Tim Eyman (center) in a photo he sent last Friday via email to donors and other supporters.

Tim Eyman (center) in a photo he sent last Friday via email to donors and other supporters.

Judge: Attorney general can resume lawsuit against Tim Eyman

A federal bankruptcy judge also ordered disclosure of names of donors to his legal defense fund.

MUKILTEO — Bankruptcy won’t protect Tim Eyman from the state’s legal pursuit much longer.

And it may not shield the names of those paying his legal bills either.

A federal bankruptcy judge on Friday cleared the way for the resumption of a civil lawsuit against Eyman for alleged violations of Washington’s election laws stemming from his involvement with two initiatives in 2012. He’s denied wrongdoing.

State attorneys put their case on hold when Eyman, of Mukilteo, filed bankruptcy in November because federal law automatically freezes civil proceedings against a debtor.

It meant scrubbing planned depositions with Eyman, his political partners Jack Fagan and Mike Fagan, and three major donors to their initiative campaigns — developers Kemper Freeman and Clyde Holland and investor Ken Fisher.

On Friday, they asked U.S. Bankruptcy Court Judge Marc L. Barreca to let them proceed, citing an exemption to allow states to carry out civil actions intended to enforce laws rather than collect debts. Barreca agreed in a move Eyman’s attorney said “wasn’t unexpected.”

“From refusing to fully cooperate with our investigation, repeatedly failing to comply with court orders, not answering questions under oath, and now using the bankruptcy process in a bad-faith effort to delay our case, Mr. Eyman continues to engage in a pattern of stall tactics to avoid accountability to the people and the state for his misdeeds,” state Attorney General Bob Ferguson said in a statement. “It’s not going to work.”

Barreca also ordered the names of donors to a legal defense fund set up by Eyman to be disclosed to the federal trustee. Those names will be kept confidential, for now. Barreca didn’t rule out the possibility they could become part of the public record in the course of a future proceeding.

“In bankruptcy, the source of funds that is going to pay lawyers for the debtor needs to be revealed,” he said in the hearing. “The U.S. Trustee must be fully informed of who those individuals are.”

State attorneys haven’t had access to that information because state law does not require contributors to legal funds be named. Barreca’s action means the state could potentially petition the bankruptcy court for the identities.

Barreca, who ruled from the bench, is expected to release a written order in the coming days.

Once the order is entered, the case will move forward, according to Brionna Aho, Ferguson’s communications director.

This dispute began with a 2012 complaint filed with the Public Disclosure Commission alleging Eyman failed to report that he was shifting money donated for Initiative 1185, a tax-limiting measure, into the campaign for Initiative 517, which sought to reform the initiative and referendum process.

Citizen Solutions gathered signatures for Initiative 1185. It paid $308,000 to Eyman after he turned in petitions for I-1185. Eyman turned around and loaned a portion to a group involved in gathering signatures for I-517.

Under state election law, money can be moved from one political committee to another but it must be disclosed in reports to the commission. And the sources of the money that is getting shifted must be revealed, as well.

Ferguson’s suit, filed in March 2017, accuses Eyman of secretly moving money between the two initiative campaigns and the money he got from the signature-gathering firm was a kickback. It seeks $1.8 million in penalties plus reimbursement of the funds Eyman received from the vendor.

At one point, trial was set for November 2018. But in September, Superior Court Judge James Dixon pushed the date to January 2020 as the attorneys for the state contended Eyman was still failing to produce certain financial records

When Eyman filed for bankruptcy Nov. 28, he reported assets of more than $2 million and liabilities of $3.2 million.

At the time he owed $77,000 in legal fees and $3.1 million to the Office of the Attorney General, listed in the filing as a disputed debt. It covers the amount sought in the lawsuit, $2.1 million, and $1 million that is likely for legal fees the agency would seek if it is successful.

In that filing, Eyman reported an average monthly income of $42,843 since May 1 with $15,849 a month coming from the legal defense fund.

On Jan. 4, an attorney for Eyman told the judge that the fund had no money in it at the time of the bankruptcy filing. Eyman has since solicited contributions for the fund. No money can be spent from it without approval of the trustee.

This story has been modified to reflect a clarification by Tim Eyman that his legal defense fund had no money in it at the time he filed for bankruptcy.

Jerry Cornfield: 360-352-8623; jcornfield@herald net.com. Twitter: @dospueblos

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