The state Fair Political Practices Commission ordered the audit, which is being conducted by the state Franchise Tax Board, according to these sources.
Jordan has responded by filing papers with the Registrar of Voters on April 13 to reopen his 1991 campaign committee, writing that he was doing so "in order to pay new bills in connection with the 1991 campaign."
Jordan also has reportedly retained Roger Brown, the former chief of enforcement of the Fair Political Practices Commission and now a private attorney in Sonora County.
Jordan's 1991 campaign committee drew the attention of the state agency charged with enforcing campaign laws because Jordan failed to list the occupation of hundreds of his contributors. The law requires occupations to be disclosed, and levies a penalty of up to $2,000 for each violation.
State investigators hone in on an omission of contributor occupation as a sign of potential money-laundering. In money-laundering schemes, a business or individual gives funds to a number of others, who then contribute the money in their own names and hide the true source of the contribution. It is much harder to spot such schemes if contributor occupations are omitted, since a cluster of contributors from the same business provides clues to investigators.
Sources familiar with the state investigation say that the review of Jordan's campaign records has turned up additional irregularities and possible violations of state and local laws.
Following his election, Jordan raised more in new contributions than he owed for his campaign. He handed out lavish bonuses to his campaign workers and, at the same time, suddenly found that he "owed" himself $35,000 for a previously undisclosed loan -- and promptly paid himself back. Records are now being sought to demonstrate that the loan was, in fact, made.
Jordan's 1991 records show he owed about $7,000 to the Plumbers Union but do not record that the debt was paid. The effect of skipping out on the debt would be to convert it into a contribution. But that would be illegal in San Francisco, since no contributions above $750 are allowed in mayoral races. Jordan is being asked to produce evidence to back his claim that the debt was paid, according to investigators.
Jordan may also face new bills if the IRS determines that he improperly claimed that his 1991 campaign staff were independent contractors. Jordan was the only major mayoral candidate who did not pay withholding taxes on his campaign staff, and the IRS takes a severe view of political committees that seek to avoid taxes by claiming campaign workers are contractors.
To pay fines and attorney fees arising from the investigation into his 1991 campaign, Jordan would need to reopen his committee since state law would not allow those expenses to be paid by Jordan's new re-election committee. The 1991 committee closed with a "zero" balance, which means that Jordan will have to fill its coffers before he can pay the "new bills."
Jordan filed to reopen the committee just one day before he went to court in a suit to halt a new campaign reform law. That law would have inhibited Jordan's ability to raise money for his 1991 committee, since it banned contributions from city contractors. Although Jordan lost his court case on contractor contributions, a petition drive against the reform supported by Jordan suspended the law anyway.
Soliciting funds from city contractors may be especially important to Jordan now, since by law he cannot tap more money from his 1991 contributors. Contractors who have not given before to Jordan thus could conceivably give $750 to his 1991 campaign and give again to his 1995 re-election committee.
Investigators say that Jordan has slowed the investigation with claims that his records can't be located, or must be reconstructed. Jordan could well be hoping that he can add months to the investigation, pushing the result past this fall's election.
Jordan 1995 campaign manager Clint Reilly confirms that Jordan's 1991 campaign committee has reopened because of the FPPC probe.
"From what I understand, the reason the account has been reopened is to pay Mr. Brown the fees he is owed for handling the issues that have been open issues with the FPPC surrounding the 1991 campaign report," says Reilly. "That's the extent of what I know."
Jordan Jr.'s Clean Sweep
"I'm pretty confident that we have the biggest machine in town," says Greg Kunin, Jordan appointee to the Film Commission and Frank Jr.'s best pal.
Kunin wasn't talking about Papa Jordan's political machine but Sonny Boy's ride-aboard steam cleaner bought to scour city sidewalks with soap and high-pressure steaming water.
Still, Kunin might as well have been tipping the wink to the political machinations that went into creating and funding Frank Jr.'s nonprofit foundation.
The group, Neighbors for Neighborhoods, got an IRS OK as a do-gooder group deserving of tax-exempt, tax-deductible status. Overall, its aim was to help organize citizens to fill one of Dad's promises: that litter would be picked up and sidewalks and streets cleaned to give a lift to civic spirits. But while doing good for others, it also did some good for Frank, Frank Jr., and Frank's campaign treasurer, Jack Immendorf.
According to IRS and Registrar of Voters records, here's how it started. During Jordan's first year in office, he put Frank Jr. on the payroll of his "Friends of Frank Jordan" committee. In all, Junior got $22,974.48 that year, with $1,500 still owed at year's end.
Not that much, you say, considering the high rents in San Francisco. But Junior probably didn't pay high rents; his voter registration shows that during this time he lived at Frank and Wendy's Fillmore Street mansion.
But there was a better way to pay Junior's expenses than through political funds. Political contributions aren't tax deductible, but it might be possible to lure big bucks from favor-seekers if a tax write-off is in the offing. Why not set up a foundation, so that contributions could be tax deductible and expenses tax exempt?