San Jose mayor’s election fundraising raises legal questions

The mayor of San Jose may have broken state and local campaign rules when he raked in six figures for a political action committee he formed to influence the 2022 election.

A complaint filed this week claims Mayor Sam Liccardo, as a sitting mayor, shouldn’t have opened the committee nor raised any money to support candidates running in this election. It further alleges the contributions the political action committee (PAC) received exceeded local donation limits, which was then spent to support three candidates in San Jose City Hall races.

Liccardo also failed to disclose the hundreds of thousands of dollars raised from developers, landlords, tech executives and contractors for the PAC as the city requires, the complaint says.

The PAC formed by the mayor insists Liccardo has done everything properly. The PAC’s attorney, Matthew Alvarez of the Sutton Law Firm, calls the complaint “a naked political ploy,” claiming elected officials across the state, including Liccardo, can raise money for PACs to support other candidates.

“These types of frivolous complaints are a complete distraction and should not be entertained by anyone,” Alvarez told San José Spotlight.

What it comes down to is whether Liccardo, a sitting elected official who is not running in the election, is considered a candidate and must follow certain restrictions including local contribution limits.

Jim Reed, Liccardo’s chief of staff who manages the PAC, also denied all claims, saying the mayor is not a candidate under city rules.

State law says all officeholders—including Liccardo—are candidates until they leave office.

The city attorney told San José Spotlight the municipal code “does not prohibit” Liccardo from opening and personally fundraising for a PAC—even ahead of the fundraising period. The mayor is also not subject to the contribution limits in San Jose, the city attorney said.

But questions surrounding his role have prompted concerns from campaign experts and local politicos. A longtime volunteer with the Santa Clara County Democratic Party filed a formal complaint to the city’s Board of Fair Campaign and Political Practices tasked with investigating campaign rule violations on Thursday.

They say the PAC has spent some of the questionably raised money to sway the 2022 elections and fear it will continue to do so.

“As someone who cares deeply about our local democracy, I am shocked by Mayor Liccardo and his PAC’s illegal fundraising from corporate developers, city contractors and lobbyists to support Matt Mahan, Joanna Rauh and Bien Doan,”Judy Pipkin, who filed the complaint, said in a statement. “This has no place in San Jose.”

Pipkin also urges the city to suspend the committee’s further spending in the 2022 elections.

Liccardo, who is terming out as mayor, formed the PAC ahead of the 2022 election. The committee has spent roughly $300,000 in May alone. But with legal questions surrounding the PAC and the money raised, an expert said the committee might have to return the majority of the money—if either the city or the state finds the PAC to have violated campaign finance rules.

“There are red flags here that, in my opinion, indicate (this PAC) should not have been opened and operated the way it initially was,” Sean McMorris, a program manager on transparency, ethics and accountability of watchdog group California Common Cause, told San José Spotlight. “It seems fairly clear to me.”

The complaint comes several months after the PAC’s legal team wrote a letter seeking advice from the state’s Fair Political Practices Commission (FPPC) about Liccardo’s role with the PAC. In particular, the lawyer asked whether Liccardo may open and operate a PAC as sitting mayor.

The PAC cited a 2014 court order involving former San Jose Mayor Chuck Reed, who successfully argued in Sacramento Superior Court that the state law prohibiting sitting elected officials from running a PAC supporting other candidates was “unconstitutional on its face” and violated his First Amendment rights.

But the lawsuit sets no precedence without further action from the legislature, the FPPC said, and Liccardo still must follow the state’s Political Reform Act that sets certain donation limits for elected officials.

“Mayor Liccardo is required to comply with all existing laws under the (Political Reform Act) pertaining to candidates until he leaves office,” the letter reads.

Jean Cohen, executive director of South Bay Labor Council, said she’s never seen such “brazen disregard” for campaign law.

“Mayor Liccardo ignored the advice of California’s Fair Political Practices Commission, raising nearly $550,000 in illegal money to support a slate of candidates he handpicked to do the bidding of corporate special interests,” Cohen said.

A PAC with deep pockets

Since Liccardo formed the PAC last October—initially called “Common Good Silicon Valley, supported by Mayor Sam Liccardo”—it has raised more than $500,000, campaign finance filings show.

It doled out more than $298,000 as of this week to support Councilmember Matt Mahan for San Jose mayor, attorney Joanna Rauh for the District 3 City Council seat and San Jose Fire Capt. Bien Doan for District 7. Most of the money has gone toward supporting Mahan’s campaign, though the PAC and Liccardo have yet to officially endorse a mayoral candidate.

“Matt Mahan, Joanna Rauh and Bien Doan all have fresh ideas for change and represent our pragmatic, independent, pro-housing, pro-jobs perspective,” Jim Reed told San José Spotlight.

Two months after Liccardo abruptly stepped down as the PAC’s head in March, the PAC changed its name, dropping “Mayor Sam Liccardo” and replacing it with the name of his 501(c)(4) nonprofit—an arrangement enabling it to provide financial support and Liccardo to continue influencing the election. The PAC now goes by “Common Good Silicon Valley, sponsored by Solutions Silicon Valley.”

Jim Reed said the practice of a nonprofit sponsoring a PAC is not uncommon, and the two organizations are following campaign rules closely. Liccardo did not answer inquiries on the issue.

What Liccardo’s done through the PAC is unprecedented, said Terry Christensen, a retired San Jose State University political science professor. He said no other San Jose mayor in recent history has raised that much money to support other candidates.

“Incumbent mayors terming out of office endorse, and maybe they give money,” Christensen told San José Spotlight, adding this election is shaping up to be one of the most expensive ones. “In some cases they help raise a little money, but through the campaign accounts, not through a separate political action committee. This is unusual, clearly.”

Legal questions raised 

Under state laws, sitting elected officials—including Liccardo—are considered candidates. Political action committees run by candidates cannot spend money on other candidates, the FPPC wrote in its letter. Such committees are also subject to local contribution limits.

The FPPC provides advice on the Political Reform Act, which regulates campaign financing, conflicts of interest, lobbying and governmental ethics. The five-person commission also investigates and prosecutes violations of the act.

In this case, the FPPC letter offered the PAC its interpretation of the law, but it did not provide a conclusive determination whether a state law had been violated. The FPPC also said San Jose will have to decide whether the mayor’s action has broken any local rules.

Community leaders and campaign experts question the legitimacy of the mayor’s PAC—and the money it has raised—after reading the FPPC letter.

The complaint argues as an officeholder, Liccardo is prohibited from opening a committee ahead of the fundraising period—which started Dec. 9 for the 2022 election. Liccardo started fundraising for his PAC in October, documents show.

What the PAC raised between last October and May also exceeds the local limits—by roughly half a million dollars, the complaint alleges. San Jose has a cap of $1,400 per contribution for mayoral candidates and $700 for council candidates. Forty eight out of 49 contributions to Common Good exceeded that threshold, according to campaign finance filings.

The money raised at Liccardo’s behest also needed to be disclosed to the city, which Liccardo has failed to do, the complaint says.

After reviewing the FPPC’s letter shared by San José Spotlight, City Attorney Nora Frimann said the mayor is not a candidate under San Jose municipal code. Both the city attorney and the mayor’s office said Liccardo did not seek the city’s opinion on the FPPC letter.

“The state and the city have different definitions of what a candidate is. The city’s municipal code is clear that Mayor Liccardo is not a candidate and is not running for any office, and therefore not subject to the city’s contribution limits,” Jim Reed told San José Spotlight, adding the PAC sought the FPPC’s opinion out of caution.

McMorris said the mayor might not have a strong case to defend his actions.

“The fact that they sent a request to the FPPC is an indication that they themselves are probably not certain,” McMorris said. “Now (Common Good) is in a position where of course they’re going to defend what they already did, but I think there is a fair argument, maybe even a strong argument, that what the FPPC is saying is correct, and what they’re saying is incorrect.”

He also believes Liccardo might have also violated local rules, pointing to a city code that states a campaign committee controlled by a candidate “is beholden to the city’s contribution limits.” McMorris said Liccardo using his name and official title in the PAC’s name is enough for the PAC to be considered a candidate-controlled committee.

“A government agency is going to have to make a determination about whether that PAC was operating illegally or not—both under state law and local law,” McMorris said. “There are red flags.”

The primary election is June 7.