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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
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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.