The Looming Pay-to-Play Problem

An FEC ruling gives government contractors license to donate to campaigns.

April 15, 2015
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Students in my election law seminar this semester tell me that I’m depressing them by teaching about money in politics. I really don’t mean to be depressing; just factual. And from my point of view I only gave them a taste of what’s wrong. A little BuckleyCitizens United with only a hint of McCutcheon sprinkled on top.

But I remember when I was in their shoes. One of my law professors at Columbia told us that only small business thinks of government as a burden, while big business thinks of the government as a lucrative customer. The thought, while simple, shook how I saw the way America works. My professor’s paradigm was thoroughly disquieting. I’m sure he didn’t mean to be depressing; just factual.

What I’ve been teaching about campaign finance and what I learned as a law student about the government as a customer has a nexus known as “pay-to-play” corruption. Businesses which are government contractors want that gravy train to keep on flowing — tax dollars are an intoxicating revenue stream. The risk is that businesses will try to ensure those government contracts by giving generously to elected officials who control the contracting process. This giving can take the form of gifts, campaign contributions and even out-and-out bribes.

The risk of pay-to-play corruption in the federal contracting was recognized decades ago. Since 1940, the Hatch Act prohibits federal contractors from giving campaign contributions. Pursuant to 2 U.S.C. § 441c:  “It shall be unlawful for any person - (1) who enters into any contract with the United States …directly or indirectly to make any contribution of money or other things of value, or to promise expressly or impliedly to make any such contribution to any political party, committee, or candidate for public office or to any person for any political purpose or use; or (2) knowingly to solicit any such contribution from any such person for any such purpose ….” In other words, government contractors cannot give or raise money for candidates.

While the language of the Hatch Act is incredibly broad, it apparently has a gaping hole in it because it does not cover certain money going to super PACs. The voting public discovered this the hard way. In 2013, Public Citizen launched a complaint against Chevron for giving $2.5 million to a super PAC called the Congressional Leadership Fund (CLF). This expenditure was the largest one from a for-profit publicly traded company in the 2012 election cycle. 

This should have be a slam dunk of a case since Chevron is a government contractor covered by the Hatch Act. But the FEC did not see it that way. As Mother Jones reported, “The FEC bought the company’s argument, which is that Chevron Corporation (the organization that donated to CLF) and Chevron U.S.A. (the organization with government contracts) are entirely different entities.” It did not matter that Chevron U.S.A. is 100 percent owned by Chevron Corp. Now it is open season for government contractors to spend in federal elections since all they have to do is spend through a different subsidiary. The Hatch Act is now barely worth the paper it’s written on if this is how the FEC is going to “enforce” it.

And while super PACs are transparent, listing publicly where they got their funds, the donors to super PACs can be dark money conduits like 501(c)(4)s or 501(c)(6)s. Consequently, federal contractors could be hiding among the donors of $600 million in dark money that has been spent in the past four years. This is why so many groups have urged the President to issue an executive order requiring greater transparency of political spending by government contractors.

The chances of pay-to-play corruption being discovered by an enterprising journalist is still out there. The Aaron Schock take down should make those who engage in pay-to-play sit up and take notice. (Former Rep. Schock was brought down by his own boastful Instagram photos which journalists cross matched with his government reports to reveal his travel on private planes of political donors.) But the less transparency there is, the fewer leads journalists will have to suss out the corrupt.

The Obama administration has stated that it has no plans to address this transparency problem. Respectfully, they should change those plans. The administration entered the White House with high hopes of being the paragon of transparency. That legacy can still be fulfilled by adopting better disclosure rules as suggested by Robert Bauer and Samuel Issacharoff among half a million others. But time is decidedly running out to do the right thing. 

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

(Photo: Flickr)