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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.