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What Today’s CEOs Can Learn from George Steinbrenner

A case from 41 years ago has important lessons for using corporate money in politics.

November 23, 2015

I’m putting the finishing touches on my first book and writing it has been an opportunity to delve into all sorts of areas of crony capitalism and evasions of campaign finance laws. 

One of the stories that still has some saliency today is a campaign finance crime committed by the late George Steinbrenner more than 40 years ago. The reason his story matters is the law he broke is still on the books — it’s known as the Tillman Act and it bars corporations from giving money directly to federal candidates.

Of course, Steinbrenner is most famous for being the irascible owner of the New York Yankees. But before that, he was the successful CEO of a company called American Ship Building which was headquartered in my present backyard in Tampa, Florida.

If you know about labor law, there’s a famous Supreme Court decision in favor of the American Ship Building Company in 1965, holding an employer does not commit an unfair labor practice if “after a bargaining impasse has been reached, he temporarily shuts down his plant and lays off his employees for the sole purpose of bringing economic pressure to bear in support of his legitimate bargaining position.” (Steinbrenner eventually grew so tired of haggling with the unions that he moved his company from Ohio to Tampa.)

During President Richard Nixon’s 1972 re-election campaign, Nixon’s fundraisers came a callin’ at Steinbrenner’s door. They would basically shake down anyone within sight, especially possible government contractors. Steinbrenner’s company had built boats for the Coast Guard and the Navy.   

Unlike other CEOs who ponied up their own money to the Nixon campaign, Steinbrenner participated in an elaborate scheme to give $100,000 (worth about $620,000 today) from his company to the campaign, which again was illegal then and now. The law states:

It is unlawful for … any corporation … to make a contribution … in connection with any election … at which presidential and vice presidential electors or a Senator or Representative in, or a Delegate or Resident Commissioner to, Congress are to be voted for, or in connection with any primary election or political convention or caucus held to select candidates for any of the foregoing offices…

Steinbrenner was indicted for his role in making corporate contributions to the Nixon campaign. He charged with not only making illegal campaign contributions, but charges of helping people make false statements to FBI and charges of obstructing justice. The way the scheme worked was for Steinbrenner’s company to give fake bonuses to employees to disguise campaign contributions that were coming from the company itself. The indictment explains the illegal conspiracy:

It was further a part of the conspiracy that the source of these contributions would be disguised so as to conceal their illegal nature from the federal investigative authorities and others by using, among others, the following means: In or about January 1973, a company-wide pattern of giving bonuses would be established to camouflage the bonuses that had already been given. The defendant STEINBRENNER would cause the destruction and alteration of records and the creation of false and misleading records concerning the payment of bonuses by the defendant, THE AMERICAN SHIPBUILDING COMPANY.

After first declaring he was “totally innocent,” Steinbrenner pled guilty to violating federal campaign finance law and other charges. Other executives in his company also pled guilty to participating in the illegal scheme. However, by pleading guilty Steinbrenner did not get any jail time and was fined a mere $15,000. What probably hurt most was that he was banned from baseball for 15 months.

Corporate contributions to federal candidates, including the three Democrats and 14 Republicans running for President (at last count), are still not allowed. The “fake bonus” gambit seems like a simple workaround. But it’s worth noting that is it illegal. 

There is one more kicker to the Steinbrenner saga and it shows that it always pays to have friends in high places. In one of his last acts in office, President Reagan pardoned Steinbrenner in 1989 for his Watergate era crimes.