GMA Fined $18 Million over Cover Up in GMO Labeling Fight

In a historic decision, a Thurston County Superior Court judge Tuesday ordered the Grocery Manufacturers Association to pay $18 million in penalties and punitive damages, after Attorney General Bob Ferguson’s lawsuit revealed GMA intentionally violated Washington campaign finance laws. The case arose from Ferguson’s investigation of the finances of opposition to voter Initiative 522, which would have required labeling of genetically modified organisms, or GMOs, in food sold to consumers.

Source: http://www.atg.wa.gov

“In light of all the evidence in the record, it is not credible that GMA executives believed that shielding GMA’s members as the true source of contributions to GMA’s Defense of Brands Account was legal,” Judge Anne Hirsch wrote in her ruling.

The ruling against GMA — a Washington, D.C.-based trade group representing major food, beverage and consumer companies — is believed to constitute the largest campaign finance judgment in United States history.

“I took this case to trial because the GMA needed to be held accountable for their arrogance and willful disregard of Washington state campaign finance laws,” Ferguson said.

Judge Hirsch found that the testimony of GMA President and CEO Pamela Bailey “was combative at times. Bailey often would not answer direct questions and frequently answered questions with questions of her own, and gave lengthy explanations that appeared designed to lecture the court and counsel for the State.”

Ferguson filed the lawsuit against GMA in October 2013. Earlier this year, Judge Hirsch granted the Attorney General’s Motion for Summary Judgment and ruled that GMA violated state campaign finance laws when it failed to register and report its political committee, which opposed I-522. GMA was identified as the largest contributor to the “No on 522” political committee in campaign disclosure filings. However, over 30 members of GMA actually financed the opposition campaign through a special, earmarked account but were not initially identified as individual donors.

Judge Hirsch then ordered a trial to determine whether GMA’s violations were intentional. Under Washington state law, penalties for campaign finance disclosure violations can equal the amount of money concealed from Washington voters. Where a court finds that the violation was intentional, the court has discretion to triple that penalty.

After a trial from Aug. 15 to Aug. 18, Judge Hirsch heard closing arguments on Aug. 30.

In today’s ruling, Judge Hirsch determined that GMA’s violations of law were intentional and tripled a $6 million penalty, for a total of $18 million, including punitive damages.

Judge Hirsch explained the factors in favor of imposing the penalty and punitive damages:

“Those factors include violation of the public’s right to know the identity of those contributing to campaigns for or against ballot title measures on issues of concern to the public, the sophistication and experience of GMA executives, the failure of GMA executives to provide complete information to their attorneys, the intent of GMA to withhold from the public the true source of its contributors against Initiative 522, the large amount of funds not reported, the large number of reports filed either late or not at all, and the latest of the eventual reporting just shortly before the 2013 election.”

Anne Levinson, chair of the Public Disclosure Commission, which enforces our state’s campaign expenditure and disclosure laws, praised the decision:  “The Court’s ruling is a major victory for the integrity of elections in our state. The PDC and the Attorney General will not hesitate to take strong enforcement action whenever there is an attempt to conceal campaign donors.”

In 2013, GMA raised over $14 million for a new “Defense of Brands” account. These funds came as a solicitation and were above and beyond regular member association dues. PepsiCo, for example, contributed nearly $3 million to the account. Nestle and Coca-Cola contributed nearly $2 million each.

GMA then contributed $11 million of that $14 million to “No on 522.” In an effort to shield individual companies from required disclosure, the money was listed as coming from GMA, not the actual donors, such as Pepsi, Nestle and Coke.

Internal GMA documents obtained as a result of Ferguson’s lawsuit revealed an intentional, systematic effort to conceal the true sources of those contributions to “No on 522.”

For example, meeting minutes from the GMA Board’s Finance and Audit Committee meeting show a discussion on the creation of the “Defense of Brands Strategic Account,” largely to oppose I-522: “By doing so, state GMO related spending will be identified as having come from GMA, which will provide anonymity and eliminate state filing requirements for contributing members.”

Additionally, in one GMA Executive Committee meeting, the Executive Vice President for Government Affairs noted that the fund would “shield individual companies from public disclosure and possible criticism.”

In 2013, the top 10 contributors to GMA’s Defense of Brands account and their contributions (as of 12/3/13) were:

1. PepsiCo: $2.696 million
2. Nestle USA, Inc.: $1.751 million
3. The Coca-Cola Company: $1.742 million
4. General Mills: $996,000
5. ConAgra: $949,000
6. Campbell Soup: $441,000
7. The Hershey Company: $413,000
8. J.M. Smucker: $401,000
9. Kellogg: $369,000
10. Land O’Lakes: $332,000

The ruling from Judge Anne Hirsch included the $18 million penalty plus an award of trial and investigative costs as well as attorney fees. Those costs and fees will be determined at a separate court hearing to be scheduled.

The largest penalty ever handed down in a Federal Election Commission case was $3.8 million in 2006. In Washington, the largest such case involved a $735,000 penalty in 2000.

An AGO review of precedents found no other state case that exceeded today’s ruling.

Senior Assistant Attorney General Linda Dalton, Deputy Solicitor General Callie Castillo, and Assistant Attorney General Garth Ahearn handled this case for the state.