California elections watchdog closes investigation into spending during 2016 Santa Rosa City Council race

A lengthy state investigation into allegations the son-in-law of a prominent Sonoma County developer violated campaign finance laws during the 2016 Santa Rosa City Council race has been closed without reaching any conclusions.

The California Fair Political Practices Commission said it ended the investigation last month because the man at the center of the inquiry, Scott Flater, and his father-in-law, developer and banker Bill Gallaher, were suing The Press Democrat over its coverage of the campaign spending.

The investigation by the state’s political watchdog agency was triggered by a formal complaint filed by a Santa Rosa contractor who questioned whether secret donors were funding what would eventually amount to a record $202,574 in independent expenditures made by Flater to support three council candidates during the November 2016 election.

FPPC investigators closed the 2-year-old case without reaching a decision on whether to charge Flater with violating the law or clear him of allegations that he had laundered political contributions and failed to disclose the source of the money for his independent expenditure campaign.

In a March 1 letter sent to Flater’s attorney, FPPC senior counsel Angela Brereton stated the investigation had been closed “due to pending civil litigation concerning conduct related to the Enforcement Division’s investigation.” It cited the lawsuit filed by Flater and Gallaher against The Press Democrat.

Gallaher and Flater had accused the paper of harming their reputations in four stories that detailed the campaign spending and documented questions in the community about the source of the money. An appellate court dismissed the lawsuit March 15 after determining Gallaher and Flater had failed to prove the stories were false.

Jay Wierenga, spokesman for the Fair Political Practices Commission, declined to say why a civil lawsuit might have bearing on the agency’s inquiry into whether election spending violated the law. He would not make FPPC officials, including Brereton, available for interviews.

The non-partisan commission - charged with enforcing election, lobbying and government ethics laws - may close cases without taking action when other agencies are investigating activities or when another “situation may have some bearing on what enforcement has, which is a case,” Wierenga said.

“Until that other situation is resolved, without any other determination, they close it,” Wierenga said.

Wierenga said the investigation into Flater’s spending was closed “without prejudice,” which means it could be reopened at any time.

Flater and his attorney did not return multiple phone calls last week seeking comment.

The investigation was unusual, both in the amount of time it consumed and the way it ended without a conclusion about the validity of the allegations raised in the complaint.

The majority of FPPC cases involve minor violations of campaign rules and are settled within six months or less, Wierenga said.

Nearly 80 percent end with some action by the agency, such as warning or advisory letters, fines and violation notices, according to agency reports from 2015 to 2018.

Only 21 percent of FPPC investigations are closed with so-called “no action” letters, which are issued when the agency declines to take action for a variety of reasons. They include cases where investigators disprove the allegations, find insufficient evidence to prosecute, or determine “the potential violations are being addressed in another forum,” according to the commission’s website.

Flater had not been a major donor to local political campaigns before 2016, when he paid for mailers and other independent expenditures to support three candidates - Jack Tibbetts, Ernesto Olivares and Don Taylor - running for the council. The $202,574 he spent was equal to 89 percent of the total contributions raised directly by all six candidates in the council race and represented an unprecedented influx of outside cash flowing into a Santa Rosa City Council election.

Flater listed his occupation as a “homemaker” in campaign filings, raising questions about the source of the money, according to the Nov. 4, 2016, complaint filed with the FPPC by Santa Rosa contractor Chris Grabill.

The new council would have been poised to vote on a controversial housing project proposed by Gallaher to build 867 homes and apartments along Chanate Road on county-owned land. A deal to sell the property to Gallaher was voided by a judge in 2017 after neighbors filed a lawsuit alleging the county should have conducted an environmental assessment of the project.

FPPC investigation records obtained by The Press Democrat under the California Public Records Act show the agency announced the closure of its investigation March 1 - just eight days after it received a batch of financial records from Flater and his wife, Molly Flater, who is Gallaher’s daughter.

The financial records appear to include statements from two of the Flaters’ joint checking accounts detailing transactions between June 2016 and January 2017. They also include statements from savings and other accounts held by Molly Flater, who is a top executive in her family’s businesses. She is listed as chief operating officer of Oakmont Senior Living and Gallaher Homes, according to the companies’ websites, and sits on the board of directors of Poppy Bank, which her father founded.

The FPPC documents show Molly Flater deposited more than 50 checks totaling over $444,000 from her family’s companies into her personal accounts between July 2016 and December 2016. The largest listed in the records, a $277,694 check from WPG Concord SL LLC, a business registered to her father, was deposited on Oct. 4, 2016.

The FPPC documents did not include any analysis of the transactions or make any connections between the checks deposited in Molly Flater’s account and the political spending by her husband.

Molly Flater did not return a phone call seeking comment Friday.

The statements show checks for $500 each from one of the Flaters’ joint checking accounts were issued to two council candidates, Tibbetts and Taylor. Multiple checks from a joint account were used to pay political consultant Rob Muelrath, who managed Scott Flater’s independent expenditure campaign in the City Council race.

There is no limit to the amount of money individuals or groups can spend on independent expenditures, as long as they report the spending and do not get the candidate’s cooperation or input.

Santa Rosa campaign finance rules cap individual donations to candidates at $500 per donor in an election cycle, an amount that critics of the limit have said makes it difficult for candidates to raise money needed for effective campaigns.

Grabill, who kindled the FPPC inquiry by filing a complaint about Flater’s spending, said he was satisfied after receiving the commission’s letter closing its investigation. Grabill said he felt the point he was hoping to make about transparency in election spending was made, even without any resolution.

“People should be accountable to their interests and their financial contributions,” said Grabill, the 34-year-old son of late attorney and housing advocate David Grabill.

Grabill noted that during the election he backed Tibbetts, who was a beneficiary of Flater’s election spending, and that he’s spoken publicly to support Gallaher’s housing project on the old community hospital site along Chanate Road.

“I filed that complaint, that doesn’t change, but that doesn’t keep me from supporting a good project when I see one,” Grabill said.

It is the second time the FPPC has conducted a lengthy investigation into campaign spending by people connected to Gallaher.

In March 2016, the FPPC closed a nearly two-year investigation into allegations that one of Gallaher’s companies, Concepts for Seniors, engaged in campaign money laundering by reimbursing contributions made in the name of its partners, consultants and employees. Investigators found insufficient evidence that Gallaher’s company violated the law, according to the closure letter.

FPPC records show it also received a July 6, 2017, complaint from an anonymous source accusing the Sonoma County Board of Supervisors and Santa Rosa City Council of violating conflict-of-interest laws by accepting campaign donations from Gallaher before votes on the Chanate project. The commission determined the complaint had no merit, according to Wierenga.

You can reach Staff Writer Julie Johnson at 707-521-5220 or julie.johnson@pressdemocrat.com. On Twitter @jjpressdem.