It’s time to disclose the political contributions of federal contractors – InsideSources
This month marks the 50th anniversary of the break-in at the Democratic National Committee headquarters in the Watergate complex that ultimately led to the resignation of President Richard Nixon.
A startling, but mostly forgotten, aspect of the larger Watergate scandal was the revelation that the Nixon administration conspired to use the federal government’s contracting and grant-making power to reward supporters, punish enemies and solicit campaign contributions.
Some of these contributions leads to indictments under a law prohibiting federal contractors from making political expenditures. This law remains in effect today. But, thanks to the 2010 Supreme Court decision United Citizens decision, an entrepreneur can now make unlimited political spending without breaking the law – and keep it all secret.
Although a depressing situation, President Biden could address some of this nonsense with the stroke of a pen.
The rationale for a contractor contribution ban is that public officials might be tempted to trade contracts for favors – and, too often, they do. The 2008 scandal involving former Illinois Governor Rod Blagojevich provides an object lesson. In addition to trying to sell a U.S. Senate seat, Blagojevich also attempted to extort campaign contributions in exchange for increased Medicaid payments. Notably, it happened shortly after Blagojevich’s predecessor was convicted…of selling state contracts.
In a 2015 decision Upholding the constitutionality of the federal contractor contribution ban, then-U.S. Circuit Judge Merrick Garland referenced a litany of public corruption cases involving contractors.
These cases might never have been uncovered had it not been for the clues in the publicly disclosed campaign contributions. But most of the political expenses that entrepreneurs can incur due to United Citizens is unlikely to see the light of day.
An episode involving the energy utility Southern Company, which receives tens of millions of dollars a year through federal contracts, shows how the current regime works. In 2020, Southern Company donated $1 million to a 501(c) nonprofit called One Nation, which was run by a former chief of staff to Senate Minority Leader Mitch McConnell. The nonprofit spent nearly $100 million that year on ads praising Republican Senate candidates and attacking Democratic candidates.
One Nation injected an additional $85 million into the Senate Leadership Fund, a super PAC also managed by McConnell’s former chief of staff. The single purpose of the Senate Leadership Fund is to “build a Republican majority in the Senate,” which happens to be McConnell’s primary task.
Since 501(c) groups are not officially political entities, entrepreneurs are allowed to contribute to them even if they incur political expenses. Here, Southern Company was able to make an essentially unlimited contribution to a Republican campaign committee without violating the ban on contractors on political spending.
We know of Southern Company’s $1 million donation to McConnell’s network because the company voluntarily disclosed it, which is a relatively rare practice. Those who give with corrupt intentions are unlikely to be so forthcoming.
Take the case of another utility, FirstEnergy, based in Ohio. A 2017 internal FirstEnergy presentation expressed the company’s preference for giving 501(c) groups because “these are considered”black money » (entities) as they are not required to disclose the source of donations.
Three years later — after FirstEnergy spent $60 million in slush money to successfully secure an incredibly generous bailout from the state legislature — a U.S. attorney accused the company of participating in ” probably the biggest bribe, money laundering scheme ever perpetrated against the people of the State of Ohio. FirstEnergy agreed to pay a $230 million fine to settle the charges.
The campaign finance law should be updated to significantly increase disclosure requirements and close the loophole that allows entrepreneurs to escape the contribution ban.
While passing a law like this is a challenge, a partial remedy could be applied now. President Biden could issue an executive order requiring federal contractors to disclose their contributions to entities seeking to influence elections.
Such a measure would increase taxpayer confidence in the procurement process. It would also be the first blow to black money at the federal level since the United Citizens decision was made over a decade ago and offers a tangible way to address the perception and reality of corruption in our system.