Hobbs Inauguration Fund Continues To Raise Concerns

Hobbs Inauguration Fund Continues To Raise Concerns

by | Jan 24, 2023 | News

By Terri Jo Neff |

The public relations and legal fallout continues after the nonprofit which accepted donations for Gov. Katie Hobbs’ public inauguration ceremony released the names of donors and the amount of each donation.

Hobbs was officially sworn in Jan. 2 during a private ceremony. She then held a public inauguration ceremony on Jan. 5. The information about who paid for that ceremony via the Katie Hobbs Inaugural Fund was finally released several days later, after attorney Tim La Sota threatened to sue Hobbs for violating public records laws.

The Katie Hobbs Inaugural Fund was registered with the Arizona Corporation Commission on Dec. 13 by Hobbs’ campaign manager Nicole DeMont as a 501(c)(4) nonprofit social welfare organization. DeMont is currently listed as the only director on ACC records.

DeMont and Hobbs have come under scrutiny for accepting $1.5 million from roughly 120 donors, including $250,000 from utility giant Pinnacle West Capital Corp., the owner of Arizona Public Service Co. (APS). But the event cost less than $210,000, according to public records.

Government transparency watchdogs are calling for an investigation into whether Hobbs’ inauguration team had a pre-event budget worked out and whether more money was intentionally accepted than needed. But La Sota says there also remains a question of whether Hobbs violated another Arizona law by using the state’s website to solicit money for her inauguration.

“That’s definitely a no-no,” La Sota told KFYI’s James T. Harris this week. “That’s no different hardly than just putting a link on the governor’s official state website to her campaign account and saying, ‘hey you know do you want to support me politically, go to my campaign.’”

La Sota also told Harris that donations to DeMont’s nonprofit reportedly entitled donors to preferred access and seating at Hobbs’ inauguration event held on public property.

Questions surrounding the inaugural fund have also led some Democrats across Arizona to express dismay, behind the scenes, that Hobbs put them in the position of having to publicly ignore the $1.5 million controversy, just years after leaders of the Democratic Party called for an investigation into the funding of Donald Trump’s inauguration.

There is also growing pushback to utility companies like APS getting so heavily involved in politics; public records show APS donated $850,000 to the failed gubernatorial campaign of Kari Lake.

APS responded to criticisms about its donation to the Katie Hobbs Inaugural Fund with a statement that the money came from shareholder funds and not from customer payments. However, the company’s image has taken a hit in the court of public opinion given the fact APS is currently seeking a rate increase.

Another large donor to the inauguration was Blue Cross Blue Shield, which anted up $100,000, as did the lobby arm of the National Association of Realtors along with Arizona Realtors. There was also $100,000 donated by Sunshine Residential Homes Inc., a for-profit company that contracts with the State of Arizona to provide some child welfare services.

The rest of the donations ranged from $10 to $50,000; several were from entities like Union Pacific, the Arizona Dispensary Association, and Salt River Project which have dealing with various state agencies.

So what happens to the $1 million plus left on the books of the nonprofit created for Hobbs inauguration?

According to the IRS, the money can be spent on anything DeMont desires, provided it falls under the very broad category of promoting social welfare within the IRS code for a 501(c)(4).

“To be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements),” according to the IRS.

In addition, seeking legislation germane to the nonprofits programs is a permissible means of attaining social welfare purposes.

“Thus, a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its primary activity without jeopardizing its exempt status,” the IRS rules state.

There has been much public consternation that DeMont will use some of the inaugural fund donations for political activities. This is permissible under IRS rules provided engaging in politics is not the “primary activity” of 501(c)(4).

The only other stated restriction under IRS Code is that the political activity cannot involve “direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”

The code makes no mention of restrictions to referendum or initiative measures that might come before voters.

Therefore, it is possible that donors to the Hobbs’ inauguration could end up seeing DeMont use their money against own their political interests.

Terri Jo Neff is a reporter for AZ Free News. Follow her latest on Twitter, or send her news tips here.

Gilbert Mayor, Council Hit With Claim For Alleged 1st Amendment Violations

Gilbert Mayor, Council Hit With Claim For Alleged 1st Amendment Violations

by | Oct 21, 2022 | News

By Terri Jo Neff |

An order last month by Gilbert Mayor Brigette Peterson for town police officers to remove three people from a council meeting has resulted in a notice of claim being served against town officials for First Amendment violations.

A notice of claim is required under Arizona law before a party can initiate a lawsuit against a public entity. On Thursday, such a notice was served on the Gilbert mayor and council members on behalf of Ryan Handelsman, Dr. Brandon Ryff, and Joanne Terry, who contend they were forced out of Sept. 20 town council meeting for engaging in constitutionally protected speech.

According to attorney Tim La Sota, his three clients attended the meeting during which dozens of protest signs were taken into the council chambers. Some of the signs were printed with the phrase “Stop Lying” while others read “Don’t Mesa My Gilbert.”

Peterson interrupted the meeting at one point and ordered a Gilbert police officer to remove a 6-inch by 24-inch “Stop Lying” sign Terry was holding in the back of the room. Terry set the sign down and the officer did not confiscate it.

A short time later, Handelsman addressed the mayor and council during the call to the public to challenge town officials to cite a statute or code being violated by those holding signs. Then Handelsman, Ryff, and Terry each decided to silently hold their signs.

“The Mayor halted the meeting and ordered the police to remove Dr. Ryff, Mr. Handelsman and Ms. Terry from the room. The police escorted them out of the meeting without incident,” according to the notice of claim, which notes the town code does not prohibit signs in the council chambers.

A First Amendment obstruction or retaliation violation could cost the town tens of thousands of dollars in legal fees plus potential damages to each of the three claimants. However, La Sota says his clients will settle for $1, but it will also cost something other than money.

In exchange for a complete release of their claims, the claimants will accept $1 as damages if Peterson and the town of Gilbert issue an official apology, La Sota wrote. In addition, Peterson would have to attend a First Amendment training class.

According to the notice of claim, Handelsman, Ryff, and Terry acknowledge that the government “need not tolerate actual disruptions of government business” and that courts have held that municipalities may enforce “certain free-speech restrictions.”

But those restrictions apply to time, place, and manner of public comment, La Sota noted, and even then courts have ruled such restrictions “must be reasonable, consistently enforced, and fall within constitutional parameters.”

Free speech restrictions by the government are also reviewed to ensure they “are both viewpoint neutral, equally and consistently enforced, as well as narrowly-tailored to meet the needs of the governing body to conduct its business, free of actual disruptions,” La Sota noted.

It is also not allowable to engage in retaliation against someone for asserting their First Amendment rights, which is what the notice of claim alleges Peterson did when she ordered Ryff removed. La Sota points to Ryff’s critical comments about the mayor during his call to the public comments at the prior council meeting.

“Then, at the very next meeting, 50 ‘Stop Lying’ signs show up with essentially the same message,” the notice of claim states, adding that Ryff contends Peterson believed Ryff was responsible for the signs.

“Dr. Ryff’s rights were violated by a vindictive Mayor who seized the opportunity to retaliate against him for years of political opposition and for having filed ethics complaints against her in the past,” the notice of claim states.

The notice of claim further alleges Handelsman, Ryff, and Terry were not being disruptive in how they displayed their signs at the Sept. 20 meeting. It also contends Peterson did not treat all sign-holders the same during that meeting, including an attendee with a visible “Don’t Mesa My Gilbert” sign who was not forced to leave the meeting.

“Certain persons silently holding signs in the back of the room may have been a distraction to the Mayor, but not every distraction is necessarily a disruption and not every disruption is an actual disruption which impedes the ability of the Council to do its business,” La Sota notes, citing a major First Amendment ruling from the Ninth Circuit of the U.S. Court of Appeals (Norse v. City of Santa Cruz, 2010).

Peterson later commented on her actions, arguing she could not read what was written on the signs. Yet that does not explain why his clients were ordered out of the council chambers while others with signs were allowed to remain, La Sota wrote in the notice of claim.

Town officials have 60 days to reject or accept the settlement demand included in the notice of claim.