Return of Donations Ordered

SACRAMENTO —  A judge ruled Monday that Lt. Gov. Cruz Bustamante broke campaign laws by using about $4 million in six- and seven-figure donations to pay for an advertising blitz.

The judge ordered Bustamante to return the contributions. But, perhaps rendering the decision more political than practical, Bustamante’s chief political consultant said all the money was gone.

In a 12-page order issued in response to a lawsuit by a Republican state senator, Sacramento Superior Court Judge Loren McMaster wrote that a fund-raising maneuver Bustamante had employed had violated the “plain and unambiguous language” of Proposition 34. That measure, passed by voters in 2000, caps political contributions at $21,200 in the recall race.

The lieutenant governor accepted donations far exceeding that sum -- including a $1.5-million gift from an Indian tribe -- in an old campaign fund established before Proposition 34 took effect. Then he shifted the money to a new fund, and used it for an ad campaign.

McMaster issued a preliminary injunction forbidding Bustamante to transfer any more of the disputed money to his current campaign.

But the judge also said Bustamante had probably “acted in good faith” and had not intentionally broken the law.

Bustamante initially planned to transfer millions from the old committee to his new “Bustamante for Governor” account.

But in the face of an outcry from other candidates, he changed strategy and moved the money to an even newer fund he set up to oppose Proposition 54, the measure that would restrict government’s ability to gather racial and ethnic data. The measure shares the recall ballot and is the subject of the television ads paid for with the disputed cash.

Bustamante’s donors are not seeking refunds; indeed, several continue to spend on his behalf.

But Bustamante’s critics used McMaster’s ruling to chastise the leading Democrat in the race to replace Gov. Gray Davis if Davis is recalled. Some called on the lieutenant governor to cancel the ads and to return the money.

“Mr. Bustamante and his campaign were in a rush to spend the money they’ve raised, knowing full well this action was pending,” said state Sen. Ross Johnson (R-Irvine), who brought the suit and is one of Proposition 34’s authors.

“He has an obligation to tell the people of California what he spent that money on and whether it was irretrievably spent.”

At a San Francisco campaign stop Monday, Bustamante said the ads -- which feature the lieutenant governor at a campaign rally -- would remain on the air. And he repeatedly insisted that his campaign was blameless.

“The decision was a total vindication of Cruz Bustamante,” the lieutenant governor said.

“The judge basically said that what we had done was exactly what we had been told to do. We’ll follow whatever the judge says we’re supposed to do.”

Richie Ross, Bustamante’s campaign strategist, said McMaster’s comments “removed a dark cloud” that had been hanging over Bustamante’s campaign.

And he said the judge’s order would have little effect on the race, largely because Bustamante had ceased the practice that was the focus of the lawsuit.

“We would certainly return any money that we have,” Ross said.

How much is left?

“None,” Ross said, indicating that virtually all of it had been spent on the television ads, which began airing a week ago today.

Bustamante accepted the $1.5 million from the Viejas Band of Kumeyaay Indians and $600,000 from the Sycuan Band of Kumeyaay Indians and $500,000 from the Pechanga Band of Luiseno Indians. The tribes own major Southern California casinos.

And the lieutenant governor took $700,000 from the labor union representing California state engineers, $200,000 from the American Federation of State, County and Municipal Employees and $200,000 from carpenters’ unions.

Proposition 54 promoter Ward Connerly said Bustamante should be required to pay back “every penny that he’s spent.”

“I felt from Day One that it was illegal” for Bustamante to handle the funds as he had, Connerly said, “and this certainly confirms that.”

Independent gubernatorial candidate Arianna Huffington, who has sought to make fund-raising an issue in the recall campaign, praised the judge’s ruling.

It “sends a strong message to politicians that they cannot get away with abusing our campaign finance laws,” she said.

Bustamante’s closest rival, Republican Arnold Schwarzenegger, said in a statement that the ruling amounts to “judgment day” for Bustamante’s “skirting and violating the campaign finance laws.”

Schwarzenegger, a multimillionaire, has spent $6 million of his own money on his campaign. Bustamante’s major donors have said they gave the six- and seven-figure donations to help make the campaign fairer.

McMaster acknowledged in his decision that wealthy candidates “enjoy an advantage over candidates of modest means.”

“However, that fact is not a basis to interpret Proposition 34 in such a manner that circumvents the expressed intent of the voters,” McMaster wrote.

Proposition 34 imposed contribution limits to “minimize the potentially corrupting influence and appearance of corruption caused by large contributions,” the judge’s order said.

The Fair Political Practices Commission concluded in 2001 that Proposition 34 did not apply to accounts that existed before the limits took effect.

McMaster partially blamed the commission, which is responsible for interpreting and enforcing state campaign finance law.

In his opinion, the judge said the commission had “provided often conflicting advice” on this issue -- though the agency said it had explained its position on the issue in various public pronouncements.

“There has been no clear and straightforward interpretation of the provisions at issue by either the FPPC or the courts prior to the commencement of this action,” McMaster wrote.

According to attorneys involved in the case, any penalty against Bustamante would be imposed, not by the judge, but by the commission, which is investigating a separate complaint by Johnson against Bustamante.

“The FPPC,” said Sacramento attorney James. F. Sweeney, whose firm represented Johnson in the lawsuit, “faces a unique situation in which they failed to act in the face of a manifest violation of the political reform act, and now the matter is in front of them for enforcement.”

McMaster’s decision could affect other incumbents, particularly legislative leaders, who also have raised new money into old committees in excess of the $3,000 cap for legislative candidates.

Times staff writers Lee Romney, Rebecca Trounson and Matea Gold contributed to this report.