‘Team Newport’ council members seek settlement with state in dispute over 2014 campaign finance reports

The current and former Newport Beach City Council members known collectively as “Team Newport,” along with their political consultant and campaign treasurer, plan to settle a long-simmering dispute with the state over their 2014 campaign finance disclosures.

A hearing officer from the legal division of the California Fair Political Practices Commission returned 44 counts Jan. 14 against current council members Marshall “Duffy” Duffield, Kevin Muldoon and Diane Dixon and former member Scott Peotter; Residents for Reform and Neighborhood Preservation Coalition, local political action committees that supported them; the committees’ head, longtime Orange County Republican consultant Dave Ellis; and the candidates’ campaign treasurer, Lysa Ray.

The allegations center largely on how contributions for mailers and door hangers were reported.

Steve Baric, the lawyer representing Ellis, Duffield, Peotter and Muldoon, said Thursday that the allegations stem from how he said the FPPC changed the committees’ designations after the 2014 election.

Baric said the groups filed initial paperwork as “slate mailer organizations,” but post-election, the state agency said they were independent expenditure committees and thus hadn’t followed the different financial disclosure filing regulations for those committees.

An independent expenditure committee funds campaign communications such as mailings and lawn signs that expressly advocate the election or defeat of a candidate or ballot measure while not coordinated with the candidate or measure’s campaigns.

A slate mailer organization produces mass mailings that support or oppose at least four candidates or measures.

“We don’t agree with the [44 counts] and we are in the process of negotiating with the FPPC for a resolution,” Baric said. “It’s ancient history at this point.”

He said such a resolution would be financial but that he didn’t know how much it might be. He said he expects an outcome within a few weeks.

FPPC spokesman Jay Wierenga said he couldn’t comment on a pending matter.

He did say that generally, the vast majority of allegations of campaign finance violations are settled immediately after agency staff determines a violation might have occurred. Accused parties who contest the initial staff findings proceed to probable-cause hearings. Most who reach that level settle thereafter, with very few taking any of the further steps that could eventually lead the case to court.

The 44 counts in the Team Newport case came after a probable-cause hearing Jan. 10.

The matter originated with a series of accusations lodged by current Newport Councilman Jeff Herdman in April and June 2015. Herdman was not on the council at the time.

His allegations focused heavily on Peotter and Residents for Reform. The complaints covered excess contributions that Peotter received during his 2014 council campaign from Woody’s Wharf — a Balboa Peninsula restaurant and bar that had been engaged in litigation with the city for years over the establishment’s desire for extended hours and dancing — plus what Herdman said were excess contributions from Duffield and other donors. Herdman argued that they gave individually and through the Neighborhood Preservation Coalition.

His complaint against Residents for Reform said the committee was “formed to influence the City Council election in Newport Beach” and was “part of a larger effort to circumvent Newport Beach campaign contribution restrictions and to obscure the true parties behind unprecedented independent expenditures in the November City Council elections.” He noted that the committee did not file a financial statement in late 2014.

The FPPC hearing officer’s determinations, summarized in a staff report prepared for the commission’s regular hearing on Feb. 21, allege that Residents for Reform did not report 12 non-monetary contributions — the mailers and door hangers — worth about $27,000 and did not identify Ellis as being the “controlling candidate” on Residents for Reform’s organizational paperwork.

The probable-cause document also accuses the Neighborhood Preservation Coalition of failing to file pre-election campaign statements listing what it had received and spent, and it alleges the four candidates failed to report receipt of contributions from the two committees.

It also accuses Ellis of controlling the two PACs while running a personal campaign for a seat on the board of the Municipal Water District of Orange County. State law bars candidates from controlling non-candidate committees such as slate mailer or independent expenditure groups.

Duffield and Muldoon cruised to victory in the 2014 council elections, with Peotter pulling out a close win and Dixon running unopposed.

All four ran for second terms in 2018, though not as a slate. Duffield, Muldoon and Dixon were successful, while Peotter lost to challenger Joy Brenner.