Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

Albany Can Learn a Lesson from Ed Koch’s Legacy

After former New York City Mayor Ed Koch sadly passed away this month, Frederick Schwarz, chief counsel at the Brennan Center, explained in a New York Daily News op-ed how we can honor Koch’s legacy. In 1986, when Ed Koch was Mayor, some of his top political allies had been caught using their office for personal gain in a scandal that rocked the city. Koch seized the opportunity to reform New York City’s campaign finance system. Along with the City Council, he instituted a small donor matching program with low contribution limits. In 1989, in the first election that followed, all three mayoral candidates—Koch and David Dinkins, both Democrats, and Rudy Giuliani, a Republican—praised the new system and participated in it. Today, the benefits of the system are even clearer: the number of small donors to political candidates has grown, and elections field more competitive races. Although New Yorkers are now more confident in City Hall, they lack the same faith in Albany. In state elections, contribution limits are too high and big money donors reign supreme. New York State would do well to take a lesson from Ed Koch’s legacy and enact public financing.

New Disclosure Bills Proposed in New York Legislature

Secret money spent by outside organizations has become increasingly common in American elections, including New York State and federal contests. In response, Assembly Speaker Sheldon Silver has sponsored a bill that would increase the disclosure requirements imposed on outside spenders. And State Senator Rubén Díaz has proposed a bill that would mandate elected officials to post their campaign contributions on their websites, including the source and amount of each major donation. In the Huffington Post, Ian Vandewalker, counsel at the Brennan Center, argues that it is important for the public to know who is behind the political ads they are bombarded with every election cycle. Voters should be able to make an informed decision on Election Day.

George McDonald Challenges NYC Contribution Limits in Court

A Republican candidate for mayor, George McDonald, has accepted 10 campaign contributions in excess of New York City’s $4,950 legal limit, including one for $40,000. His campaign has also obtained a $120,000 loan in violation of the City’s election laws. McDonald filed a lawsuit earlier this year to invalidate the City’s contribution limits, which he argues run afoul of state law. The case is ongoing, and McDonald and the New York City Campaign Finance Board are set to appear in court on March 12^th. McDonald would face a $57,050 fine from the New York City Campaign Finance Board if he doesn’t return the excess contributions. If his legal challenge prevails, McDonald will likely face no penalty.  The City is defending the contribution limits. Campaign Finance Board spokesman Matthew Sollars said it “reduces the influence of deep-pocketed special interests and keeps corporate money out of our elections.”

Corporations Donate $670,000 to New York State Candidates, Save $2.4 Billion in Taxes

A December report from the US Public Interest Research Group showed that America loses nearly $150 billion to corporate tax havens each year. Regional assessment of the data by the Fair Elections Coalition for New York campaign demonstrates that offshore tax havens cost New York State $2.4 billion in annual tax revenues. Seventeen multinational corporations, including Bank of America, Citigroup, PepsiCo and Pfizer, sheltered billions of dollars in these accounts. At the same time, these 17 corporations also contributed over $670,000 to New York State politicians, including individual legislators, the Republican Senate Campaign Committee and the Democratic Assembly Campaign Committee. As Karen Scharff of Citizen Action explains, “You can never tie a specific policy to a specific to campaign contribution. But you can tie the overwhelming preponderance of behavior.” At a time of dire fiscal shortages, and suggested cuts to education and healthcare, it is critical to reform the system which creates the perverse incentives for politicians to pass such inequitable tax policies. Citizen-funded elections are critically needed in New York State. The estimated cost of $25-$42 million is well worth it.

NATIONAL

Supreme Court to Hear Challenge to Aggregate Campaign Contribution Limits

On Tuesday, the Supreme Court agreed to hear a challenge to decades-old federal campaign contribution limits. The case, brought by Alabama political donor Shaun McCutcheon, seeks to challenge aggregate contribution limits—the total amount that a donor may give to candidates, parties and PACs in a cycle. If the Supreme Court strikes down these aggregate limits, it would represent a fundamental reassessment of a principle established in Buckley v. Valeo in 1976—that direct campaign contributions may be strictly regulated because of their potential for corruption. The lower court ruled against McCutcheon, reasoning that without the aggregate limits candidates could solicit enormous sums and then “know precisely where to lay the wreath of gratitude.” McCutcheon has stated that he is prepared to abide by contribution limits to individual candidates and groups, which currently stand at $2,600 per election to federal candidates, $32,400 per year to national party committees, $10,000 per year to state party committees and $5,000 per year to other political committees. However, he objects to the separate two-year aggregate limits of $46,200 for contributions to candidates and $70,800 for contributions to groups.

New ABA Resolution Urges Congress to Mandate Disclosure

The American Bar Association has adopted a resolution in support of disclosure of political and campaign spending during its Midyear Meeting in Dallas. The resolution, 110B, urges Congress to require all outside spenders to disclose the source of their funds and the amounts spent. The resolution requests that contributions “used for making electioneering communications and independent expenditures,” as well as “the amounts spent for such communications and expenditures” be publicly disclosed in reports filed with the Federal Election Commission. According to ABA President Laurel Bellows, the new policy “increases transparency and gives voters the information they need to make informed decisions.” “Making the amount spent on political communications widely available is in the public interest and will instill greater confidence in our electoral system,” she added.

McConnell Vows to Filibuster Nominee for Consumer Financial Protection Bureau

On Wednesday, President Barack Obama officially nominated Richard Cordray to head the Consumer Financial Protection Bureau. Cordray formerly served as the Attorney General of Ohio. The CFPB was established by the Dodd-Frank financial reform legislation as a watchdog agency to oversee the financial industry. Republican Senate Minority Leader Mitch McConnell has pledged to filibuster the nomination until several changes are made to weaken the Bureau’s oversight capacity. Just as outside spending played an important role in Chuck Hagel’s confirmation battle, campaign contributions from Wall Street may play a role in Cordray’s. According to FEC filings compiled by the Center for Responsive Politics, Senator McConnell recently held a fundraiser in New York City at the offices of Moore Capital Management, a large hedge fund. Additionally, he received $38,000 from Travelers Insurance donors in the fourth quarter. Travelers Insurance lobbied on the implementation of the financial reform legislation during that period. The American Bankers Association PAC donated $5,000 to McConnell’s Bluegrass Committee leadership PAC on January 1st. A thorough list of contributions is available on the Public Campaign website. McConnell’s Wall Street donors are hoping he will stifle the agency in charge of protecting consumers from the excesses of the financial industry.

Jesse Jackson Jr. Pleads Guilty to Using Campaign Funds for Personal Expenses

Jesse L. Jackson Jr., a former Democratic Congressional Representative from Illinois, pleaded guilty Wednesday to one felony fraud count for his use of $750,000 in campaign funds to pay for personal expenses. As part of a plea agreement, prosecutors recommended that Jackson receive a sentence of 46 to 57 months in prison. Robert L. Wilkins, the judge overseeing the case, is scheduled to sentence Mr. Jackson on June 28. Jackson’s wife, Sandi, pleaded guilty to falsifying income tax statements while Jackson was extracting funds from his campaign treasury. Prosecutors will seek a sentence for her of 18 to 24 months. From 2007 to 2011, Jackson purchased $10,977.74 worth of electronics at Best Buy, and spent $5,587.75 for a vacation at the Martha’s Vineyard Holistic Retreat. Other expenditures included $313.89 for stuffed animals at Build-A-Bear workshop and a $7,000 elk head from a taxidermist in Montana. “For years I lived off my campaign,” Jackson, said. “I used money I shouldn’t have used for personal purposes.”

New York Needs Transparency in Political Spending

Huffington Post
February 21, 2012

Ian Vandewalker

Unprecedented amounts of secret money were spent on last year’s federal elections. In fact, spending by shadowy outside groups has become increasingly pervasive everywhere, including in New York elections. Unless we change the system with reforms like meaningful disclosure rules and public campaign financing, this crisis will only grow worse. Fortunately, key figures in Albany are pushing for more transparency in our state’s government. 

New York State Senator Rubén Díaz recently sponsored a bill that would require elected officials to post the amounts and sources of campaign contributions on their websites, increasing the availability of this key information.  Additionally, a bill sponsored by Speaker Sheldon Silver last month would significantly increase the disclosure requirements imposed on outside spenders.

Governor Andrew Cuomo has signaled his strong and committed leadership in the fight to bring secret political spending out of the shadows. In last month’s State of the State address, the governor called for comprehensive campaign finance reform, including “the nation’s most aggressive disclosure law, period.”

New Yorkers need these champions of transparency to continue their efforts. Voters have a responsibility to make informed decisions on Election Day, and the state must ensure the public has access to all the relevant facts. Everybody knows the identity of the source is relevant in deciding how much to trust an election-year message. Viewers of an ad that argues hydrofracking is safe would take into account whether the ad was paid for by the industry that stands to make billions of dollars. And voters deserve to know how much pro-fracking interests are willing to spend in favor of certain candidates, when some collect 15 percent or more of their campaign funds from those sources. The same is true of other special interests active in New York politics, from gambling to the soft-drink industry.

Ultimately, though, while transparency is crucial, it’s only one piece of the puzzle. A complete solution to the broken system in Albany is a full package of reforms centered on public financing of elections, so that candidates have an alternative path to victory that relies on their constituents and average voters, and not influence-seeking special interests.

The governor has called for a public financing system that would provide candidates matching funds for every small donation by a resident of the district they seek to represent. A similar system has increased donor participation and diversity in New York City. Combined with improved disclosure, lower contribution limits, and sensible enforcement of campaign finance laws, this type of reform would make Albany responsive to all the people of New York, rather than those who can afford to spend the most.

Ian Vandewalker serves as counsel for the Brennan Center’s Democracy Program where he works on voting rights and campaign finance reform.

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag#moNeYpolitics and #fairelex.

CAMPAIGN FINANCE AND ETHICS NEWS

NEW YORK

JCOPE Releases Report on Lopez Scandal to Legislative Ethics Committee

The New York State Joint Commission on Public Ethics sent to legislators its long-awaited report on sexual harassment complaints against sitting Assemblyman Vito Lopez.  Last year, the Assembly secretly approved a $103,000 settlement to end sexual harassment allegations against Lopez by two female staffers. Gerald B. Lefcourt, a Manhattan attorney representing Lopez, confirmed that the report covers sexual harassment claims against Lopez and the $103,000 settlement using public money. The Legislative Ethics Commission will make the JCOPE report public within 45 days.

NATIONAL

Florida House Bill Would Practically Obliterate Contribution Limits

The Florida House of Representatives is considering a legislative proposal that would substantially increase the amount of money a person can contribute to a political campaign. HB 569 is a top priority for Speaker Will Weatherford. It would allow contributors to donate up to $10,000 to state candidates, as opposed to the current limit of $500. In exchange for the higher contributions, the bill would mandate online disclosure of contributions within 24 hours. Thus far, HB 569 has cleared the House Ethics and Elections Subcommittee on a 10-2 vote and is currently in the Appropriations Committee. According to Adam Skaggs, senior counsel at the Brennan Center, the measure would serve as a form of incumbency protection. A Brennan Center study found that, compared to states with contribution limits of $2,000 or more, the likelihood of an incumbent having a viable challenger increases by 15 percent in states where the contribution limit is set to $500 or less. The average state contribution limit to legislative candidates in America is $4,000, according to the National Conference of State Legislators. According to Lloyd Leonard of the League of Women Voters, "it is not a good deal for the public to raise contribution limits so that special interest groups can contribute directly large amounts; it is simply not a tradeoff that is worth considering."

Gun Lobby Spending Big in Congressional and State Races

Following the series of tragic incidents involving gun violence throughout the United States, interest groups on both sides have ramped up their efforts in state and federal politics. The most well-known and active group by far, the National Rifle Association (NRA), spent $18.6 million last year in Presidential and Congressional contests through its PAC and lobbying arm. The NRA has been an aggressive player in the political money game, frequently joining lawsuits concerning campaign finance reform and significantly outspending gun control proponents. However, new opposition groups are emerging. The pro-gun control Independence PAC, backed by New York City Mayor Michael Bloomberg is involved in an Illinois Democratic Primary, running $660,000 worth of ads against Congressional candidate Debbie Halvorson. Battle lines are being drawn in state legislatures as well.  In Pennsylvania, Democrats have introduced a series of gun control bills, and it remains to be seen how their effort will affect their reelection campaigns. Gun rights advocates in the state spent approximately $10,000 in the last election cycle to help elect friendly candidates. An interactive chart of aggregate donations on the issue is available at the Sunlight Foundation’s website.

Representative Jesse Jackson Jr. (D-IL) Admits Violating Campaign Finance Laws

Former Representative Jesse L. Jackson Jr. (D-IL) has admitted to violating campaign finance laws in a plea deal with federal prosecutors. Representative Jackson was reelected to Congress in November of last year. He resigned shortly thereafter, citing ongoing health problems. Federal agents were investigating Jackson’s Congressional campaign fund for irregular transactions in 2009, 2010 and 2011. Jackson allegedly utilized the funds to purchase a $40,000 Rolex watch, furniture and travel expenses for a friend. Federal law prohibits the use of campaign funds for personal expenditures. At the time of his resignation, the House Ethics Committee was conducting a probe into separate accusations that Jackson offered to raise money for former Illinois Governor Rod Blagojevich (D) in exchange for being appointed to Barack Obama’s vacant Senate seat. The independent Office of Congressional Ethics referred the matter to the Ethics Committee in August of 2009 but the Committee’s investigation was delayed while the Department of Justice prosecuted Blagojevich on 17 corruption charges.

Senator Wyden and Murkowski Detail Legislative Proposal on Disclosure

US Senators Ron Wyden (D-OR) and Lisa Murkowski (R-AK) recently announced a bipartisan plan to institute campaign finance disclosure. More than $400 million in unaccountable dark money was spent during the 2012 election cycle by non-profits registered under the 501(c) section of the tax code. These non-profits operate as political organizations, funneling millions into campaigns without disclosing their donors. The legislation would require all groups spending at least $500 in political campaigns to register and disclose a majority of their donors. Television or radio ads, and robocalls would be subject to “stand by your ad” provisions mandating disclosure of the group’s top three donors. In addition, FEC and the IRS would have to construct joint regulations on donor disclosure, along with an online database covering all political committees. "When people hear that their tax dollars are being used to subsidize what are essentially campaign operations that call themselves social welfare organizations and get these tax breaks and anonymity, they're just flabbergasted," Senator Wyden said about conversations he had at town meetings in Oregon. “People are getting furious.”

Ongoing Menendez Scandal Illustrates Need for Reform

Last week, Reform NY informed readers about the ongoing ethics scandal between Senator Menendez (D-NJ) and a high profile donor, Dr. Solomon Melgen, from Florida. Menendez contacted the Centers for Medicare and Medicaid Services in the past to complain about its finding that Melgen had overbilled the government $8.9 million in Medicare reimbursements. He also attempted to pressure the Department of Homeland Security not to donate port security equipment to the Dominican Republic because it threatened a lucrative contract belonging to a company run by Melgen. The Senate Ethics Committee is currently investigating Senator Menendez’s involvement in these matters. Melgen’s direct and indirect contributions to Menendez, the Democratic Party and its affiliated Super PACs amount to more than $1 million. Government watchdog groups are urging the Senator not to engage in any business related to Melgen in congressional committee deliberations for the term of the ethics probe. “He should be recusing himself from any discussions or negotiations about port security in the Dominican Republic,” said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington. Craig Holman, a government affairs lobbyist at Public Citizen, stated Menendez should “recuse himself if there is a conflict of interest that could cast the public’s doubt on any decision he might make.”

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag#moNeYpolitics and #fairelex.

CAMPAIGN FINANCE AND ETHICS NEWS

NEW YORK

Publicly Financed Elections are Good Business
In an op-ed published Sunday in the Albany Times-Union, co-founder and CEO of the American Sustainable Business Council, David Levine, explains why business owners are so enthusiastic about campaign finance reform. A poll commissioned by the ASBC indicates that business leaders are dissatisfied with the current role that money plays in American politics. Other surveys, such as this one by the Committee on Economic Development demonstrate support for reform is also strong in the business community; 72 percent are in favor of creating a public financing system that would match low-dollar contributions and give average citizens more incentives to contribute to campaigns. Secretive donations to political campaigns and organizations perpetuate perceptions of corruption, eroding the public’s trust in government institutions as is necessary for a functioning market and a participatory democracy. “Underneath the headlines, many business owners still believe that success should come from hard work, safe and quality products, and good customer service—not spending on elections.”

Lobbying Disclosure Reports Available on JCOPE Website
The New York State Joint Commission on Public Ethics has recently implemented the nation’s first system of disclosure of funding sources for specified entities spending in excess of $50,000 per year on lobbying expenditures. The disclosure is a requirement of the Public Integrity Act of 2011, which seeks to end the practice of black box lobbying, whereby expensive lobbying gifts are provided to legislators by unrecognizable and hidden groups. The public will now be better served with information about who is funding the state’s large lobbying campaigns.

In Passing Campaign Finance Reform, Senator Klein Holds the Key
Senator Jeffrey Klein has been in the news quite often lately over the Independent Democratic Conference’s decision to create a ruling coalition with the Republicans in the New York State Senate. It turns out Klein’s coalition could be instrumental in determining the fate of campaign finance reform in the state. Governor Andrew Cuomo has already committed himself to reform; he proposed that the state adopt a system similar to that of New York City, where small donations are matched with public funds. Although Senator Klein has stated he supports campaign finance reform, he has not yet weighed in on any specific proposals.

NATIONAL

Senator Menendez’s Ethics Scandal Illustrates Need for Campaign Finance Reform
The developing scandal involving Senator Robert Menendez (D-NJ) and Dr. Salomon Melgen, an eye surgeon in Florida, provides a clear illustration of how mega-dollar campaign contributions can create an appearance of corruption. Dr. Melgen is under federal investigation for overbilling Medicare nearly $8.9 million over the past decade. Federal auditors have noted an abnormally high volume of eye injections, surgeries and laser treatments performed at his West Palm Beach clinic. Back in 2009, Senator Menendez contacted federal officials about Melgen’s audit, complaining that it was unfair to penalize the doctor because the billing rules were ambiguous. Menendez also intervened on Malgen’s behalf in the eye doctor’s efforts to close a deal to provide port security in the Dominican Republic. Dr. Melgen also happens to be a major contributor to Senator Menendez, having donated tens of thousands of dollars to his campaigns over the years and over $700,000 to Majority PAC, a Super PAC that spent $582,500 on behalf of Mendendez. Now, Menendez is facing a Senate ethics inquiry regarding two free trips he took in 2010 on Melgen’s private plane to the doctor’s seaside mansion in the Dominican Republic. Menendez acknowledged this month that he had not properly disclosed the trips and wrote a personal check for $58,500 to reimburse Melgen.

Super PACs and 501(c)’s Compete Over Secretary of Defense Nomination
The flood of outside spending on elections has spilled over into the nomination process for positions in the Obama Administration. Several groups are levying funds to gather public opposition to Senator Chuck Hagel’s nomination for Secretary of Defense. According to the Sunlight Foundation’s Political Ad Sleuth, outside groups have already spent at least $212,000 on television advertisements to torpedo Senator Hagel’s chances. Use Your Mandate, a new organization which presents itself as a liberal gay rights group but purchases its television time through a prominent Republican firm, is attacking Hagel as “anti-Gay,” “anti-woman” and “anti-Israel” in ad slots during popular Sunday morning political talk shows. The American Future Fund, a dark money group, has spent $14,000 on an ad to air on Fox News Sunday that attacks Hagel's personal financial assets. Meanwhile Hagel’s supporters such as the Bipartisan Group have placed ads, valued at $35,000, in Mike Allen's Playbook, a popular email newsletter put out by Politico. In the post-Citizens United world, the nomination process has evolved into a drawn out political campaign fueled by interest group spending.

Obama Considering Major Donor for Secretary of Commerce

President Obama is considering nominating Penny Pritzker, a successful businesswoman from Chicago, for Secretary of Commerce. Pritzker, part of the Hyatt Hotel dynasty, has experience running a real estate company and serving on the boards of Hyatt, the credit-reporting company TransUnion, and the Wm. Wrigley Jr. Company. She has also been a prominent donor to the Obama campaign and Senate Democrats. Pritzker chaired Obama’s national fundraising operation during his 2008 campaign, helping him raise nearly $750 million. In 2012, she bundled over $500,000 for the campaign. Since 1990, she has contributed to no fewer than 73 Senate candidates, including a grand total of $32,800 to the 13 members of the Senate Committee on Commerce, Science and Transportation. Although Pritzker may well be qualified for the position, the practice of awarding mega-donors with plush ambassadorships and, in rare instances, cabinet positions casts presidential nominations in unseemly light.

Campaign Funds of Former Politicians Used as “Slush Funds”

A review of campaign finance reports by USA TODAY shows that former House members that lost races are using their leftover campaign funds to pay for everything from luxury cars to obscure foundations that bear their names. Federal laws allow former lawmakers to keep their campaign accounts active indefinitely and dole out funds to candidates, political parties and charities. The money also can be used to pay any lingering campaign expenses – such as gifts for volunteers and salaries for any remaining staffers. Florida Republican Allen West had a stockpile of $900,000 in his war chest after his unsuccessful bid for Congress. He donated $250,000 each to the Allen West Foundation and the American Legacy Guardians. The organizations share a post office box in Boca Raton, Florida. As to their mission or purpose, West has stated that will be forthcoming. Former Congressman Edlophus Towns from New York retired in April of 2012 but continued to make $602 monthly payments to Infniti Financial Services for a leased vehicle. The campaign also bought a $2,300 computer from an Apple store in Manhattan on November 28^th.  Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, stressed that politicians should be required to close their campaign accounts after a fixed time period "because they give the appearance of being treated as slush funds."