Washington AG to Review GMA Correspondence with Attorneys in Campaign Finance Lawsuit

Ahead of a trial in the state of Washington to determine whether the Grocery Manufacturers Association (GMA) intentionally violated campaign finance disclosure laws, the organization said it relied on the advice of outside counsel in forming an account with millions of dollars in contributions from the likes of Coca-Cola, Nestlé and PepsiCo.

The trial was postponed on April 11, so that the office of Washington State Attorney General Bob Ferguson could review GMA’s conversations with its lawyers regarding an account that funded a campaign designed to defeat a 2013 food-labeling ballot initiative.

In March, Thurston County Superior Court Judge Anne Hirsch ruled GMA violated state law by failing to register as a political committee and report its contributions from its members to defeat Initiative-522. In the fall of 2013, Washington voters rejected the ballot measure, which called for labeling of foods containing GMOs (genetically modified organisms).

The trade association, which received roughly US$11 million to defeat the initiative, didn’t disclose the individual contributions of its members, and in reporting its initial contribution on June 10, 2013, it listed the contributor’s name as “Grocery Manufacturers," Hirsch noted in her March 9 opinion.

Of the $14 million GMA raised from its members in solicitations for a new account, PepsiCo alone contributed nearly $3 million, while Nestlé and Coca-Cola funded upwards of $2 million each, according to Ferguson’s office.

Hirsch can impose “treble" or triple damages if she determines GMA intentionally violated the law. A 1976 ballot initiative that was approved by Washington voters requires the disclosure of political campaign expenditures to the public.

Ferguson’s team sought to prevent GMA from introducing evidence of its conversations with its lawyers, arguing the disclosure was untimely. Hirsch postponed the trial until Aug. 15, so the state could review the evidence.

“This attempt to introduce records at the last minute, after resisting our efforts to obtain them earlier in the process, continues GMA’s pattern of trying to hide the ball from the people of Washington," Ferguson said in a statement.

In response to such criticism, GMA reported notifying the state on March 30 that it was waiving the attorney-client privilege concerning relevant meetings in which its outside counsel was present. The trade association also notified the state that its outside counsel could be available for deposition, but possibly not before the April 11 trial.

“The state has continuously claimed a ‘flagrant violation’ and an ‘elaborate scheme,’ and having been unable to prove that, has deliberately tried to suppress the facts that actually disprove it," GMA said in a statement. “GMA will show the Court a careful and law-abiding organization that proceeded under the guidance of lawyers, and the state wants to suppress this information."

GMA Changed Strategy Following Victory in California

Initiative-522 was not the first GMO-labeling ballot measure that was defeated after large sums were donated by the food industry. A campaign to defeat California’s Proposition 37 in 2012 raised $39 million, and roughly half of the funds were contributed by food manufacturers, GMA noted in its trial brief. The trade association said it only contributed about $2 million.

The defeat of California’s ballot initiative came at a steep price. As Hirsch pointed out, some GMA members and staff “received negative responses from the public and the supporters of the California initiative, including death threats."

At a meeting on Feb. 28, 2013, GMA’s board of directors “voted to create an account, the Defense of Brand (DOB) account, for the express and specific purpose of shielding the contributions members made from scrutiny and to eliminate filing requirements for contributing members," Hirsch noted.

Louis Finkel, GMA’s executive vice president of government affairs, conceived the idea of the account before he was aware of Washington’s ballot initiative, according to GMA’s trial brief. Pamela Bailey, president and CEO of the trade group, supported the plan.

Noted GMA: “Mr. Finkel believed that the DOB account would vest GMA with substantial funds it could employ flexibly across the nation at its own discretion; raise those funds through a predictable, semi-annual dues assessment against interested members; make GMA the lead GMO-labeling spokesperson for the grocery industry that its mission required; give members budget certainty; and permit GMA to disclose future GMA contributions as coming from GMA rather than an individual member thus, to the extent possible, avoid targeting smaller members for retaliation."

The trade association denied Finkel or Bailey believed disclosures limited to GMA contributions could impact the outcome of Washington’s ballot initiative.

During the Feb. 28 board meeting, GMA’s outside counsel was present. William MacLeod, a partner with the law firm of Kelley, Drye & Warren, described the account as “brilliant and creative" in communications with Finkel, GMA noted.

“Mr. MacLeod expressed no reservation about going forward with the DOB account and treating its expenditures as GMA contributions," the trade organization declared in its brief. “Mr. Finkel and Ms. Bailey relied on this advice in determining that the DOB account was not a Washington political committee and could treat itself solely as a unitary contributor under Washington disclosure law."

Hirsch reached a different conclusion. She found GMA violated Washington’s public campaign finance laws by failing to register as a political committee and knowingly hiding the actual source of the funds it received to oppose the GMO-labeling ballot measure.

“There is one, and only one, reasonable inference that can be drawn from the facts before this court: that the GMA intentionally took steps to create and then hide the true source of the funds in the DOB account from the voting public of Washington State," the judge wrote in her opinion.