Powerful companies donate millions on Newsom's behalf

April 27, 2021 9 AM PT

SACRAMENTO — Facebook, Google and Blue Shield of California are among the companies that contributed $226 million to government causes on Gov. Gavin Newsom’s behalf last year, an unprecedented level of spending that is raising alarms about the influence large corporations are amassing in Sacramento.

State records reviewed by The Times show that so-called “behested payments” surged in 2020 compared with the year prior, when companies gifted $12.1 million on Newsom’s behalf. The governor’s haul last year during the COVID-19 pandemic was six times as much as that reported by former Gov. Jerry Brown during his final eight years in office combined.

With no limit on how much money can be donated by organizations or individuals at the behest of the governor, millions of dollars flowed in to prop up public services during the pandemic and fund Newsom’s favored programs, including an effort to address homelessness and a public safety campaign promoting the importance of wearing masks.

The corporations say they were simply trying to help the state in a time of need. But no matter how noble the cause, critics fear the donations could allow corporations to hold more sway in state government. They noted many of the donors have other business before the governor, received no-bid government contracts over the last year or were seeking favorable appointments on important state boards, which they say creates the appearance of a pay-to-play system.

“It calls into question whether companies are getting special access and special decisions because they are giving tens of millions of dollars,” said Jamie Court, president of the advocacy group Consumer Watchdog.

Under California law, a donation is considered a behested payment when an elected official or someone acting on their behalf asks an organization to donate money or services to a nonprofit or government agency for a legislative, governmental or charitable purpose, such as supplying free air time to run public health ads or giving cash to the governor’s program promoting volunteerism. General requests for charitable donations not directed at any particular organization are not required to be reported as behested payments, according to the state’s campaign finance watchdog agency, the Fair Political Practices Commission.

The top donor of behested payments to Newsom in 2020 was tech giant Facebook, which gave $27 million for gift cards that went to front-line healthcare workers and for public health ads. Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan, gave another $3.7 million for COVID-19 related efforts such as polling services aimed at improving public health response and help with the state’s public awareness campaign, as well as money for the state’s wildfire recovery efforts.

More than $43 million in behested payments was earmarked in 2020 for the governor’s office, including $500,000 from YouTube, $300,000 from TikTok and $227,000 from Netflix, with those donations used for public health ads. COVID-19 vaccine maker Pfizer Inc. gave $250,000 on behalf of the governor to a nonprofit providing trailers to house families in need of shelter during the pandemic.

Paramount Pictures, Amazon, T-Mobile and Bank of America Corp. were among the more than 100 donors that gave on behalf of Newsom last year.

It is the responsibility of the elected official — not the donor — to report behested payments to the FPPC. Newsom’s office said the donations helped the state provide services to those hit hardest by the COVID-19 crisis and that the governor plans to continue “leveraging public-private partnerships to advance public policy, drive innovation, and save taxpayer dollars,” said Kathleen Kelly Janus, a senior advisor on social innovation to Newsom.

Company officials contacted by The Times said behested payments allow the private sector to respond to calls about unmet needs in the state, which were particularly pronounced during the crisis.

“Given the unprecedented nature of the COVID-19 pandemic, we made a series of donations to help people and provide economic relief, especially for small businesses, frontline health care workers and those in our home state of California,” Facebook said in a statement.

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‘Behested payments’ spur calls for reform

Behested payments have been a part of state politics for years.

In 1997, the California Legislature sought to categorize payments made on behalf of an elected official that were not campaign-related or personal gifts, calling them “behested payments” and enacting reporting requirements “to inform the public of significant transactions involving an elected official, and the influence that may accompany the payments,” according to an FPPC report.

In that first year, commission records show companies donated nearly $244,000 on behalf of lawmakers, with no behested payments reported for then-Gov. Pete Wilson.

“The question raised is always about whether it curries favor versus whether it benefits society or a charity?” FPPC spokesman Jay Wierenga said of behested payments. “How do you balance that? For now, this is how the Legislature has determined how to make that balance — by allowing it but requiring disclosure at a certain point.”

Unlike campaign contributions, there is no monetary limit on a behested payment, and the state only requires donations of $5,000 or more to be reported to the FPPC. The practice and its reporting requirements have prompted calls for reform in recent years, with the Los Angeles City Council considering a proposal in 2019 to ban elected officials from soliciting charitable donations from companies with city contracts.

The FPPC is currently exploring issues around behested payments given on behalf of lawmakers and statewide elected officials, Wierenga said.

Politicians have been reluctant to ban the practice, arguing that charitable donations serve a valuable purpose. Others say that the level of transparency required now is enough to give the public adequate insight to what would otherwise be private dealings.

“Do I have concerns? Sure,” said Jessica Levinson, a political analyst and professor at Loyola Law School. “But they aren’t enough to overcome the fact that I think adding restrictions to behested payments will do more harm than good. It risks forcing money underground to less transparent places. There are so many other places for these groups to park their money that I’m not sure we should cut off this route.”

This year, companies have thus far donated $2.4 million on behalf of Newsom, who is facing an effort to recall him from office, with half of those payments related to pandemic efforts. Three organizations, including Silicon Valley Bank, collectively gave $175,000 this year on behalf of the governor to the California Partners Project, a nonprofit launched by First Partner Jennifer Siebel Newsom that focuses on promoting gender equity and understanding the impact of technology and media on children.

‘Innovative public-private partnerships’

In January, Google gave $13,225, and in February the Chan Zuckerberg Initiative gave $90,000 in behested payments, with both going directly to the governor’s office for a COVID-19 public health campaign. Those donations came as Newsom was set to make key appointments to the inaugural board for the California Privacy Protection Agency created under Proposition 24, which was approved by voters last year and tasked with enforcing the state’s online privacy laws.

Newsom’s governing powers have allowed his administration to enter into multimillion-dollar, no-bid contracts with little oversight during the pandemic. Among those receiving lucrative contracts to help with pandemic response are the deep-pocketed companies that have made campaign contributions to Newsom or behested donations on his behalf.

For example, Google gave $7 million on April 9, 2020 in a behested donation to Newsom’s office for public health ads. Days later, Verily, the health-focused subsidiary of Google parent company Alphabet, was awarded an expanded no-bid contract for $13.1 million for coronavirus testing. Verily was ultimately paid more than $68 million for three testing services contracts before the state ended the agreements earlier this year.

The governor’s office said there is no link between the behested payments and contracts awarded, and that the influx of donations on Newsom’s behalf are the result of the companies’ eagerness to help during the pandemic and Newsom’s expanded use of public-private partnerships.

“The governor is incredibly proud of our innovative public-private partnerships, which have been instrumental in helping our state deal with a range of issues,” said Newsom spokesman Daniel Lopez. “The challenges created by this pandemic galvanized philanthropy and businesses to offer their support for those in our state hardest hit by this disease.”

Google spokesman José Castañeda said the company wanted to help with issues identified by Newsom, just as it had when donating millions to California nonprofits.

“We’ve been working to help around the world during the pandemic, and we’ve tried to be responsive to specific community needs,” Castañeda said.

Other companies that gave on behalf of Newsom last year and later received contracts include management consulting firm McKinsey and Co., which gave $250,000 in an April 2020 behested payment and received a $6-million no-bid contract three months later. McKinsey was again tapped for a contract in February of this year, signing a two-month, $13-million contract to support California’s vaccine efforts.

A McKinsey spokesperson said the behested payment was for pro bono consulting to the nonprofit California Forward, which was working in tandem with the Governor’s Office of Business and Economic Development to assess the economic impact of the pandemic.

“We provided this pro bono support to California Forward because, like other companies, we wanted to help our community during a humanitarian and economic crisis,” the company said in a statement. “Subsequently, we were retained by the California Department of Public Health and the California Government Operations Agency on different topics.”

Some of the companies that made behested payments on Newsom’s behalf routinely do business with California state agencies, including Bank of America, T-Mobile and Kaiser Permanente.

A top donor is tapped to help

When Newsom called for private-sector donations to help launch his initiative to combat homelessness in the state, Blue Shield of California said in a press release that it was one of the first to respond in January 2020, giving $20 million to help launch the effort.

The Oakland-based company, which has been a longtime top donor to Newsom’s political campaigns, has been repeatedly tapped to help during the pandemic. Blue Shield was asked to help improve testing efforts in California after the state’s disastrous start, fueled by a shortage of testing supplies, long wait times for results and data glitches.

The company’s chief executive, Paul Markovich, served as co-chair of the governor’s testing task force, with some of the company’s employees also working on the effort.

And following a shaky rollout of the state’s COVID-19 vaccination efforts, the Newsom administration struck a far-reaching $15-million deal with Blue Shield to overhaul vaccine distribution in the state.

In an interview with The Times, Markovich said Blue Shield became involved in overseeing the state’s vaccine efforts after a member of the Newsom administration called him with concerns about how best to track doses administered across the state and how to improve inoculation rates.

“My suggestion to them was that they needed to improve the performance management reporting and get better data,” Markovich said. “I just gave my two cents on the subject of improving performance reporting and then they called back and said, ‘Well, could you just do all of that for us?’”

Markovich said improving COVID-19 vaccine rates is a shared mission that benefits all Californians and that the contract was set up so that it was clear that Blue Shield would only recoup up to $15 million of its costs, but not make money off the deal. The company’s involvement has nothing to do with past campaign donations or behested payments to Newsom, Markovich said.

“The part that I think is unfair and unfortunately, I think, can contribute to cynicism and undermining the faith that we have in our institutions, whether they’re political or commercial in this case, is this accusation that there’s something corrupt about it or there’s something untoward in the relationship,” Markovich said. “Everything about the working relationship is out in the open, and it’s very clear there’s no benefit accruing to Blue Shield as a result of this work.”

‘You have to be critical’

When Brown, the former governor, was nearing the end of his final term in office and didn’t have a campaign that political donors could contribute to, donors instead made behested payments to two charter schools that the former Oakland mayor founded in that city. Prior to Brown, then-Gov. Arnold Schwarzenegger used behested payments to cover his travel expenses and to raise millions for the After-School All-Stars program that he founded.

In most cases, the behested payments are tax-deductible, said Michael Simkovic, a professor of law and accounting at USC Gould School of Law.

“A tax deduction doesn’t mean it’s free, it means it’s 30% off,” Simkovic said.

As long as the donation isn’t directly benefiting a politician, Simkovic said behested payments are generally a good thing. The donations can improve a company’s brand with good publicity, particularly by helping during a crisis, which can be well worth the cost. At the same time, they provide money to charities and programs that need it.

“There are a variety of reasons it can be beneficial to shareholders, but that doesn’t mean it’s not good for society,” he said. “It can be both.”

With COVID-19 infections down, and the state preparing to fully reopen the economy in June, the pace of Newsom’s behested payments has slowed compared to last year. During the first three months of 2020, companies and individuals gave $7 million on behalf of the governor. This year, that total is $2.4 million. The largest donation this year has been from Sunlight Giving, which was created by WhatsApp co-founder Brian Acton and his wife, Tegan Acton.

Mindy Romero, the director of the Center for Inclusive Democracy at USC, said the amount of donations pouring in last year on behalf of Newsom provided much needed help to the state during the pandemic, but she added that corporate cash can also breed mistrust.

“Going forward, if they continue there will be more of a critical eye about what the purpose is, and there should be more demand for accountability and explanation,” Romero said. “It’s generally a good thing if private organizations want to donate, but there are other pathways than through the government that don’t give an impression — if not the reality — of an unfair advantage. I think we need to be critical: If we get the golden goose, you have to be critical of why it’s being given.”

Los Angeles Times staff writer Taryn Luna contributed to this report.