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Transparency for Democracy’s Sake

When it comes to money in politics, transparency is about strengthening democracy and preventing the manipulation of the government for private ends.

December 21, 2020

When it comes to money in polit­ics, trans­par­ency is not just an end in itself — it’s about strength­en­ing our demo­cracy and disin­centiv­iz­ing both prof­it­eer­ing off of public resources and the manip­u­la­tion of the govern­ment for private ends. This is true as 2021 dawns for reformers facing a new White House and a new Congress. Reformers today are stand­ing on the shoulders of giants from previ­ous gener­a­tions of Amer­ic­ans who respon­ded to earlier polit­ical scan­dals with laws that require more sunlight.  

It’s import­ant to under­stand the origins of our trans­par­ency laws. The first campaign finance disclos­ure law in the United States was the Publi­city Act of 1910, which required reports of polit­ical spend­ing after elec­tions. It was quickly amended in 1911 to also require disclos­ure of polit­ical spend­ing before elec­tions

The genesis of the Publi­city Act was the New York Life Insur­ance Scan­dal of 1905. It is now nearly forgot­ten, but at the height of the scan­dal, the daily papers in New York frequently referred to life insur­ance offi­cials as “the mean­est type of thieves, robbers, and embezz­lers.”

Managers of insur­ance compan­ies had secretly given corpor­ate money to the Repub­lican Party, some of which was used for bribes. Charles Evans Hughes, who would later be elec­ted governor of New York and even­tu­ally join the Supreme Court, headed an invest­ig­a­tion of the biggest insur­ance compan­ies, during which George Perkins, a part­ner of J.P. Morgan and vice pres­id­ent at New York Life, revealed that money includ­ing an off-books check for $48,702.50 (worth more than $1 million today) had gone from New York Life to the Repub­lican National Commit­tee. The scan­dal was two-fold: huge dona­tions from corpor­a­tions were going to a national polit­ical party and these dona­tions were secret. Today, we’d call that $48,702.50 check “dark money.”

Pres­id­ent Theodore Roosevelt, who received money from the Repub­lican Party during the 1904 elec­tion cycle, tried to get ahead of the insur­ance scan­dal, telling Congress in Decem­ber 1905:

If [polit­ical contri­bu­tions] are extor­ted by any kind of pres­sure or prom­ise, express or implied, direct or indir­ect, in the way of favor or immunity, then the giving or receiv­ing becomes not only improper but crim­inal. It will undoubtedly be diffi­cult, as a matter of prac­tical detail, to shape an act which shall guard with reas­on­able certainty against such miscon­duct; but if it is possible to secure by law the full and veri­fied public­a­tion in detail of all the sums contrib­uted to and expen­ded by the candid­ates or commit­tees of any polit­ical parties, the result cannot but be whole­some. [emphasis added]

Congress took five long years to act, but ulti­mately the Publi­city Act became law.

Another change that increased trans­par­ency of money in polit­ics came after Water­gate under the Federal Elec­tion Campaign Act of 1974. This law created the Federal Elec­tion Commis­sion, charged it with track­ing fundrais­ing and polit­ical spend­ing in federal elec­tions, and provided the public with the most access­ible campaign finance inform­a­tion yet. 

So why was the law needed? Under­stand­ing that requires appre­ci­at­ing some of the ins and outs of Pres­id­ent Richard Nixon’s 1972 reelec­tion campaign and the subsequent Water­gate scan­dal. In early 1972, there was a temporal gap in the federal campaign finance disclos­ure law that had been passed in the previ­ous year, which meant that the Nixon campaign could and did assure donors that their dona­tions would be kept on the q.t. if they arrived before April 7, 1972

Nixon’s personal secret­ary, Rose­mary Woods, kept a secret list of larger donors under lock and key. This list was later dubbed “Rose­mary’s baby” after the horror film of the same name. These names and their dark money dona­tions came out after lawsuits by Common Cause and invest­ig­a­tions by Congress into the Water­gate break-in. What spilled out into public from Nixon’s fundrais­ing efforts was a mish­mash of huge dona­tions, some plainly illegal dona­tions from corpor­a­tions, and money to buy ambas­sad­or­ships.

These revel­a­tions spurred the Congress to pass the reform bill. When it was chal­lenged, the Supreme Court concluded in Buckley v. Valeo that disclos­ure of money in polit­ics is gener­ally “the least restrict­ive means of curb­ing the evils of campaign ignor­ance and corrup­tion.” 

More recently, the Trump pres­id­ency has been punc­tu­ated with campaign finance issues. Earlier this month, the federal govern­ment released a crim­inal refer­ral about Trump’s phone call with Ukrain­ian Pres­id­ent Volodymyr Zelensky and its possible viol­a­tion of the campaign finance ban on soli­cit­ing foreign­ers in a U.S. elec­tion. Combined with the fact that Trump was iden­ti­fied as “Indi­vidual-1” in a crim­inal case against his personal lawyer Michael Cohen, a new campaign finance scan­dal is break­ing at the 11th hour of his pres­id­ency.

It’s worth noth­ing that both of the previ­ous instances of poten­tial campaign finance misdeeds involved subter­fuge. In Cohen’s case, the money he spent paying Stormy Daniels and Karen McDou­gal for their silence was hidden through an LLC called Essen­tial Consult­ants and then was later repaid by the Trump Organ­iz­a­tion. Mean­while, the Ukraine call was hidden in a highly clas­si­fied server to conceal its damning contents.

The new Trump campaign finance scan­dal is this: accord­ing to a partially unsealed court docu­ment, there may have been an exchange of campaign funds for a pres­id­en­tial pardon. The docu­ment noted that on August 28, 2020, the federal district court in Wash­ing­ton was asked if prosec­utors could access certain attor­ney-client commu­nic­a­tions and that they later found emails “indic­at­ing addi­tional crim­inal activ­ity” includ­ing a “secret lobby­ing scheme” to secure a pardon and a “related bribery conspir­acy scheme in which [redac­ted] would offer a substan­tial polit­ical contri­bu­tion in exchange for a pres­id­en­tial pardon or reprieve of sentence for [redac­ted].”  There is an oblique refer­ence to the White House Coun­sel’s office in the docu­ment, but so much is redac­ted that it is diffi­cult to tell exactly what it means: “At most, [redac­ted] provided merely a coordin­at­ing role, includ­ing with the [redac­ted] and the White House Coun­sel’s office, to help ensure [redac­ted]’s work on behalf of [redac­ted]’ clem­ency peti­tion reached the targeted offi­cials.” 

Accord­ing to press reports, the pardon request was on behalf of Hugh Leslie Baras, who was convicted for fail­ing to report income to the IRS, and the invest­ig­a­tion includes lawyer Abbe Lowell and Repub­lican fundraiser Elli­ott Broidy. The pardon was never given to Baras. But the other man mentioned here raises a lot of red flags. Broidy, who was nabbed in 2009 for a pay-to-play scheme in New York State, and who later pled guilty to a foreign lobby­ing crime in 2020, was the vice chair of the Trump inaug­ural commit­tee, which ran what Open Secrets called the “Dark Money Inaug­ur­a­tion.”

This latest Trump epis­ode with the poten­tial bribe-for-pardon gambit is why campaign finance trans­par­ency is import­ant and why the new Congress should pass improved campaign finance disclos­ures as contem­plated in the For the People Act (H.R.1).

Trans­par­ency is not an end in itself. I don’t wish more paper­work on anyone for its own sake. But know­ing that campaign spend­ing has to be repor­ted can change the incent­ive struc­ture for those with the worst motives. Dark money is the crim­in­al’s best friend. If donors know that polit­ical spend­ing will see the light of day, there is less incent­ive for them to ask for illegal actions from an elec­ted offi­cial — whether that’s an ambas­sad­orial appoint­ment or a grant of a pardon.

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