP is funded by a mandatory dues assessment of one dollar per month per WEA member. COP rebates slightly less than one-half of the money it receives to the Uniservs, and keeps the remainder for use at the state level. Until September, 1996, COP used much of its funds to pay the majority of WEA-PAC's overhead and administrative expenses. COP also uses its funds to carry on other
Page 5 of 14 politically related activities. The purpose of COP paying overhead and administrative expenses for WEA-PAC is to enable WEA-PAC to use the funds it collects from its voluntary contributors for direct contributions to candidates and ballot measures. JURISDICTION AND VENUE 2.1 This Court has subject matter jurisdiction over this action pursuant to RCW 42.17.400. 2.2 The violations alleged herein have been carried out, in whole or in part in Thurston County by the WEA, WEA-PAC and COP. Therefore, venue is proper in this Court pursuant to RCW 4.12. OVERVIEW OF THE LAW 3.1 RCW 42.17.680(3 prohibits employers from withholding or diverting a portion of their employees' wages or salaries for contributions to political committees or for use as political contributions except upon written request of the employee. The request from the employee for such deductions must be repeated annually. 3.2 RCW 42.17.020(33 defines political committee as any person "having the expectation of receiving contributions or making expenditures in support of, or opposition to, any candidate or any ballot proposition." 3.3 Pursuant to RCW 42.17.040 and.050 a political committee must file a statement of organization with the PDC and designate a treasurer within two weeks after its organization. 3.4 RCW 42.17.080 and.090 also require political committees to file periodic reports listing the name, address, money value, and date of all contributions received, and a detailed accounting of expenditures. RCW 42.17.020(14(a(i defines contribution broadly to include "anything of value." 3.5 RCW 42.17.180 requires employers of registered lobbyists to file monthly reports with the PDC if the employer, or the employer's
Page 6 of 14 lobbyist, makes a contribution in excess of $100 to a political committee which is not reported by the employer's lobbyist. FACTUAL CONTEXT OF CLAIMS 4.1 Prior to September 1, 1994, the WEA had a political committee, Political Unity of Leaders in State Education (PULSE. PULSE was registered as a political committee with the PDC and reported its contributions and expenditures. PULSE paid for, and reported, all of its administrative and overhead expenses. 4.2 Prior to January 1, 1994, approximately 48,000 of the 65,000 WEA members authorized one dollar per month payroll deductions to PULSE. Annual reauthorization of these deductions was not then necessary. PULSE spent its money on a variety of political activities including support of candidates, ballot measures and local levy elections. 4.3 Initiative 134 was adopted by 72 percent of those voting in the November, 1992, election. In addition to contribution limits, Initiative 134 contained RCW 42.17.680(3. That section provides, in relevant part: No employer or other person or entity responsible for the disbursement of funds in payment of wages or salaries may withhold or divert a portion of an employee's wages or salaries for contributions to political committees or for use as political contributions except upon written request of the employee.... The request is valid for no more than twelve months from the date it is made by the employee. This statute meant that WEA members would have to affirmatively authorize each year the one dollar per month payroll deduction for PULSE. 4.4 Subsequent to January 1, 1994, the effective date of RCW 42.17.680(3, the number of WEA members who authorized the one dollar per month payroll deduction for political purposes dropped from approximately 48,000, to approximately 12,000.
Page 7 of 14 4.5 The WEA had anticipated this reduction in payroll deductions for political contributions. In February 1993, the WEA formed the "Life After 134 Task Force." The purpose of this task force was to determine how the WEA could continue business as usual with respect to political contributions despite the anticipated reduction in PULSE funds resulting from the need for annual reauthorization of the PULSE dues deduction. This task force recommended several actions which were adopted by the WEA including: a In April, 1994, the WEA Representative Assembly voted to disband PULSE and replace it with WEA-PAC and COP. b WEA-PAC registered with the PDC as a political committee. It was formed by the WEA to continue many of the political activities formerly conducted by PULSE including direct contributions to candidates and ballot measures. WEA-PAC is funded, in-part, by voluntary one dollar per month member payroll deduction contributions. Contributing members must affirmatively authorize this deduction on an annual basis. c COP was created by the WEA to pay for many of the political activities previously paid for with PULSE payroll deductions. COP is funded by a mandatory one dollar per month dues assessment. This assessment was passed at the WEA Representative Assembly in April, 1994. WEA members are required to pay this dues assessment through payroll deduction, but agency fee, or fair share payers of WEA are not assessed COP dues. COP assessments are paid each month as part of the payroll deductions collected from WEA members. The COP assessments are placed in a segregated COP account at the WEA. COP funds are not commingled with WEA general funds. Any money which COP has remaining at the end of a fiscal year is carried forward in COP's account to the next fiscal year. Slightly less than one-half of the money which is collected by COP is transmitted to the Uniserv Councils. The remaining funds are used by COP primarily for political activities, including the payment of
Page 8 of 14 overhead and administrative expenses for WEA-PAC and other political activities. COP has not registered with the PDC as a political committee. CLAIMS 5.1 The plan to disband PULSE and to replace part of its political function with COP was an attempt by the WEA to circumvent the requirements of RCW 42.17.680(3. This statute requires that payroll deduction for political contributions be voluntary and reauthorized annually. COP is a political committee under RCW 42.17 and its funds are expended for political activities as those are defined in RCW 42.17, yet COP dues are mandatory and there is no provision for annual reauthorization of the payroll deduction for COP dues. 5.2 The WEA's plan to replace PULSE with WEA-PAC and COP led to at least $180,000 in political contributions which went completely unreported to the PDC in violation of RCW 42.17, and to the improper reporting under RCW 42.17 of an additional $162,225 in contributions. 5.3 As a separate matter, the WEA failed to report to the PDC approximately $232,602 in contributions to other political committees which it was required to report as a lobbyist employer pursuant to RCW 42.17. 5.4 The public's right in RCW 42.17 to know of the financing of political campaigns was severely frustrated by the reporting violations of WEA, WEA-PAC and COP. I. COP Failed To File And Report As A Political Committee And The WEA Failed To Properly Register COP As A Political Committee. 6.1 COP funds are collected through a mandatory dues assessment separate from WEA general dues. Members are not able to opt-out of paying this assessment, and there is no provision for annual reauthorization as required by RCW 42.17.680(3. 6.2 From September, 1994, through the present COP made approximately
Page 9 of 14 $251,880 in contributions to WEA-PAC. This amount includes $141,740 in contributions COP made to WEA PAC to pay overhead and other administrative expenses of WEA-PAC, and $110,140 in donations which were originally reported by WEA PAC as loans from WEA. These contributions from COP paid for the kind of expenses which PULSE had previously paid for with PULSE dues, and enabled WEA-PAC to use the money it received through voluntary contributions on direct contributions to candidates and ballot measures. 6.3 From September, 1994, through the present COP also made contributions to political committees other than WEA-PAC which it also failed to report to the PDC. 6.4 From September, 1994, through the present COP also spent its funds on other politically related activities. These activities included lobbying, the production and distribution of an anti-voucher video, expenditures in support of candidates, and get-out-the-vote pieces. These expenditures were not reported to the PDC. 6.5 From September, 1994, through the present, COP's primary purpose, or one of its primary purposes, was to influence the political process by supporting or opposing candidates and ballot measures. 6.6 COP is a political committee within the meaning of RCW 42.17.020(33. As such, COP is required to report all contributions and expenditures to the PDC. COP has not registered with the PDC and filed reports with the PDC as a political committee as is required by RCW 42.17.040,.050,.080, and.090. By failing to register and report as a political committee COP violated RCW 42.17.040,.050,.080 and.090. 6.7 The WEA created a political committee when it created COP. When creating COP, the WEA had the obligation to file with the PDC a statement of organization for COP, and designate a treasurer for COP. By failing to take these actions, the WEA violated RCW 42.17.040,.050,.080 and.090. By failing to take these actions, WEA also evaded the
Page 10 of 14 requirements of RCW 42.17.680(3 as school district employers had no way of determining that voluntary and annual authorizations for payroll deductions to COP were necessary. II. WEA-PAC Failed To Report At Least $180,000 In Contributions From COP And WEA General Dues. 7.1 From September, 1994, through August, 1996, COP paid the majority of WEA-PAC's overhead and other administrative expenses. COP made numerous separate payments to WEA-PAC over the course of that period. PDC staff informed the WEA that these individual payments by COP were contributions to WEA-PAC, yet none were reported to the PDC by WEA-PAC. 7.2 Starting in September, 1996, the WEA began paying the majority of the overhead and administrative expenses of WEA-PAC. At the request of PDC staff, WEA-PAC is currently reporting many of the payments made by the WEA to cover WEA-PAC costs as contributions to WEA-PAC. 7.3 COP continues to make contributions to WEA-PAC. These contributions have not been reported to the PDC by WEA-PAC. 7.4 The total of all unreported contributions COP made to WEA-PAC is approximately $141,740. By not reporting these contributions, WEA-PAC violated RCW 42.17.080(2 and RCW 42.17.090(1 and (2. 7.5 From September, 1994, through August, 1996, the WEA used general dues money to pay at least $38,000 of the overhead and other administrative expenses of WEA-PAC. Among other costs, the WEA paid for WEA-PAC's rent, and the monthly payroll benefits of WEA-PAC's treasurer. This was not the situation when PULSE was in operation. PULSE's rent and the benefits of PULSE's treasurer were paid for by PULSE. The WEA also paid the salaries and benefits of WEA employees for the time those employees spent conducting WEA-PAC business. 7.6 The payments by the WEA which are referenced in paragraph 7.5 constitute contributions to WEA-PAC, yet they have not been reported by
Page 11 of 14 WEA-PAC to the PDC. By failing to report these contributions, WEA-PAC violated RCW 42.17.080 and.090. III. WEA-PAC Improperly Reported Donations From WEA As Loans. 8.1 In 1994, WEA-PAC reported to the PDC that it had received $162,255 in loans from the WEA. In January, 1995, WEA-PAC reported to the PDC that these "loans" from the WEA had been forgiven. These amounts were calculated to repay WEA-PAC for overhead and other administrative expenses incurred by PULSE from January, 1994, through August, 1994. The purpose of these contributions was to enable PULSE/WEA-PAC to use its voluntary dues for direct contributions to candidates and to political committees supporting or opposing ballot propositions. 8.2 The "loans" from WEA to WEA-PAC were not really loans. They were donations to WEA-PAC from the WEA's general dues account. There was never any intention by WEA-PAC to repay these "loans" nor was there any intention by WEA that WEA-PAC repay WEA. Instead, COP reimbursed the WEA $110,140 for part of the "loans" to WEA-PAC, and the WEA received no reimbursement for the remaining $52,115. WEA-PAC violated RCW 42.17.080 and.090 by reporting these contributions as loans rather than as donations. IV. The WEA Failed To Report Contributions To WEA-PAC From Both The COP Program And From General Dues. 9.1 The WEA is a lobbyist employer as that term is defined in RCW 42.17.020(29, and has been such throughout the time period September, 1994 to the present. If the WEA or one of its lobbyists makes a contribution in excess of $100 to a political committee which is not reported by one of its lobbyists, then the WEA is required by 42.17.180 to report that contribution to the PDC. 9.2 Since September, 1996, the WEA has paid the majority of WEA-PAC's overhead. The WEA has not reported these contributions to WEA-PAC even though they have exceeded the $100 threshold.
Page 12 of 14 9.3 From September, 1994 through the present the WEA made numerous contributions to WEA-PAC in excess of $100. In addition to the contributions described in paragraphs 7.5 and 9.2 the WEA donated $162,255 to WEA-PAC. The WEA's failure to report the contributions described in paragraphs 7.5 and 9.2 and the $162,255 donation was in violation of RCW 42.17.170, and.180. 9.4 Further, if the court determines, as the WEA contends, that COP is not a political committee and that COP was not required to register and report as a political committee, then the WEA, as a lobbyist employer, was required to report to the PDC the contributions made from the COP account to WEA-PAC and other political committees. In that event, WEA violated RCW 42.17.170 and.180 by failing to report the COP contributions set forth in paragraphs 6.2, 6.3, 7.1, 7.3, and 7.4. / / / / / / V. The WEA Failed To Report Contributions To Other Political Committees. 10.1 Approximately $232,602 in contributions from the WEA or its lobbyists to political committees have gone unreported by the WEA and its lobbyists, excluding the contributions the WEA has made to WEA-PAC. The WEA has not reported these contributions in violation of RCW 42.17.170 and.180. REQUEST FOR RELIEF WHEREFORE, it is requested that: 1. The Court enter an Order finding that; (1 COP is a political committee; (2 COP failed to register and report as a political committee in violation of RCW 42.17.040,.050,.080 and.090; (3 the WEA created COP and failed to file a statement of organization for COP, designate a treasurer for COP, and file reports of contributions and
Page 13 of 14 expenditures with the PDC in violation of RCW 42.17.040,.050,.080 and.090; (4 WEA-PAC failed to report at least $180,000 in contributions from COP and WEA general dues; (5 WEA-PAC improperly reported $162,255 in donations from WEA as loans in violation of RCW 42.17.080 and.090; (6 the WEA failed to report contributions to WEA-PAC from both the COP program and from general dues in violation of RCW 42.17.170 and.180; (7 the WEA failed to report approximately $232,602 in contributions to political committees in violation of RCW 42.17.170 and.180. 2. The Court order COP to register and report as a political committee; 3. The Court order WEA, WEA-PAC and COP to pay civil penalties as provided by RCW 42.17.390; 4. The Court grant further relief as provided in RCW 42.17.390 and.400; 5. The Court award the State its costs and disbursements herein, including investigative costs and reasonable attorney's fees, pursuant to RCW 42.17.400; and 9. The Court grant such other relief as the Court may deem just and equitable. DATED this day of February, 1997. CHRISTINE O. GREGOIRE Attorney General CHIP HOLCOMB Senior Counsel WSBA No. 1454 JOHN M. GERBERDING Assistant Attorney General WSBA No. 23157
Page 14 of 14