Jury agrees that Sizemore's OTU groups engaged in racketeering
By DON McINTOSH, Associate Editor
It took three days to reach a decision, but on Sept. 27 a Multnomah County Circuit Court jury of 15 announced its verdict: A set of groups created by union foe Bill Sizemore "engaged in a pattern of criminal activity" to place two anti-union initiatives on the ballot in 2000, and would have to pay $842,000 in damages to the Oregon's two largest teachers unions. Under state anti-racketeering statutes, that amount would then be tripled by the judge to $2.52 million.
"The jury sent a strong message to the public that fraud in the political process will not be tolerated," said Kris Kain, president of Oregon Education Association (OEA), which is a plaintiff in the suit.
OEA and American Federation of Teachers (AFT)-Oregon filed the suit against Sizemore's Oregon Taxpayers United (OTU) in December 2000, charging a pattern of fraud and racketeering activities that caused the unions to have to spend heavily to defeat them. The jury agreed that: * Sizemore's organizations submitted forged signatures on the initial statements of sponsorship for the future ballot measures;
* They submitted forged signatures on initiative petitions used to qualify measures for the ballot; and
* They lied on state and federal tax returns and state Contribution & Expenditure (C&E) reports.
"The hypocrisy of this guy is stunning," said Oregon AFL-CIO President Tim Nesbitt. "He's been campaigning against unions for eight years now, trying to restrict how we raise and spend money for our members, which we do legitimately according to strict state and federal laws. And all the while it turns out that he's not only playing fast and loose with his contributors' money, but he's hiding it, laundering it and giving them tax deductions in violation of state campaign laws and state and federal tax laws."
Immediately after the verdict was announced, the state attorney general's office announced that - based on evidence introduced in the suit - it would open an investigation into violations of state charitable activities law. This could lead to fines, said Kevin Neely, executive assistant to the Oregon attorney general, though other remedies are more typical, such as removing an organization's directors or dissolving it legally.
Neely said it's also possible that civil and criminal charges could come from the trial's exposure of elections law violations, but no investigation of those has yet been opened. Neely confirmed that his office granted Sizemore's former aide, Becky Miller, immunity from prosecution in the hope that her testimony in the suit would lead to prosecution of "more important targets."
The trial began Sept. 9 and lasted three weeks. An article in the Sept. 20 issue of the Northwest Labor Press, available at www.nwlaborpress.org, detailed the trial's first week. Weeks two and three continued the flood of startling revelations about Sizemore's operation.
The fraud started in the very founding of Sizemore's network of groups. His set-up included several organizations, beginning with the OTU Educational Foundation (OTU-EF), which shared the same office as OTU and the OTU Political Action Committee (OTU-PAC).
OTU-EF is classed as a tax-exempt non-profit foundation: Donations to it are tax deductible, but political work for candidates is prohibited, and work for initiatives is limited to 5 to 20 percent of expenses.
But OTU-EF was political from the get-go. It paid the salaries for all of Sizemore's employees, whether they worked for his ballot measures, his 1998 campaign for governor, or his radio station.
In a 1998 letter, Sizemore - the Republican Party's gubernatorial nominee - told supporters they could contribute to one of his ballot measure campaigns by donating to the foundation, deducting the amount on their tax return, and concealing their identity from state elections officials and the public.
Former OTU-EF employee Miller told the jury almost all the work she did was political in nature, and when in 1999 an Internal Revenue Service (IRS) auditor began looking for proof that the foundation was sticking to its charitable, educational mission, she created sham educational projects, several hastily-thrown-together reports that she then told the IRS had been created earlier at substantial expense.
Miller also described methods Sizemore used to launder contributions in order to circumvent donor disclosure laws. One scheme was to have Oregonians make contributions to anti-union Grover Norquist's Washington, D.C., group, Americans for Tax Reform. Sizemore would send those checks in batches, and have the group send back a single check for the total amount.
Attorney Paul Rundele, chairman of the board of OTU-EF, testified that he couldn't remember any educational projects the foundation accomplished. Nor could he remember the names of any other board members.
And Carol Bobo, a current OTU-EF employee, said under oath that she worked for both organizations and didn't separate the time she spent on OTU-EF and OTU-PAC activities.
Tax-deductible contributions to OTU-EF thus found their way into the OTU-PAC, and then to Sizemore's "company," I&R Petitions, Inc., which was supposed to oversee Klein Campaigns and other "subcontractors" who were doing the actual signature gathering.
One key contribution to the signature campaign was a $25,000 OTU-EF check, laundered through OTU-PAC, that went directly to Klein Campaigns. Sizemore asked the jury to believe that the money was spent on a "survey," which was never conducted and about which he could provide no details.
"What surprised me is how cavalierly money was tossed around from organization to organization," said AFT-Oregon Executive Director Dick Schwarz, who observed the three-week trial.
Days of testimony convinced the jury that Sizemore's initiatives could not have made it onto the ballot without the financial support from the "educational foundation."
Rampant Signature Fraud
They also could not have made it onto the ballot without rampant forgery.
Though on the witness stand Sizemore repeatedly ducked any responsibility for forged signatures, he hired the signature-gathering crew boss Saul Klein, and oversaw Klein's operations with daily conversations and weekly meetings. And it was Sizemore who decided how much would be paid per signature.
In February 2001, Sizemore aide Kelli Highley pled guilty to perjury and forgery. Two petitioners employed by Klein - Paul Frankel and Jim Gurga - have also pled guilty to forgery. Frankel spent 30 days in jail. Both were fined $5,000 plus court costs, and will spend three years on probation, during which they are forbidden from collecting signatures in any state.
The state attorney general's office is investigating eight other Sizemore petitioners based on evidence given to them by the union-backed Voter Education Project.
Leesa Beaudoin, who used to work for OTU sorting petitions and doing bookkeeping for Sizemore's radio station, testified that she was told by Miller or Sizemore about the "Roundtable," a system for obtaining forgeries, in which two to four people would take turns signing initiative petitions, changing ink colors so the forgeries would be less obvious.
Klein himself testified on videotape in December 2001 during the pre-trial deposition phase. [After the deposition, Klein disappeared and could not be located for the trial.] In his testimony, Klein confirmed that he worked almost exclusively for Sizemore. He said several petition circulators routinely forged signatures, but then reversed himself several times. His testimony was full of memory lapses, and he changed his story repeatedly about the extent of forgery and whether and what methods were used to detect it. And just as Sizemore never filed tax returns for I&R Petitions, Klein admitted he never filed tax returns for his company.
Christopher Lancefield, a childhood friend of Klein's, worked for the signature-gathering operation in 1999. Lancefield testified that he quit in February 2000 because he was stressed out from dealing with the kinds of people who collect signatures, and was having nightmares about going to jail. Lancefield said Klein had asked him to sign blank petition sheets in the space where circulators swear that they've witnessed the above signatures.
Jurors and observers gasped as former police officer James Green, an expert in forensic document examination, stacked six transparencies on top of each other to prove to the jury that signatures were traced on the documents filed to qualify measures for circulation.
The state doesn't validate all signatures turned in on initiative petitions, but instead judges a statistical sample. In 2000, Sizemore's Measure 98 campaign needed 89,084 signatures to qualify for the ballot; it turned in 129,583. Based on the state's sample of 6,491, it declared 35,621 invalid, meaning the measure qualified for the ballot with 4,914 signatures to spare. Green was given a portion of the same sample - 220 signatures - and was able to show that at least 13 were "not genuine."
Dave Thomas, the statistical expert who developed the state's methodology for counting signatures, testified that if elections officials had discovered the forged signatures Green found in the sample, Measures 92 and 98 would not have qualified for the ballot.
On the witness stand, Sizemore professed his innocence, denying involvement or knowledge of forged signatures, false elections reports or fraudulent tax returns. He said fighting forgeries was his "mission in life" and blamed county clerks for failing to find them.
To demonstrate his tenacity in ferreting out fraudulent signatures, he showed jurors three boxes which he said contained petitions with forgeries on them that he had refrained from turning in to the secretary of state's office.
OEA attorney Greg Hartman, of Bennett, Hartman, Morris and Kaplan, later walked him through the contents of the boxes. More than half were petitions for measures that were dropped partway through the signature-gathering process; another quarter were for measures that didn't belong to any Sizemore campaign.
[Gene Mechanic, of the law firm Goldberg, Mechanic, Stuart & Gibson, represented AFT-Oregon.]
Government Agencies Stood By
Leaders of the two unions declined to say how much the suit cost them, but Hartman confirmed the attorney fees were in the six-figure range. More than one observer said privately that this expense and effort could have been avoided if authorities had enforced the law. Oregon's secretary of state has subpoena power and could have gotten at any time the same documents the unions obtained.
Jeanie Berg, a union political strategist who has spent years researching Sizemore, said she filed a complaint in 2000 with the secretary of state's office -pointing out evidence that Miller was violating the law restricting work in the education foundation - but the complaint went nowhere. Why didn't the government act? "You should ask them that question. We would have been happy for them to have done that a long time ago," Hartman said.
As for the tax violations, Hartman said he has not heard from the IRS or U.S. attorneys.
Seeing the state do nothing, the lawsuit was a way for unions to fight back.
"The racketeering statute is not just aimed at Tony Soprano," Hartman said. "It's aimed at any organization that engaged in a pattern of criminal mischief. This suit is about requiring people who participate in the political process to play by the rules."
Very few of Sizemore's ballot measures passed with voters, but they were costly to defeat and they diverted the unions from using resources to organize new workers or push their own pro-active agenda. In fact, Sizemore admitted that part of his strategic plan was to have so many measures on the ballot that opponents would have to dilute their resources. And his former number two employee, Miller, admitted that harming unions financially was part of their plan.
The plaintiffs had sought $2.76 million; the jury awarded $2.5 million. Because OTU is unlikely to be able to pay the entire amount, Hartman said the plaintiffs expect to file another suit seeking judgment against Sizemore personally.
Sizemore owns a six-bedroom house and 37 acres in Clackamas County. His five children attend private school [their tuition paid for by his signature-gathering company]. He also owns a"world-class show stallion," he told the jury.
He was receiving salaries totaling at least $75,000 a year from OTU-EF and OTU-PAC, and appears to have benefited about $200,000 from his company I&R Petitions, which he hired to "oversee" the signature gathering (while I&R's sole investor Robert Randall received nothing for his $175,000 investment). In 2000 Sizemore reported $213,000 income on his personal tax returns.
Immediately after the verdict, Hartman requested a court order dissolving Sizemore's organizations, and restraining the sale, transfer or destruction of any records or assets. "[Sizemore] is going to have to fight for his life," said Sizemore attorney Gregory Byrne, who defended OTU in the trial.
Though he was present during the trial, Sizemore wasn't present to hear the verdict. Byrne said he was hunting with his son. "Mr. Sizemore's family is more important to him than his political career," Byrne said.
Byrne said he was unsurprised by the verdict, and will appeal with the argument that the case should not have been heard to begin with. Byrne had asked Circuit Court Judge Jerome LaBarre at the beginning of the trial to dismiss the suit; the judge refused.
The Sept. 27 verdict was the product of years of work and expense, but OEA president Kain says it was worth it. "I'm feeling really good right now," Kain said. "In this trial, we were able to do something to clean up the initiative process."
By shedding light on the corruption of Sizemore's operation, Kain said, the trial has dramatized the need to pass Ballot Measure 26 (the Initiative Integrity Act), an initiative that would prohibit paying by the signature in initiative campaigns.
"Measure 26," Kain predicts, "will remove the incentive to commit forgery and fraud."