Pay to Play

Yesterday the web site iWatchnews, a project of the Center for Public Integrity, released a scathing report on the number of bundlers for the 2008 Obama campaign that have subsequently been appointed to administration positions.

Titled Obama rewards big bundlers with jobs, commissions, stimulus money, government contracts, and more, the report begins:

Telecom executive Donald H. Gips raised a big bundle of cash to help finance his friend Barack Obama’s run for the presidency.

Gips, a vice president of Colorado-based Level 3 Communications LLC, delivered more than $500,000 in contributions for the Obama war chest, while two fellow senior company executives collected at least $150,000 more.

After the election, Gips was put in charge of hiring in the Obama White House, helping to place loyalists and fundraisers in many key positions. Then in mid-2009, the new president named him ambassador to South Africa. Level 3 Communications, in which Gips retained stock, meanwhile received millions of dollars of government stimulus contracts for broadband projects in six states-though Gips said he was “completely unaware” of the stimulus money.

More than two years after President Obama took office vowing to banish “special interests” from his administration, nearly 200 of his biggest donors have landed plum government jobs and advisory posts, won federal contracts worth millions of dollars for their business interests or attended numerous elite White House meetings and social events, an investigation by iWatch News has found.

Pretty scandalous, isn’t it?

Except upon reading the full report, and applying a little common sense it becomes pretty clear that the Obama administration is being unfairly smeared by the accusation that they’re simply handing out government jobs and contracts as a reward for their top fundraisers.

Fred Wertheimer wanted to testify in person at yesterday’s congressional hearing on the President’s proposed Executive Order.  The Committee decided that two pro-EO witnesses were enough, particularly as one was the sole witness on a “panel” and testified for over two hours.  Rick Hasen, who has made the remarkable claim that the federal law struck down in Citizens United did not “ban … any form of political speech,” and criticized the idea that prohibitng a corporation from speaking was a “ban” because the corporation had the alternative to set up a separate PAC, rather casually accuses Committee Chairman Issa of “gagging” Wertheimer.  Given his 13 pages of written testimony, we’re not sure Wertheimer has quite been “gagged,” but if so, at least it is “reasonable” gagging.  

Fred Wertheimer’s conclusory testimony to two House committees implying that the Constitutionality of President Obama’s proposed EO on government contracting has been blessed by the Supreme Court represents either ignorance or an intentional effort to mislead.

More than a little skepticism is called for when the White House says that “ethics” and “transparency” motivate a proposed Executive Order mandating that government contractors keep tabs on their employees’ political activity and inform the government of their political donations before getting a contract. 

So-called campaign finance “reformers” apparently are alarmed at the idea that government contractors might spend money voicing their opinions on candidates for public office, hence the move initially to ban government contractors from doing so under the DISCLOSE Act and now the effort by the Obama administration to impose a disclosure regime that seems designed to discourage them from doing so.

At the same time, the “reform” community claims the answer to all of the unfettered political speech unleashed on the public by Citizens United is the Fair Elections Now Act, which would give hundreds of millions or even billions of dollars to political candidates, with this money coming directly from… government contractors?

I guess corporate-funded political speech is only a problem when the business get to decide how to spend it, not when the “reformers” get to funnel it directly to politicians’ campaigns.

Rick Hasen, law professor at Loyola University and proprietor of Election Law Blog, had an interesting comment in The Hill newspaper today relating to the pending (for quite some time) DISCLOSE bill, as Senator Schumer and Congressman Van Hollen’s effort to undermine Citizens United is now cleverly known as.

Hasen was addressing the legislation’s ban on government contractors engaging in independent expenditures. The ban only covers for-profit corporations it seems (or so we’ve been told – the legislation has been crafted behind those closed doors that I thought so-called campaign finance “reformers” were so appalled by), exempting non-profits and unions.

Attempting to explain this, Hasen said the following:

Hasen said some of the biggest campaign spending restrictions outlined in the summary would only affect corporations. For example, large federal contractors, recipients of government bailout funds who have not repaid the money and foreign-owned companies would be banned from election spending.

“There are no foreign-owned unions and unions are not government contractors,” Hasen said. “The biggest limitations in this bill apply only to corporations because there are no parallels in the labor world.”

Well, I don’t know too much about “foreign owned unions,” although I’d note that some foreign involvement would seem to be suggested by the names of the Service Employees International Union,  the International Brotherhood of Electrical Workers, and others. The IBEW even has a Canadian on what appears to serve the function of a board of directors (International Executive Council members).

But there certainly is a parallel between for-profit government contractors and unions, at least in terms of receiving government funds.

Earlier this week the Colorado Supreme Court struck down a controversial “pay-to-play” law. The Court ruled that Amendment 54, enacted by referendum in 2008 as a state constitutional amendment, violated the First Amendment to the U.S. Constitution.

Covington & Burling LLP issued an excellent analysis of the ruling today:

A diverse group of plaintiffs-including the chancellor of a state university, a board member of a nonprofit corporation, a labor union, and a local city council member-argued that this law violated the First Amendment by excessively burdening their right to political expression via political contributions. The Supreme Court held that significant portions of the law were unconstitutionally overbroad, including the complete ban (as opposed to a cap) upon contributions that reached to all levels of government regardless of a recipient’s ability to influence contract awards or a recipient’s relationship with the contractor.

The memo also considered broader implications for “pay-to-play” statutes in other jurisdictions:

Despite this sweeping defeat for Colorado’s pay-to-play law, we expect that states will continue to enact and enforce pay-to-play laws. Statewide pay-to-play laws in Connecticut and New Jersey recently withstood First Amendment challenges on the basis that the interest in preventing corruption and its appearance was heightened in light of recent scandal in those states. Targeted pay-to-play laws in Louisiana (aimed at casinos) and Georgia (aimed at insurance companies) as well as federal pay-to-play laws and regulations that apply to government contractors, brokers, and dealers of municipal securities also have withstood constitutional challenge. The Supreme Court of Colorado’s opinion reinforces the idea that states and courts may consider a properly crafted pay-to-play law to be an appropriate means to mitigate political corruption and quid pro quos in politics.

InvestmentNews reported on questions surrounding a pending Securities Exchange Commission pay-to-play rulemaking setting federal restrictions on contributions to state and local officials responsible for awarding bonding contracts.

Yesterday, a Denver district judge temporary halted a so-called “pay-to-play” ban preventing certain state contractors from donating to state campaigns, according to a story today in The Denver Post.

Groups, including those in the business and labor communities, have criticized the ban as an unconstitutional infringement on the rights of Coloradans to participate in politics.

Judge Catherine Lemon agreed with opponents of Amendment 54, who argued the measure was “confusing, discriminatory and in violation of free-speech rights.” The case will now head to trial.

From the story:

The amendment prevents anyone tied to an entity that receives a no-bid government contract greater than $100,000 from giving to political parties or candidates at any level.

Plaintiffs complained that vagaries in the language left would-be contributors afraid of donating, even if the rules might not apply to them.

“In my mind, it’s just not a close case,” Lemon said after hours of arguments. “When First Amendment freedoms are involved, the state has got to come forward with evidence of a sufficiently important (threat).”

Everyone has an interest in their government — contractors, doctors, teachers, etc. — and there’s no justifiable reason to give people unequal First Amendment rights. The proper way to combat the possibility or perception of undue influence by state contracters is a transparent bidding process and vigilance on the part of the press and the public. The answer is not arbitrarily restricting the First Amendment rights of citizens.