City Council candidate Manny Morales' get-out-the-vote operation in May violated the city's campaign finance law, according to a settlement agreement released Monday.

Morales, a controversial candidate whose Facebook page was riddled with homophobic and racist postings, lost narrowly in the Seventh District primary to incumbent Councilwoman Maria Quiñones-Sánchez.

Two political action committees backing Morales - the 7th Ward/Friends of Angel Cruz PAC and Latinos United for Political Empowerment (LUPE) - settled with the Board of Ethics on Monday, admitting illegal coordination with the Morales campaign, exceeding contribution limits, and failing to report contributions.

The two groups must pay a total of $8,000 in penalties.

Under the Philadelphia Code, if a political committee coordinates its expenditures with a candidate's campaign, those expenditures are considered in-kind contributions subject to limits. Limits on committees in the 2015 primary were $11,500 per calendar year.

The board settlement found that LUPE gave Morales' campaign $22,000 in coordinated expenditures and 7th Ward gave $48,325.

Shane Creamer, the Ethics Board's executive director, said the situation was unique because of the extent of ongoing coordination.

"In the past, most of the settlement agreements we've had involving coordinating expenditures are more transactional - one expenditure or maybe a couple," he said. "But this involved a plan that had a lot of execution in terms of placing orders, making payments, distributing materials."

The money went toward get-out-the-vote operations, events, T-shirts, and campaign communication materials. Morales' campaign manager worked closely with the PACs, placing orders on behalf of LUPE with printers and T-shirt vendors, the settlement says. He also helped organize and pay election day workers with LUPE's money.

Cruz, a state representative, who helped direct both PACs' activities, said Monday any violations were accidental.

"I had a treasurer - every receipt was filed," he said. "Everything we felt we needed to do was done. Did we commit a mistake, according to Ethics? Yes. Whatever Ethics said, that's what we agreed to. That's OK, because we knew we weren't [knowingly] making mistakes. We'll pay the fine and move on."

He said Quiñones-Sánchez filed the complaint because she "still can't accept almost losing to Manny Morales."

Quiñones-Sánchez also filed a complaint against Morales, who is not cited in the report.

"We believe he didn't file his paperwork either - the same way LUPE was cited, he should be," Quiñones-Sánchez said. "When you look at his reports, there's no way he could have had that many people out on the streets, so clearly this was going on. There's more to come."

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