In summary

Documents obtained by CalMatters reveal a behind-the-scenes look at a controversial no-bid contract — and a showdown between two of California’s most ambitious politicians.

The unpaid invoices piling up in Secretary of State Alex Padilla’s office had climbed to more than $34.2 million. 

It was Nov. 2. Since early September, his staff had been wrangling with the staff of State Controller Betty Yee over whether Padilla’s office had the budgetary authority to pay for a $35 million contract it had awarded to public affairs firm SKDKnickerbocker to run a statewide voter education campaign called Vote Safe California. The secretary of state’s office maintained that it did have budgetary authority. The controller’s office, which approves payments, maintained that it did not. 

With the two agencies at an impasse, SKDKnickerbocker was left to shoulder millions of dollars in costs for a campaign explaining new pandemic voting procedures. One invoice for a month’s worth of media buys on TV, radio, Facebook, Twitter, YouTube and Snapchat topped $11 million, and two others topped $9 million, according to documents obtained by CalMatters through a public records request. 

On Oct. 20, about two weeks after the controller’s office publicly said it would not approve payment of the contract, Padilla sent an email to Yee. 

“Betty,” he wrote. “To support the payment of the voter education program the Secretary of State’s office has been directed to conduct by the Governor and the Legislature, I’m attaching background materials of how similar contracting on behalf of counties has been done previously by the SOS as well as other state departments/agencies.” 

“I hope this addresses any remaining questions or concerns.” 

California Controller Betty Yee’s office has refused to authorize payment of taxpayer dollars for the “Vote Safe California” education campaign. AP File Photo/Rich Pedroncelli

Two days later, Yee’s chief counsel sent an email to Padilla’s chief counsel. “Our position remains unchanged,” Rick Chivaro wrote. “Moreover … the (State Controller’s Office) will not be making any further considerations regarding this matter.” 

That the state of California could leave SKDKnickerbocker to eat up to $35 million is just the latest controversy entangling the contract. There is the question of why Padilla’s office would award a voter education contract to a firm tied to Joe Biden’s presidential campaign during one of the most contentious elections in U.S. history, which 40% of California voters doubted would be conducted fairly and openly. There is the question of whether the contract itself was awarded fairly and openly — one of the losing firms formally challenged the secretary of state’s decision, arguing that SKDKnickerbocker was given a “significant unfair advantage.”

And then there is the question of power. Who will prevail in a struggle between two of California’s most ambitious politicians — Padilla, considered one of the frontrunners for Kamala Harris’ Senate seat, and Yee, another Senate contender who is running for vice-chair of the California Democratic Party and contemplating a run for governor in 2026

Pressure building

For now, Yee appears to have had the last word. But the Howard Jarvis Taxpayers Association, which sued Padilla on Oct. 9 for his “continuing attempt to carry-out an unlawful $35 million expenditure of taxpayer funds,” added Yee as a defendant Thursday amid concerns she would change her mind. 

“We suspect that there will be increasing pressure on Controller Yee to make payment on that illegal contract,” said Jon Coupal, the association’s president. “In order to protect taxpayers, we felt it necessary to add Controller Yee so that any injunctive relief we obtain … from the court applies to her, as well.” 

It appears that pressure is indeed building on Yee.

On Nov. 13, the secretary of state’s office asked the Department of Finance to transfer federal funds for the contract, though the department has not yet acted on the request, Finance spokesman H.D. Palmer said.

The controller’s office had already intimated that it would not approve the use of those funds. “The appropriation relied upon was clearly made to the counties and not to the SOS,” Dave O’Toole, the controller’s chief operations officer, wrote in an Oct. 2 email to Padilla deputy Lizette Mata.

Yee did not respond to a request for an interview on Friday. Padilla declined multiple interview requests through spokeswoman Paula Valle, who said the secretary of state could not comment on pending litigation.

“We have full confidence that the Secretary of State’s office will pay us the amount owed under the contract,” said Heather Wilson, head of SKDKnickerbocker’s California office.

‘Significant unfair advantage’

Hundreds of documents and emails CalMatters obtained through public records requests offer a glimpse into the behind-the-scenes of a contract shrouded in secrecy.

Although congressional and state Republicans were quick to lambast Padilla’s office for awarding the contract to SKDKnickerbocker — a firm closely associated with the Democratic Party and one of Biden’s main election campaign advisory firms — Republicans weren’t the only ones complaining. 

Fabian Núñez, former Assembly Democratic speaker and now a partner at Mercury Public Affairs, filed a formal protest against the secretary of state’s office on Aug. 28, alleging SKDKnickerbocker’s contract proposal contained “material violations” that “led to a significant unfair advantage.” Núñez said the violations “should have resulted in disqualification of SKDK prior to the interview process.” 

Fabian Nunez, former California Assembly speaker and now a partner at Mercury Public Affairs, complained about how Padilla’s office awarded the California vote contract to a competing finalist. AP Photo/Denis Poroy, 2009 File Photo)

Mercury and SKDKnickerbocker were finalists for the contract, along with Grace Public Affairs. According to Núñez’s complaint, SKDKnickerbocker violated the terms of the informal request for proposals by submitting “additional creative and written materials” that pushed the proposal past the 15-page limit. Though SKDKnickerbocker’s proposal was only 13 pages, it submitted other materials via hyperlinks that, when clicked, resulted in a 49-page submission, Núñez wrote. 

“Mercury was specifically told by the SOS’s office in response to a question that it could not provide additional creative work and response elements as part of our proposal beyond the 15 pages,” Núñez wrote. “Yet, SKDK provided multiple creative links and story boards in its proposal. As a result, this provided SKDK a significant and profound unfair advantage in winning the work.” 

Núñez asked the secretary of state’s office to re-review the proposals and reconsider its decision, adding, “A fair bidding process in which all responsible bidders are evaluated by the exact same rules is what the public and all bidders expect.” 

Núñez and another representative for Mercury Public Affairs did not respond to multiple requests for comment. 

The secretary of state’s office denied Núñez’s request in a Sept. 1 email, writing that “common procedures or practices applicable to competitive bid agreements … do not apply for the process used for an emergency contract.”

Emergency declaration draws criticism 

That the contract was declared an emergency sparked pushback from critics who said it allowed the secretary of state’s office to evade the transparency of the competitive bidding process. Because Padilla declared an emergency need, his office was able to award the contract without prior approval from the Department of General Services, said Monica Hassan, the department’s deputy director of public affairs.

The contract also was awarded through an expedited, no-bid process that appeared to be invitation-only. On July 17, Padilla’s office sent an email to 15 political consultants and public affairs professionals — many of whom have worked on the campaigns of prominent Democrats — inviting them to submit a proposal for the Vote Safe California campaign. Seven firms submitted proposals, and on Aug. 13, SKDKnickerbocker was awarded the contract.  

According to Hassan, the secretary of state’s office submitted the contract to the Department of General Services in early September, only to voluntarily withdraw it. The contract was then resubmitted on Sept. 25, the same day Padilla sent a letter to the department justifying its emergency nature.  

“Given the urgency which these essential the (sic) services need in response to the COVID-19 pandemic; there was not sufficient time to competitively bid these services or seek a Non-Competitive Bid (NCB) approval due to the time associated processes,” Padilla wrote.

The Department of General Services approved the contract on Oct. 1, nearly two months after it had been awarded. 

Meanwhile, the controller’s office and secretary of state’s office still were battling over whether Padilla’s office had the budgetary authority to pay for the contract. The secretary of state had a powerful ally in that battle: the Department of Finance, part of Gov. Gavin Newsom’s administration. 

“Trying to get a definitive answer is a little like catching a greased pig.”

Rick Chivaro, chief counsel to the California controller

Padilla’s office identified multiple potential funding sources for the contract, including local assistance funds for counties for costs associated with running an election amid the pandemic. 

To justify using the local assistance funds, Mata, the Padilla deputy, cited one of Newsom’s executive orders, which instructed the secretary of state to work together with counties to ensure “sufficient voter outreach and education.” 

“Entering into the contract on behalf of all 58 counties was essential to maximize statewide reach and consistent messaging across all media markets for all Californians,” Mata wrote in a Sept. 11 email to O’Toole, the controller’s chief operating officer. 

The Department of Finance backed up Mata. “SOS is actually contracting at the state level to provide education and outreach on behalf of the counties because it’s more efficient,” Clint Kellum, a Finance analyst, wrote in a Sept. 11 email to O’Toole. 

The controller’s office didn’t seem convinced. 

“Trying to get a definitive answer is a little like catching a greased pig,” Rick Chivaro, the controller’s chief counsel, wrote in a Sept. 17 email to Thomas Hiltachk, the lawyer representing the Howard Jarvis Taxpayers Association. 

‘We are not able to approve payments’

On Oct. 2, the day after the Department of General Services approved the contract, Mata sent O’Toole an email. “We have a couple of invoices that need to be processed so any help you could provide to expedite this would be welcome,” she wrote. By this time, SKDKnickerbocker had submitted three invoices totaling more than $9.7 million. 

O’Toole wrote back later that day, citing five concerns with the secretary of state’s proposed funding sources. One of them: “The contract relies on both the availability of state and federal funds — neither of which are evidently available for this purpose,” he wrote. 

He also struck down the secretary of state’s proposal to use funds set aside for the counties. “It is our understanding that … the SOS sought to obtain approval from the counties to utilize the funds, and only a handful of the counties contacted by the SOS agreed to allow the SOS to utilize the money appropriated to the counties,” he wrote. 

O’Toole concluded with: “Until we can get these issues resolved and SOS can demonstrate availability and appropriate use of the funds, we are not able to approve payments on the contract.” 

The matter didn’t end there. On Oct. 6, the Howard Jarvis Taxpayers Association sent a cease-and-desist letter to Padilla. The letter led with: “By now you have learned that the State Controller has rejected the contract you entered into with SKDKnickerbocker for $35 million.”

“Entering into the contract on behalf of all 58 counties was essential to maximize statewide reach and consistent messaging across all media markets for all Californians.”

Lizette Mata, deputy to Secretary of State Padilla

This set off a flurry of activity at the secretary of state’s office. 

Steve Reyes, Padilla’s chief counsel, forwarded the letter to six people, including Padilla. “See first line in the attached letter,” he wrote. 

Five minutes later, Mata sent O’Toole an email. “Is any of this true? Calling you now.” 

About two hours later, O’Toole wrote Mata back. “This email confirms what we discussed regarding claims against the SKDKnickerbocker LLC contract for voter education and public education purposes. Based on the absence of authority in … the identified fund sources on the contract, the (controller’s office) will not approve claims for the SKDKnickerbocker contract.” 

The next day, Oct. 7, both the secretary of state’s office and SKDKnickerbocker told CalMatters that work on the campaign would continue. 

Padilla steps in

On Oct. 9, the Howard Jarvis Taxpayers Association sued Padilla. 

On Oct. 20, Padilla stepped in, sending Yee a direct and personal appeal to approve payment of the contract. His email included a two-page document justifying payment of the contract. 

The document cited a bill Newsom signed into law in August, which directed the secretary of state to “conduct a statewide voter education and outreach campaign regarding new procedures in place for the election.” It also included four examples showing when the secretary of state spent local assistance funds on behalf of counties and the controller approved those payments, and referred to letters from five county elections officials who said they approved of Padilla using the funding for the SKDKnickerbocker contract. 

“I don’t know anybody who I would consider a competent state manager who would want any part of something like this.”

Mike Genest, head of California Finance Dept. Under former GoP Gov. Schwarzenegger

“Thank you for forwarding this background material, Alex,” Yee wrote. “We are reviewing this information and will respond afterwards.” 

On Oct. 22, Yee’s chief counsel wrote to Padilla’s chief counsel, informing him that the controller’s office hadn’t changed its mind and wouldn’t consider the matter again. 

“That budget item is for local assistance, and by its very terms requires that the monies ‘shall be provided to the counties,’” Chivaro wrote. “As such the memorandum from the SOS does not alleviate the concerns raised by this office concerning the propriety of approving the submitted expenditure.” 

Chivaro confirmed Friday that the controller had not drawn any warrants to issue payment for the contract. 

It’s unknown if SKDKnickerbocker plans any action to recoup its expenses. A clause in the contract — typical of most state contracts — absolves California of its liability to pay SKDKnickerbocker if the state budget doesn’t appropriate enough funds for the contract. 

It’s also unknown whether SKDKnickerbocker has paid bills associated with the contract. Four subcontractors, who collectively performed services totaling hundreds of thousands of dollars, did not respond to emails or return phone calls. 

“I know a lot of high-level state managers,” said Mike Genest, a political consultant who led the Department of Finance under then-Gov. Arnold Schwarzenegger. “And I know that sometimes they have to push the rules around a little bit to get the job done. But for the most part, people don’t want to do that because they don’t want to be exposed to some kind of problem legally.” 

He added, “I don’t know anybody who I would consider a competent state manager who would want any part of something like this.”

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Emily Hoeven writes the daily WhatMatters newsletter for CalMatters. Her reporting, essays, and opinion columns have been published in San Francisco Weekly, the Deseret News, the San Francisco Business...