This is a great story telling how big money moves in political campaigns. It also shows how consultants raise the big bucks. On the other hand, rich people are shown to be stupid. The million dollar donor thought he could keep his donation secret. He can not be that dumb.
“Jesse Powell, a founder and chair of Kraken, one of the world’s largest cryptocurrency exchanges, is accusing Rescue and the group’s current and former operators of deceiving him to raise eleventh-hour dollars into the committee. When Powell demanded they send it back to him, arguing the money was conditioned on his name staying out of the public eye, they refused, channeling it into advertisements that consultants collected commissions on. Rescue’s lawyers counter that Powell didn’t suffer damages.
The trial could start as early as November for the GOP consultants who are again trying to derail the career of Newsom, the ambitious Democrat in his final term as governor. Last week, Rescue organizers led by veteran political fundraiser Anne Dunsmore were cleared to begin collecting the roughly 1.6 million signatures needed to put the question on a future ballot.”
How a crypto pioneer lost $1 million to the Gavin Newsom recall
Jesse Powell, a founder and chairman of the massive crypto exchange Kraken, is suing the recall committee Rescue California and its operatives, arguing they tricked him out of the money.
On the same day that Jesse Powell wired the disputed $1 million to Rescue, the state’s most respected public poll released a survey showing Newsom easily favored to vanquish the recall. | David Paul Morris/Bloomberg via Getty Images
By CHRISTOPHER CADELAGO, Politico, 04/10/2024 https://www.politico.com/news/2024/04/10/jesse-powell-newsom-recall-lawsuit-00151337
SACRAMENTO, California — Republicans have launched another longshot bid to recall Gov. Gavin Newsom of California. But they’re dealing with a larger, even existential problem this time.
Rescue California, the recall committee helmed by Republican consultants, is facing a $1 million lawsuit filed by a deep-pocketed Bitcoin pioneer stemming from the last, failed attempt to boot Newsom from office in late 2021.
Jesse Powell, a founder and chair of Kraken, one of the world’s largest cryptocurrency exchanges, is accusing Rescue and the group’s current and former operators of deceiving him to raise eleventh-hour dollars into the committee. When Powell demanded they send it back to him, arguing the money was conditioned on his name staying out of the public eye, they refused, channeling it into advertisements that consultants collected commissions on. Rescue’s lawyers counter that Powell didn’t suffer damages.
The trial could start as early as November for the GOP consultants who are again trying to derail the career of Newsom, the ambitious Democrat in his final term as governor. Last week, Rescue organizers led by veteran political fundraiser Anne Dunsmore were cleared to begin collecting the roughly 1.6 million signatures needed to put the question on a future ballot.
The superior court fight filed in Orange County in November 2021 and amended in October has received scant attention as it unfolds over hundreds of pages of court briefs. It lays bare the difficulty of political success in 2024 and the crippling financial implications for its leaders should they lose in court. In addition to the $1 million Powell wired to Rescue just days before the September 2021 recall vote, he’s also seeking damages for their alleged theft and fraud.
“I’ve never seen a lawsuit like this,” said Marty Wilson, an executive at the California Chamber of Commerce, whose board recently took an early, unanimous vote to oppose the new recall.
Beyond the legal implications, the lawsuit offers an unusually detailed, behind-the-curtain look at a campaign in desperate crisis on the eve of the election and a high-net-worth donor from the tech world trying to anonymously navigate unfamiliar terrain seemingly alone and without political intermediaries. On the same day that Powell wired the disputed $1 million to Rescue, the state’s most respected public poll released a survey showing Newsom easily favored to vanquish the recall, 60 percent to 38.5 percent.
How Powell got involved
Powell states in the civil lawsuit that he was introduced to Dunsmore by an unnamed mutual acquaintance shortly before the 2021 recall. Dunsmore, a political fundraiser whose roots in California Republican circles go to the Pete Wilson era, is credited by allies with helping streamline a rag-tag statewide operation from her perch in Orange County.
After connecting with Dunsmore on Sept. 9, 2021, five days before Election Day, Powell states that he expressed interest in learning more about Rescue’s efforts. Powell, who has advocated for “ libertarian philosophical values” at Kraken, and espouses an affinity for a “ pirate aesthetic,” a look he described as bearded and disheveled, has donated money to politicians from both parties.
Powell expressed antipathy to Newsom during the recall, taking to social media during the pandemic to accuse the governor of “authoritarianism” after the governor announced children would need the Covid-19 vaccine to return to school. Powell also wrote approvingly about recall Republican candidate Larry Elder, though he was skeptical about whether the “brainwashed masses are ready to acknowledge the problems and execute a viable plan.”
Recently, he’s cheered on Republican John Deaton, the U.S. Marine and cryptocurrency attorney challenging Democratic Sen. Elizabeth Warren of Massachusetts, who has battled with crypto. But Powell’s knowledge of campaign finance laws was limited, based on his lawsuit, and he relied on professionals from Rescue to help guide him in the process.
Lawyers for both parties declined to speak on record.
Later on the same day Powell and Dunsmore first connected, Sept. 9. 2021, they spoke by phone. Powell states that he told her he wanted to contribute money to the recall. But, he says, only on the condition that personally identifying details, like his name and company, be kept confidential and not disclosed to the public. Powell claimed he feared for his safety and added in the lawsuit that he had received serious and frightening death threats in the past.
A 24-hour pressure campaign
The day after the Powell and Dunsmore discussion, an adviser at Dunsmore’s Capital Campaigns sent Powell a contribution form and wiring instructions. Powell states he was still concerned about his name becoming public, writing to Dunsmore and asking whether he would be identified if he made the donation through a corporation.
In a 12:15 p.m. email on Sept. 10, Dunsmore wrote that if Powell contributed the money “thru a corporation then that information is the only thing disclosed,” according to the lawsuit.
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What transpired over the next 24 hours — according to email traffic quoted in the lawsuit — is crucial to his case. Powell responded to Dunsmore 24 minutes later, saying he’d contribute via an LLC, limited liability corporation.
California law requires that political donations made through an LLC must disclose the full name for the officer that approved the political activity. The state also requires that donations made via an intermediary include the name, address, occupation and employer of the donor.
Despite “Dunsmore’s reported decades of experience in campaign fundraising, [she] did not, as she should have, clarify that her earlier statement about contributing through a corporation applied only to corporations and not LLCs,” Powell’s lawsuit states.
“Dunsmore failed to inform [Powell] that making a contribution through an LLC would lead to the disclosure of [his] identity, his company’s identity and other personal information, as the officer of the LLC responsible for approving the contribution, and as the true source of the contribution under the ‘Intermediary Rule.’”
California law also requires ballot committees to list their top three contributors, including highlighting those that give $50,000 or more in advertisements and on their website.
People cast their ballot in the California gubernatorial recall election at a polling station at a polling station in Beverly Hills, California, September 14, 2021. | Robyn Beck AFP via Getty Images
Powell told Dunsmore he wouldn’t be able to contribute until the following week. But he alleges she pressed him to act fast. At 12:36 p.m. she wrote to say that however much he could wire by 1 p.m. could go to TV and radio ads. She urged him to use a credit card and said the money that would clear by Monday could go into texting people who hadn’t already voted. “Even wiring some now snd [sic] more later would work,” she wrote.
Powell told Dunsmore he needed to transfer funds to the LLC from his personal account.
Dunsmore again didn’t warn him that would trigger the disclosure, he states in the lawsuit. “At the banks’ mercy at this point,” he wrote. “The LLC is basically empty and not able to send anything today.”
At 12:40 p.m. that same day, Dunsmore asked Powell if he had someone who would loan the money to Rescue. Then, the committee could pay them back when Powell’s wire landed.
Powell wrote back at 12:43 p.m. to say he could loan the money, provided that it not be “disclosed in any public records.” Powell initiated a transfer to Rescue around 12:53 p.m.
He heard from Dunsmore that his personal information “would be disclosed” if he personally loaned money to Rescue California, and, at 1:06 p.m., he wrote back that he couldn’t make the personal loan, either. He stated he would see about sending money the next week from an LLC.
Twelve minutes later, his wire moved, hitting Rescue’s bank account at 1:19 p.m.
‘Shit:’ A million-dollar mess
Treasurer Kelly Lawler wrote to Dunsmore at 1:21 p.m. to say the $1 million had landed. Dunsmore wrote back: “Shit I don’t think he meant to do that! Can we give it back without reporting it?????” Three minutes later, Dunsmore emailed Lawler, “yikes — it wont [sic] look good in an audit if we return it now …” Dunsmore asked Lawler to call her.
Lawler replied at 1:28 p.m. and added to the email chain the Republican consultants Dave Gilliard and Natalie Blanning Weber. Gilliard stated the $1 million was subject to reporting.
Despite their obvious panic, Powell notes in the lawsuit that none of the Rescue consultants moved to decline the wire.
A minute before Gillard’s email to the Rescue group, Dunsmore emailed Powell to let him know his $1 million had arrived and asked him if it should be declined. “‘Jesse,” she wrote to him, “a million loan personal from you just arrived in our account! Should we decline it?”
Powell told her he couldn’t stop it in time and asked Dunsmore to consider it a loan or an error (the note sent with the wire described it as a “loan.”) He said she could return it the next week.
Powell claims no one replied to his 1:50 p.m. email. Dunsmore and Rescue didn’t decline the wire transfer or respond to him about the possibility of considering the wire a loan, “which would require disclosure of information [Powell] had repeatedly stated needed to remain confidential …” the lawsuit states.
Rescue reported the funds to the Secretary of State as a personal contribution from Powell, including his name, the address from the wire transfer and listed him as CEO of Kraken.
Powell claims he was caught by surprise, learning via a Twitter post that the money — and where it came from — was now public.
He complained to Dunsmore at 6:57 p.m. They went back and forth about correcting what had been reported. Powell also discovered that he was listed publicly among Rescue’s top donors.
Rescue: Powell wanted to donate
Rescue’s lawyers portray a different discussion that took place on Sept. 10, 2021.
In court filings, Powell is described as a “sophisticated political contributor” to conservative campaigns, who connected with representatives for Rescue with plans to contribute more than $5 million to the Newsom recall. Rescue told him there wasn’t time to spend $5 million, but that they could accept $1 million, according to a court filing.
Dunsmore later told POLITICO that Powell had even discussed putting together a group that could raise “double-digit millions” on behalf of the recall.
Rescue’s filings fill in other parts of the discussion between Powell’s 1:06 p.m. email and when his wire landed in Rescue’s account at 1:19 p.m.
At 1:10 p.m., Dunsmore emailed Powell to ask whether the $1 million he discussed sending was “guaranteed one way or another sometime next week?”
“I can spend it now if I know it will be there,” Dunsmore told him.
“Yes, definitely,” Powell replied.
Dunsmore wrote back to him at 1:12 p.m. “Let me go to work,” she said.
Rescue’s lawyers argue that when the committee received Powell’s wire, consultants went about spending the money on ads and voter contract “based on the prior email communications.”
In a Dec. 28, 2023 memorandum, Rescue’s lawyers matter-of-factly state that “the $1 million donation triggered disclosures mandated by California law … of [Powell’s] donation, including his name, employer, address, and amount of contribution.”
Dunsmore told POLITICO on Tuesday that the contribution form Powell received with the wiring instructions included the following disclosure in the fine print: “State law requires political committees to report the name, mailing address, occupation, and employer for each individual whose contributions aggregate to $100 or more.”
The standoff over disclosures
The next morning, on Saturday, Sept. 11, Dunsmore and Lawler tried to get Powell’s correct employer and occupation, conveying to the state that they’d requested the information from him. Powell said he wouldn’t give it to them, and that he wanted the $1 million back.
Dunsmore told Powell the funds had been spent and asked for money from the LLC.
Gilliard emailed Dunsmore to say his firm purchased $650,000 in ads and text messages urging people to vote “yes” on the recall (“370K on TV/Radio, 130k in texts and 150k in digital ads.”) His firm invoiced Rescue for ads and texts, Powell’s lawsuit states, an amount marked “paid,” according to the suit.
Powell and Dunsmore went back and forth about the disclosure of his name. And in his lawsuit, Powell’s lawyers point to the Fair Political Practices Commission, the state’s campaign and ethics watchdog, not requiring a contribution to be reported to the state if it’s not deposited, negotiated or cashed — and is returned within 24 hours.
Powell alleges that Dunsmore never informed him of the so-called “24-hour Rule.” He also points to Dunsmore’s comments the previous day where she told him the wire transfer could be declined and the money returned to him. Powell continued to press Rescue for the money back. Dunsmore forwarded the email to Gilliard and Blanning Weber.
Powell’s lawyer sent a formal demand on Sept. 17. Rescue’s lawyer wrote back five days later, refusing to return the funds.
Rescue bleeds red ink
By the end of 2021, with the recall failure months past, Rescue filed its campaign finance statement with the state. The group reported a balance of $22,131, along with $1,021,018 in debts. One million dollars of that was categorized as a loan owed to Jesse Powell II of San Francisco, listed as “CEO/Co-Founder” of Kraken Exchange.
Last month, Lawler confirmed that she stepped down from the new recall effort after people briefed on the conversations told POLITICO she was pressured by Republican officials, who don’t believe the new recall has a chance and view it as a distraction.
“While I did receive calls asking me to step down, I am my own woman and it was my decision,” Lawyer said in response.
Gilliard said he is not working on the latest effort, which was launched by Dunsmore.
Rescue’s lawyers argue that the statute of limitations for some of Powell’s allegations against the Gilliard Blanning firm and its principals — receiving stolen property — expired after one year, in September 2022. Powell’s lawyers dispute that. A hearing is set for May 17.
Dunsmore is still raising money and trying to gather signatures for the new recall effort.
Last year, the Rescue committee raised about $2,500.
