Got Corruption? Nixon's Milk Money.

October 21, 2013

In The New York Times, I wrote about the illegal contributions from the dairy industry to President Richard Milhous Nixon’s 1972 reelection campaign. I focused on this as a reason why the current Supreme Court should uphold aggregate contribution limits, a post-Watergate reform. 

The matter of Nixon’s milk money actually came up recently at the Supreme Court from an unexpected source: Senator Mitch McConnell’s lawyer. During oral argument in McCutcheon v. FEC, Justice Alito asked, “In Buckley [v. Valeo], the Court sustained aggregate limits. What has changed since Buckley?”

Mr. Burchfield, the lawyer representing the Senator, responded, “[o]ne of the concerns in Buckley was the dairy industry, which contributed to hundreds of PACs supporting President Nixon's re-election. That is no longer possible.”

This answer before the Justices raises a number of issues. First, what was the story with the Nixon’s milk money and second, would it be impossible to repeat today?

Most of the questionable money came from the Associated Milk Producers, Inc. (AMPI), a conglomeration of 20 diary cooperatives.

As the D.C. Circuit noted in Buckley v. Valeo (the case that reviewed the post-Watergate reforms including contribution limits): “[t]he record before Congress was replete with specific examples of improper attempts to obtain governmental favor in return for large campaign contributions. One example of the quid pro quo of contributions in exchange for public acts was from the dairy industry.” The same court noted, “[l]ooming large in the perception of the public and Congressmen was the revelation concerning the extensive contributions by dairy organizations to Nixon fund raisers, in order to gain a meeting with White House officials on price supports.”

The money the dairy industry gave to Mr. Nixon’s campaign was illegal six ways to Sunday. AMPI’s donations were unlawful because there was the quid pro quo of exchanging a pledge of $2 million in campaign contributions for a sizable increase in federal milk subsidies.

Although no one was convicted of bribery, several individuals involved entered plea deals with the Watergate special prosecutor. For example, David L. Parr, special counsel to AMPI, pled guilty to criminal conspiracy charges. Harold Nelson, AMPI’s general manager, pled guilty to criminal conspiracy charges for illegal payments to a government official and illegal campaign contributions. Both Parr and Nelson went to jail. John Valentine and Norman Sherman, who ran a computer mailing firm, pled guilty to aiding and abetting AMPI in making the illegal contributions.

Lest I give the misimpression that this was just a Nixon or Republican problem: let me be clear that AMPI was giving to both sides of the aisle. Indeed, campaign manager Jack Chestnut was convicted of accepting illegal campaign contributions from AMPI for Democrat Hubert Humphrey’s presidential campaign. 

AMPI’s campaign money was illegal because it came from a corporate source.  Corporations, then and now, are barred from giving directly to a candidate for federal office under the Tillman Act. AMPI itself pled guilty to one count of conspiracy and making illegal campaign contributions. The company tried to conceal that the money was from a corporate source through fake billing and bogus bonuses, as well as padded legal fees. AMPI was fined $35,000 (almost $144,000 in today’s dollars) for these illegal donations.

Individuals at AMPI also flouted the spirit of campaign disclosure laws by splitting the millions they were spending into smaller $2,500 amounts and routing it through hundreds of PACs. Nixon’s fundraiser Herbert Kalmbach testified before the Senate, “We were trying to develop a procedure … where they [AMPI] could meet their independent reporting requirements and still not result in a disclosure.” 

This obfuscation nearly worked. As the Senate Select Committee’s Report on Watergate detailed, “the milk producers could report the contributions [to the 100 intermediate]...committees, without the ultimate beneficiary, the President’s campaign, being disclosed.” And, moreover, the names of the committees were meant to be innocuous, such as the one ironically named, “Americans United for Honesty in Government.” For a list of the Orwellian PAC names, see the original evidence from the Watergate hearings here.

Then there was small matter of tax avoidance. One reason to route the money through multiple committees in $2,500 increments was to try to avoid triggering the gift tax that kicked in at $3,000 at the time. In 1976, the IRS hit AMPI with a huge tax bill — much of it linked to the illegal campaign contributions.

So was Sen. McConnell’s lawyer correct that this couldn’t happen again? Well partially. Arguably, it never should have happened in the first place given that much of the money was corporate and therefore not allowed at all in a presidential campaign.

Nonetheless, one of the safeguards enacted post-Watergate to stop a repeat of the milk money madness was strict limits both on how much individuals can give to candidates, parties and PACs, as well as the aggregate limit that McConnell and McCutcheon want to eviscerate. The behavior of chopping up a million dollar donation into less noticeable $2,500 chunks in dummy PACs is also captured by the FEC’s anti-earmarking regulations. Today, this behavior would also be more difficult to get away with because of online PAC disclosures at the FEC.

But this argument that Nixon’s fundraising couldn’t be repeated under current law seems a tad disingenuous as Sen. McConnell and his ilk seem hell bent on dismantling all regulations on campaign money. If they succeed in striking the aggregate limit at issue in McCutcheon, I’m sure the next lawsuits will be over disclosure, coordination rules, anti-earmarking rules, and then finally all contribution limits, whether for rich individuals or multi-national corporations. 

These campaign finance laws are meant to maintain the integrity of our democracy to prevent a situation where those with the biggest wallets get their wish list granted by those in power. Don’t forget, the whole point of the campaign money from the milkmen was to get $100 million—roughly half a billion in today’s dollars—in federal price supports for dairy products. Ultimately, such a brazen wish list to the government winds up costing the average taxpayer a pretty penny.

(Photo: Thinkstock)

The views expressed are the author's own and not those of the Brennan Center for Justice.