Secret Cash: The Worst Political Scandal of All

Saturday, June 4, 2011 by CommonDreams.org
by Michael Winship

Sometimes I feel like Gus, the father in "My Big Fat Greek Wedding" -- you know, the guy who thinks you can cure all maladies with a spritz of Windex and declares, "Give me a word, any word, and I show you that the root of that word is Greek."

Only in my case, it's give me a scandal, any scandal, and I'll show you how the corrosive influence of money on politics is at its root and makes what's bad even worse (okay, maybe not in the case of Anthony Weiner -- yet). It's not an especially effective party trick, I know, unless you're at a really dreary policy wonk picnic, but you work with what you've got.

John Edwards' illegitimate child? The legal case being built against the freshly indicted, former presidential candidate isn't about paternity or custody or any of that kind of stuff, but revolves around felony campaign finance charges; whether or not two wealthy backers -- his now deceased fundraising chair Frederick Baron and 100-year-old heiress Rachel "Bunny" Mellon -- provided hundreds of thousands in contributions that in reality paid for the hiding of Edwards' mistress, Rielle Hunter, and their baby.

Newt Gingrich and his wife Callista's big fat, revolving, no interest credit account at Tiffany's? It might be tin-eared and wrong for someone who purports to be a fiscal conservative and a man of the people to throw around big bucks for expensive bling, but that ain't necessarily the scandal. Look a little deeper. On May 24, Jeff Stein of The Washington Post blog "Spy Talk" reported, "At the same time Tiffany & Co. was extending Callista (Bisek) Gingrich a virtual interest-free loan of tens of thousands of dollars, the diamond and silverware firm was spending big bucks to influence mining policy in Congress and in agencies over which the House Agriculture Committee -- where she worked -- had jurisdiction, official records show."

Until 2006, Ms. Gingrich was chief clerk at the committee. During the years between 2005 and 2009, Tiffany's annual lobbying costs shot up from around $100,000 to $360,000, according to the nonpartisan Center for Responsive Politics.

The jewelry giant strongly denies any connection: "We had no reason to lobby the Agriculture Committee and we did not... Our focus has been on the Natural Resources Committee." The company also said it had never spoken with Newt or Callista Gingrich about federal mining policy.

But hang on, there's more. Tim Carney of The Washington Examiner reports, "Christy Evans, formerly a top staffer to then-whip Newt Gingrich, is a registered lobbyist for Tiffany's, the high-end jeweler where Gingrich and his wife enjoy an extraordinary line of credit. Evans, former floor assistant to Gingrich and now a lobbyist at the legendary K Street firm Cassidy & Associates, has represented Tiffany's on mining issues since 2000, according to lobbying filings."

The revolving door between government and corporate interests, revolving credit... the saga of Newt "Holly Golightly" Gingrich spins on. The whole affair is reminiscent of the preferential loan treatment now-collapsed subprime mortgage giant Countrywide Financial Corporation reportedly gave a few years ago to Fannie Mae CEO Jim Johnson (he resigned as a result), North Dakota Senator Kent Conrad (chair of the Senate Budget Committee), former Connecticut Senator Chris Dodd (who served as chair of the Senate Banking Committee), and former cabinet secretaries Alphonso Jackson and Donna Shalala.

Yet all this greed and venality pales against the dark heart of the worst political scandal of all, the continuing nightmare caused by Citizens United and other court decisions that have unleashed a monster of unlimited and frequently anonymous private and corporate campaign cash against a nearly defenseless citizenry.

The recent disclosure that the conservative, "grass roots" advocacy organization American Action Network received first year revenues of $2.75 million from fewer than a dozen unnamed, wealthy donors (and 82% of the money from only three of them) led Melanie Sloan, executive director of Citizens for Responsibility and Ethic in Washington, to cite AAN as just one example of how "very few people are having a disproportionate impact on our country's elections."

(The group, affiliated with Karl Rove's American Crossroads political action committee, raised another $24 million in the four months before the 2010 midterms, funding attack ads against Democratic Senate candidates in Wisconsin, Florida, Washington State and Florida described by progressive watchdog Media Matters as "bogus," "deceptive" and "stripped of the facts.")

This revelation follows superb investigative reporting by a Bloomberg News team last month headlined "Secret Donors Multiply in U.S. Election Spending." They found that outside, or non-party organizations, including "trade groups, unions and non-profits started by political operatives that raise and spend money for advertising" spent $305 million on the 2010 elections, four times more than similar groups spent four years ago. They plan to raise even more money for the 2012 campaign. Contrary to law, five of those groups have failed to report to the Federal Election Commission (FEC) more than $4 million spent on attack ads in last year's races.

"The organizations face little scrutiny from the FEC, where split votes between Republican and Democratic commissioners have stymied enforcement in case after case for almost three years," Bloomberg reported. "As a result, voters may find themselves choosing the next U.S. president knowing less about those trying to shape their views of the candidates than they have since secret money helped finance the Watergate burglary and re-elect President Richard Nixon in 1972."

The journalists quoted Donald Simon, a director of pro-disclosure organization Democracy 21: "The amounts of corporate money involved in Watergate will look quaint by the standards of secret corporate funding that will take place in 2012."

Republicans and many Democrats oppose all new attempts at campaign finance reform, including a proposed White House executive order requiring corporations seeking government contracts to reveal their political contributions. On May 26, a federal district court in Alexandria, Virginia, ruled that a long-standing ban on corporate contributions to federal candidates is unconstitutional. Unless the composition of the Supreme Court shifts in a new direction, a constitutional amendment that reverses Citizens United and other federal rulings may be our only prayer, the solitary hope we have to prevent the total usurpation of representative government by big businesses with bottomless pockets.

The Greeks had a word for it -- "oligarchy" -- political clout based on economic dominance. It is, in the words of economist Simon Johnson, "an antithesis to democracy... a small group with a lot of wealth and a lot of power. They pull the strings. They have the influence. They call the shots."

No accountability, no scruples, no shame. It's the biggest scandal of all: a republic struck down by a possibly fatal malady that even Gus the Greek's magic bottle of Windex can't cure.

Political Payments Explained

by Pat LaMarche
Wednesday, February 9, 2011 by the Bangor Daily News (Maine)

This week, I was copied on an e-mail that a faithful BDN reader sent to about 20 people. A number of the co-recipients were prominent Maine politicians, and several of the other names appeared to be his family.

Here’s part of what he wrote, “I just noted the Federal Election Commission has raised the limits on campaign contribution to candidates and political parties committees as an inflation adjustment for the next election cycle. As an individual on social security I was informed because there was no inflation last year … and there would be no increases in social security benefits this year. Well, what is it, 0 percent as declared by the Social Security Administration, or the 4.166 percent inflation increase adjustment declared by the Federal Election Commission for politicians?”

If anyone got back to him, they didn’t “reply all” because it didn’t reach the rest of us.

Seeing no response from his elected officials, I thought this faithful reader deserved a larger audience for his outrage at the double standard he so adeptly exposed.

And for Charlie — his name is Charlie — I looked for some answers. According to the Federal Election Commission, those cost-of-living increases in donation amounts are automatic. The law mandates the increases happen every odd year, no matter what the economy actually does. The new limits are $2,500 for candidates or $30,800 to national party committees.

But really, Charlie, you shouldn’t worry your pretty senior head about the contributions. That increased donation won’t affect you because on your miserly Social Security income you can’t afford to be a maximum donor anyway.

Because I don’t know your finances, Charlie, I did a little research on the Internet to see what the average Social Security recipient is facing and just pictured you as that guy.

If you’re ordinary, Newsweek says you get $1,170 each month as your benefit payment. AARP says that even though more than 10 million seniors have nothing to live on but Social Security, the average senior adds to his or her income by about 20 percent each month from what was basically his or her life’s savings.

That’s still less than 1,500 bucks a month, Charlie. So you’re not going to donate more than six weeks’ pay to a candidate or almost two years’ pay to a national party committee this year.

Charlie, practically speaking, you don’t matter. Congress would have to double your Social Security to get you to even consider maxing out on a political contribution and really, they have much bigger fish to fry.

Charlie, remember Citizens United? This is from the FEC website. It’ll put into perspective why no candidates or elected officials got back to you in your semipublic forum, “In Citizens United v. FEC, issued on January 21, 2010, the Supreme Court held that the prohibitions in the Federal Election Campaign Act (FECA) against corporate spending on independent expenditures or electioneering communications are unconstitutional.”

Poof! No need for cost-of-living increases on limits now. No limits! If someone’s got gobs of money, it can all go to engineer any election he chooses. Well, that won’t do you much good, Charlie. You’re on Social Security. But if you were the CEO of a Wall Street bank or defense contractor, imagine the fun you’d be having.

But Charlie, that’s not all. That zero inflation rate has got to be sticking in your craw. Our high unemployment has wages down, and I’m sure you know the price of yachts has plummeted during the past two years. And travelmole.com says the cost of a cruise is off a whopping 11 percent.

But after you pay your rent, you’re probably thinking about food and heat, not yachts. Sadly, Charlie, those two are way up. If the crumbling prices of extravagances and all those unemployed neighbors of yours hadn’t flattened the inflation statistics, you might have seen an increase of 2 or 3 percent. That’s what the Consumer Price Index says your food costs will increase by this year, and the Energy Information Administration says you’ll pay about 20 percent more for heat this winter.

Maybe that’s why Wall Street-financed politicos aren’t talking about Social Security’s zero inflation much — because a simple Web search and a little common sense prove what liars they’d have to be.

‘Christine O’Donnell is clearly a criminal’ says Watchdog Group

By David Edwards - Monday, September 20th, 2010

Christine O'Donnell has had her share of problems since winning the nomination for Republican Senate candidate from Delaware last week. Things got even worse Monday when a government watchdog called for O'Donnell to be prosecuted.

Citizens for Responsibility and Ethics in Washington, or CREW, filed a complaint alleging O'Donnell had used $20,000 in campaign funds for personal expenses.

CBS News reported:

"Christine O'Donnell is clearly a criminal, and like any crook she should be prosecuted," CREW Executive Director Melanie Sloan said in a release. "Ms. O'Donnell has spent years embezzling money from her campaign to cover her personal expenses. Republicans and Democrats don't agree on much these days, but both sides should agree on one point: thieves belong in jail not the United States Senate."

CREW is requesting that the U.S. Attorney's office in Delaware open a criminal investigation and asking the Federal Election Commission to audit O'Donnell's campaign expenses. 

The group said its allegations are tied to former O'Donnell aide David Keegan's affidavit stating O'Donnell, who has run for Senate three times, paid her rent for two months out of campaign funds in 2009 and also used campaign funds for meals and gas. In addition to misappropriation of campaign funds, CREW argues that O'Donnell is guilty of lying about the expenditures and committed tax evasion by not reporting the money as income. 

Representatives for O'Donnell, whose financial disclosure form said her earned income between March 2009 and June 2010 was just $5,800, did not immediately respond to a request for comment.

Sloan told CNN that partisan politics played no part in their complaint against O'Donnell.

"We're about right and wrong and not about black or white, Republican or Democrat," she said. "And it is flat-out wrong for a candidate for the U.S. Senate to be stealing her campaign funds and be using them for personal use."

This isn't the first time that the O'Donnell campaign has faced negative publicity. For weeks, questions have swirled about how long it took the candidate to pay back student loans, how she earns a living, and if she has had tax troubles.

Politico observed:

The Republican Party's hopes for winning back the Senate rest on a perennial candidate with a sketchy employment history who has dissembled about her education, defaulted on her student loan and her mortgage, sued a former employer for mental anguish, railed against the evils of masturbation and questioned whether it would have been OK to lie to prevent Nazis from killing Jews during World War II.

On the eve of her nomination, Republican strategist Karl Rove worried that O'Donnell has said "nutty things."

On his Friday show, HBO's Bill Maher broadcast  a 1999 video of O'Donnell admitting she had "dabbled" in witchcraft while in high school. Following that video, the candidate failed to appearon two Sunday morning news shows.

It was revealed Monday that a former O'Donnell aide once wrote that President Barack Obama is secretly a Muslim.

Jon Moseley told TPMuckraker's Ryan J. Reilly that he still holds those beliefs.

"Yes, actually, I do," Jonathan Moseley told TPM on Monday when asked if he still believes that Obama secretly practiced the Islamic faith.

"The reason being that becoming a Christian is more than simply rooting for a football team," Moseley said. "There's an actual conversion that takes place. And I don't think we've ever seen evidence that he ever converted."

Campaign Contribution Records Are Open, but Hardly Transparent
Monday 03 May 2010
by: Sebastian Jones  |  ProPublica

In January, the United States Supreme Court overturned limits on corporate election spending, basing its decision, in part, on the assertion that campaign finance records are more open and accessible than ever before.

"With the advent of the Internet, disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters," Justice Anthony Kennedy wrote in the court’s majority opinion.

ProPublica decided to test this premise as we pored over campaign contribution filings to tell the story, co-published on April 16 in the Washington Post, of 16 lawmakers who held fundraisers at two Bruce Springsteen concerts last year, many of them in sky boxes rented from companies and special interests. We wanted to know if the records the court had referenced could show us who was getting face time with lawmakers at these pricey events, information that’s key to determining whether special access was influencing legislative decisions.

While we found many records online, none of them clearly indentified those who attended the fundraisers or how much money was raised. At best, we ended up with a handful of possible attendees. At worst, we were left with no clues at all.

The Federal Election Commission requires politicians to disclose the dates and amounts of contributions they receive in periodic reports. Corporate and special interest political action committees (PACs) are also required to file reports with the FEC, disclosing the money they contribute. "In a perfect world, they match up," FEC spokesperson Mary Brandenberger told ProPublica.

But when we compared those records for the Springsteen fundraisers, two problems emerged. Most of the dates the politicians said they got the money differed significantly from the dates the PACs said they disbursed their contributions. And many of the expenditures the lawmakers disclosed in their reports were so vaguely described that they were almost meaningless.

We began our search with an advantage, because some invitations to the Springsteen fundraisers were leaked to the nonprofit Sunlight Foundation’s Party Time website. Sunlight’s list represents only a small fraction of the fundraisers held in Washington each year, so there may have been more fundraisers at Springsteen concerts – there’s simply no way of knowing for sure.

With the invitations in hand, we began plowing through the records, but in no time at all, something seemed odd: the lawmakers reported surprisingly few contributions on the dates of the concerts —May 18 and Nov. 2, 2009. Even expanding our search to include contributions made near the dates of the fundraisers yielded few additional matches.

Without knowing the true date of a contribution, it was impossible to determine whether a donor had bought a ticket to the event or if a contribution had been made during a period when the donor had a monetary interest in legislation before Congress.

Rep. Dutch Ruppersberger, D-Md., who hosted a May 18 fundraiser in a box rented from aerospace contractor ATK, declared in FEC filings that he received 15 individual contributions on May 4, all from employees of defense contractor Northrop Grumman. He received eight more contributions on June 15, including several from lobbyists with theCarmen Group. However, none of the 23 donations were for the $1,500 Ruppersberger was asking for a ticket to the event, suggesting they may not have been relevant.

Ruppersberger reported receiving several contributions from PACs on or near the concert date. Two, for $1,000 and $5,000, came from aerospace contractor ATK, which also rented Ruppersberger a box for the event. ATK’s corporate PAC told the FEC it disbursed the donations on May 7, 2009 – a week and a half before the concert. However, Ruppersberger’s campaign committee said he got the checks more than a month later, on June 8.

Rep. Ruppersberger's campaign committee reported receiving contributions from aerospace contractor ATK in June 2009 (left). ATK declared the contribution in May. Click to see the documents.

Ruppersberger’s campaign press secretary, Heather Molino, did not explain the discrepancy. Instead she told ProPublica in an e-mail, "we follow FEC regulations and report the date campaign contributions (checks) come into our possession. We can’t speculate what happens to checks before we get them."

To gauge whether the gap between Ruppersberger’s and ATK’s filings was an outlier or a common occurrence, ProPublica reviewed the dates of 825 PAC contributions the 16 lawmakers reported receiving during filing periods that covered the dates of the concerts. After comparing the dates the lawmakers reported receiving the donations with the dates with the PACs reported disbursing them, we found an average gap of 13.6 days. In 81 instances, the gap was a month or more.

Several of the lawmakers suggested the gaps might be due to PACs listing disbursements before they actually made.

Jen Gilbreath, Rep. Peter Defazio’s campaign manager, said the International Brotherhood of Electrical Workers PAC reported disbursing a contribution on Apr. 23, 2009, but then sent it to the local union branch, which mailed it to DeFazio’s committee on May 26. She said it arrived on May 29, 2009, which is the date that DeFazio’s committee reported receiving it.

ProPublica could not cross-check whether the lawmakers accurately filed the contributions they received from individual donors, because the FEC doesn’t require individuals to disclose political contributions. The only FEC record of those contributions is the one submitted by the lawmakers’ campaigns.

We also found it was usually impossible to connect the expenses the lawmakers itemized on their disclosure forms to the Springsteen fundraisers, or to any specific fundraiser for that matter. For example, the leadership PAC for Rep. Joseph Crowley, D-N.Y., rented a box for his May 18 Springsteen fundraiser from GE/NBC Universal – describing the expense as "PAC Fundraising Expense for FUndraiser [sic] at hall."

We were able to confirm that those payments – and similarly vague payments listed by other lawmakers – were for Springsteen boxes only through additional reporting that did not rely on the public records that Justice Kennedy described as "the information needed to hold corporations and elected officials accountable."

Hedge Fund Managers Invest on Capitol Hill

Your congressional leaders--bought and sold as easily as any prostitute.

###

Hedge Fund Managers Invest on Capitol Hill
by Manu Raju

John Paulson, one of the world’s richest hedge fund managers, has not been shy about spreading his wealth to Senate campaign coffers — or to the chairman of the committee that could directly affect his bottom line.

Paulson held a ritzy $1,000-per-head fundraiser for Senate Banking Committee Chairman Chris Dodd last year — and then maxed out his donation with $4,800 more for the Connecticut Democrat’s now-aborted reelection run.

Paulson is hardly alone.

According to a review of Federal Election Commission records, the nation’s 10 richest hedge fund managers have dumped nearly $1 million into campaign accounts over the past several years — with much of it going to senators who’ve given them a friendly reception on Capitol Hill.

And despite all the tough talk about a crackdown on Wall Street, consumer advocates and critics from other financial sectors say hedge funds would get off pretty easily under the regulatory reform bill Dodd’s committee approved last month — a charge Dodd’s aides reject.

Many hedge funds enjoyed an enormously profitable year in 2009, in part because of good bets that federal dollars would be used to rescue “too-big-to-fail” financial institutions. And the Top 25 earners made more than $25 billion last year, according to a recently released survey by Absolute Return + Alpha magazine.

Those Top 25 feature some familiar names in Capitol Hill’s fundraising quarters, including liberal investor George Soros, who earned $3.3 billion last year and has dropped $42,000 of his cash into Democratic campaigns in the past few years.

Other Top 25 managers have hedged their bets, in some cases making contributions to candidates.
For instance, Carl Icahn of Icahn Capital, who earned $1.3 billion last year, pumped $4,600 into New Hampshire Democrat Jeanne Shaheen’s 2008 campaign to unseat then-Sen. John Sununu — only to give Sununu $1,000 a short while later.

Steven Cohen of SAC Capital Advisors, who earned $1.4 billion last year, contributed $59,000 to the Democratic Senatorial Campaign Committee’s coffers in 2006 and 2007 and $58,900 to the National Republican Senatorial Committee in 2007 and 2009, records show.

Sheila Krumholz, executive director of the Center for Responsive Politics, which tracks campaign donations and lobbying, said that the hedge fund industry’s political contributions skyrocketed 16,000 percent from 1990 to 2008, with the bulk of the cash flowing in the past election cycle when the industry spent $17.2 million. And she said that lobbying by the booming industry has increased substantially, too, pointing to a 680 percent increase in lobbying expenditures between 2006 and 2007.

“They’re doing this because they saw the writing on the wall: more regulation and more taxation,” Krumholz said.

A spokesman for Cohen declined to comment, and Icahn did not respond to a request for comment.
Industry officials argue that hedge funds and other private investment pools are not large enough to bring down the system and should be subject to less stringent regulations than the major financial institutions that helped spawn the global recession — and that often only a wealthy private investor loses money if a hedge fund crashes.

And Dodd's aides contend that the Banking Committee took an aggressive posture towards the investment pools that are now largely unregulated.

“Dodd’s bill imposes tough new restrictions on hedge funds, including better regulation, greater disclosure and protections to the economy as a whole,” said Kirstin Brost, a Dodd spokeswoman. “Sen. Dodd never has allowed campaign contributions to influence his positions. It’s just silly to suggest he’d start when he’s not running for reelection.”

But critics say that the Senate Banking Committee bill will be ineffective if it doesn’t provide for even stronger regulation of the hedge fund industry and private equity firms.

“Failing to pass legislation that allows the [Securities and Exchange Commission] to oversee hedge funds and private equity will leave critical holes in the regulatory framework and allow systemic risks to build in the shadowy financial markets,” said Heather Slavkin, AFL-CIO’s senior legal and policy adviser.

FEC records show that Dodd, the driving force behind the bill, collected big money from hedge fund managers — particularly in 2009, as he prepared for the reelection campaign he eventually abandoned. In recent years, Dodd has received $18,000 in campaign contributions from the Top 10 hedge fund managers on the Absolute Return + Alpha list.

Asked about Paulson’s contributions to Dodd, a spokesman for Paulson said in a statement: “John Paulson supports a variety of candidates in both political parties, based on keeping the United States the financial and economic capital of the world.”

Paulson has donated $30,300 since 2007, with most of it going to senators, including Democrats Arlen Specter , Frank Lautenberg, Finance Committee Chairman Max Baucus, Majority Whip Dick Durbin and Senate Majority Leader Harry Reid and Republican Scott Brown.

Hedge fund managers prefer the Senate Banking Committee’s bill to the measure that passed the House last December. Unlike the House bill, the Banking Committee bill does not put restrictions on executive compensation for hedge funds.

Under the House bill, hedge funds could shoulder the bulk of the financing to wind down failing financial institutions, since hedge funds with more than $10 billion in assets would have to pay into the program. Dodd’s bill would spare hedge fund managers by making more systematically risky firms finance the program for failing institutions – unless the hedge funds themselves are considered systemically risky.

The Banking Committee’s bill would require hedge funds with more than $100 million in assets to register with the SEC and smaller ones to register with states, but some advocates of tougher regulations are concerned that it would not go as far as the House bill in pushing them to divulge information about their risks to investors and creditors. Supporters of the Banking Committee’s bill say the measure gives the SEC ample authority to investigate the books of hedge fund managers.

Private equity firms and venture capitalists are both exempt from certain registration requirements under Dodd’s bill. Sen. Jack Reed (D-R.I.) is preparing an amendment that would close off that exemption by requiring private funds with more than $30 million in assets to register with the SEC and disclose information to regulators on any risks.

Douglas Lowenstein, president of the Private Equity Council, which represents private equity firms, said the House, the Senate Banking Committee and the Obama administration “all have recognized that private equity firms, by their nature of their business model, do not pose systemic risk.” And he said that the group supports the need for regulators to obtain information about private equity firms’ systemic risk, which both the House and Senate bills would allow them to do.

The Managed Funds Association, which represents hedge funds, supports mandatory registration requirements for its members and all private investment firms.

The disparity between the two bills comes on the heels of another House-Senate fight — over whether to continue allowing hedge funds, private equity firms and other similar partnerships to treat profits at the capital gains rate of 15 percent — rather than as ordinary income, with tax rates as high as 35 percent. The House is pushing forward with language that would increase the tax rate as a way to pay for a number of expiring programs, but the Senate has long resisted such a tactic.

Sen. Chuck Schumer (D-N.Y.) said Monday that the tax is “one of the things on the table” as the two bodies negotiate. But Schumer has many allies on Wall Street, too. When he ran the DSCC in the past two cycles, Schumer was notorious for collecting funds from top money managers, including nearly $150,000 from the 10 wealthiest hedge fund managers, FEC records show.