Eyman

Eyman may face charges

Investigation centers on diversion of $200,000

BRAD SHANNON, THE OLYMPIAN

Originally published Saturday, April 6, 2002

OLYMPIA -- State investigators said Friday that they will seek civil charges against initiative pitchman Tim Eyman and his former business partner, Suzanne Karr, stemming from Eyman's diversion of more than $200,000 in initiative proceeds for his private use.

The announcement by the Public Disclosure Commission sets in motion a long process that could land Eyman in court to defend himself against costly civil allegations. Criminal charges in cases like this are rare and were not part of the PDC's discussions, agency spokes-man Doug Ellis said.

But the recommendation by investigators -- to send the case to Attorney General Christine Gregoire's office for civil charges -- could lead to sanctions of up to $10,000 per violation, or triple that amount if it's found Eyman's offenses were willful, Gregoire spokesman Gary Larson said.

The allegations, which go before the five-citizen members commission on Tuesday, culminate a nearly two-month investigation by six staff members at the PDC who looked at Eyman's Permanent Offense political action committee, his for-profit consulting business, several of his initiatives and his associates.

They cleared some of his associates, including his wife, Karen, and Permanent Offense board members Monte Benham of the Tri-Cities area and Jack Fagan and Mike Fagan, both of Spokane.

Eyman and Karr, his former campaign treasurer who left their business partnership in 2000, face possible charges.

"Staff is recommending at this point that the commission move along and find (that there are) apparent violations and refer the matter to the attorney general for appropriate action," said Vicki Rippie, the PDC's executive director.

Biggest sins

The biggest among Eyman's sins, in the eyes of the PDC, was his decision to set up a for-profit corporation that would let him divert profits from his initiative campaigns without having to disclose that fact. Until his confession on Feb. 3, he always insisted publicly that he was keeping the money in a special account for future initiatives or to pay such contingencies as legal fees.

Eyman's lesser alleged sins were his use of campaign money to reimburse his private business expenses, fuel his Lexus and pay for other questionable expenses.

Among them were a $500 donation to the Republican National Committee in 2000 and $60 he gave to opponents of his property tax-capping Initiative 747 last year when he crashed their fund-raising party featuring former U.S. Sen. Slade Gorton.

Eyman's rebuttal

Eyman issued an e-mail to reporters at 4 a.m. Friday saying the main charge "is flat wrong," asserting that he always accurately reported his political action committee's payments to his private, for-profit company for consulting services.

But he did not address the larger question targeted by the PDC: his insistence since last year that he would never use the money for his own use, after creating the corporation to shield the fact that he had.

Believing that Eyman's actions were serious, PDC staff members are recommending tough sanctions that go beyond the PDC's ability. The agency by law can impose fines of up to $2,500.

"Staff maintains that falsifying reports is one way to accomplish concealment," the PDC investigators said in an executive summary of the agency's lengthy investigative report. "Manipulating the system to frustrate full disclosure, to hide the truth, is another. That's what occurred in this case."

By law the Attorney General's Office can seek $10,000 per campaign violation and triple that if the violations were considered willful.

If the PDC refers the case to the Attorney General's Office, Eyman could face a civil lawsuit that could cost him thousands of dollars in legal fees and potentially thousands more in fines.

In past cases where the Attorney General's Office has taken action, it has filed lawsuits and then won judgments against campaign violators such as the Washington Education Association. It also has negotiated settlements that cost other violators hundreds of thousands of dollars. But Rippie declined to compare this case to any other.

'Whistleblower'

Like Eyman, Karr issued a statement to challenge the charges. She described herself as the "whistleblower" in the case and questioned why the PDC would target the person who brought Eyman's deceptions to light.

It was her e-mails to a reporter in early February, which indicated Eyman had taken money from the campaign, that may have prompted Eyman to announce a few days later that he had been lying.

"The two people on the (Permanent Offense) committee who should have stepped forward are Monte Benham (one of four board members) and Karen Eyman (treasurer). Both knew about Tim's salary, both knew he was not being honest about it, and neither one of them made an effort to change the situation," Karr wrote. "On the other hand, I tried repeatedly for over a year to get Tim to change his position and finally, as a last resort, went to the media to let them know."

Eyman's confession that he'd taken money prompted attempts in the Legislature to require greater financial disclosure by sponsors of initiatives, but the measure died in the House. So did other measures to rein in initiatives or subject them to greater public scrutiny.

Since then, no one has been working lately to adopt tighter rules that might prevent another initiative backer from doing what Eyman is accused of doing. And the PDC has been too busy investigating the Eyman case to consider what reforms might be needed.

In any case, there's not a lot the state can do if someone is devoted to deceiving the public about where campaign money is going.

"If someone wants to break the law, they can break the law. It's almost like speeding," said Ellis, the PDC's director of public outreach.

"The public disclosure law is pretty much self-regulating. We get thousands of candidates and committees filing with us. We don't have the staff to look at all of them. If someone wanted to conceal information, they probably could," Ellis said.

"But when they get caught, it tends to be a very egregious situation because the whole concept of public disclosure is to keep the public informed of the finances of the campaign, of any campaign. When that's being thwarted, there tends to be more repercussions."

As the PDC's latest bombshell hit the political scene, it was far from clear what repercussions might be felt by backers of other initiatives.

Pushing ahead

Eyman's associates such as the Fagans and Benham, who are pushing I-776, which caps car tab fees at $30, said they will push ahead with paid signature-gatherers to get their measure on the November ballot. Eyman will remain on their team, they said in an e-mail.

Backers of I-784, which would require a criminal conviction before police can take away a person's property in drug cases, also are moving ahead.

"I'm not especially concerned by what is happening to Eyman," said Richard Shepard, a Tacoma lawyer and president of Liberty Initiatives, a nonprofit group that plans to push a series of initiatives over the next few years that have a libertarian tilt.

"At some point there is a lesson in that you handle your business with integrity," Shepard said. "But in the grand scheme of things, the man worked very hard, and if he's got a mortgage and 4-year-olds and all that stuff, I don't fault him for taking some compensation. But if he's saying one thing and doing something else, there's a problem."

Eyman's problems won't scare off his group from creating paid campaign positions, if money is available for it in future years, Shepard said.

"At this point, the only people who are getting any compensation are the, shall we say, grunts in the field. ... I'm talking about the people who print the petitions and prepare the databases and do the mailings," he said. "That's really thankless stuff, and somebody's got to do it."

Alleged violations

Investigators are asking the Public Disclosure Commission to find that Tim Eyman, his former initiative business partner and the campaign committed a number of violations.

Eyman and Suzanne Karr are accused of:

- Concealing campaign expenditures by billing the Permanent Offense political action committee and the Traffic Improvement Initiative Committee (Initiative 745) for management and consulting services, then giving the money to Eyman. The PDC said Karr moved $60,616 from the PAC and I-745 coffers to the for-profit Permanent Offense Inc. in 2000. Eyman was "compensated as an employee" for $54,142, earning another $400 profit as the 51 percent shareholder, while Karr earned $400 as 49 percent shareholder. The next year, Karr left the group and Eyman moved $165,492 from the PAC to his for-profit firm, again for management, consulting and other services. He also earned $5,000 as an employee and as 100 percent owner got profits of approximately $150,000. Eyman and Karr are accused of creating the for-profit company to conceal the fact Eyman was to receive the money.

- Failing to properly report Permanent Offense PAC campaign expenditures, including in-kind contributions of $39,769 from Permanent Offense to the PAC or I-745 effort for management, accounting and other services in late 2000.

Additionally, Eyman is accused of:

- Using campaign funds to pay for expenses of his Insignia Corp. business or for his personal use , including $11,567 in postage expenses for which there were no Postal Service invoices. Eyman "was unable to account for postage reimbursements of $2,800 and $5,600, but acknowledged that these could have been for (his private watch-selling company) Insignia Corp. business or his personal use. He was reimbursed $120 for a round-trip cab fare for which Eyman provided a one-way, $60 receipt. In other instances he received reimbursement for maintenance on a family car, a Lexus, although the PDC said a portion of the costs should have been paid by him.

- Failing to keep campaign records. Eyman and Permanent Offense PAC kept inadequate campaign records in 2001, including lack of receipts to justify reimbursements.

- Illegally reimbursing a contribution. Eyman was reimbursed by the PAC for contributing $500 to the Republican National Committee in August 2000 and $60 to the No on I-747 Committee in October 2001. Eyman apparently crashed a fund-raiser by his opponents, giving $150, of which $90 was refunded.

The Permanent Offense PAC is accused of:

- Failing to report in-kind contributions Permanent Offense Inc. made to the PAC and failing to report orders placed, debts and obligations.

- Failing to designate Tim Eyman as treasurer of Permanent Offense PAC. Although his wife, Karen, was listed as treasurer, Eyman "had sole control" of the PAC's finances and his wife did not review reports filed by the PAC or approve expenditures.

- Failing to keep records to justify reimbursing Eyman for campaign contributions.

On the Web:

- Public Disclosure Commission

What's next

The Public Disclosure Commission will hear its staff's recommendation to seek civil charges against Tim Eyman, an associate and his Permanent Offense political committee in a 9 a.m. meeting Tuesday in Senate Hearing Room 2 of the John A. Cherberg Building on the Capitol Campus.

The Olympian Copyright 2002

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