RESOURCE MATERIAL SERIES No. 56

CAMPAIGN FINANCING AND CORRUPTION IN THE US

Anthony Didrick Castberg*

I. OFFICIAL CORRUPTION IN THE reduced significantly. The reform UNITED STATES movement was frequently aided by outrageous scandals, such as the Teapot Corruption was common in the US in the Dome scandal during Harding’s 19th century. Patronage was widespread, administration, and by the press, which and although the spoils system was created often played a crusading role in bringing with the intention of diversifying scandals to public attention. bureaucrats, it became clear that corruption continued to increase. Rapid The nation suffered a setback during the industrialization and westward expansion prohibition era, 1919 - 1933. Prohibition not only expanded the role of government, was the result of the 18th Amendment to but also of corruption in government. the US Constitution, which prohibited the Although there was considerable manufacture, import and sale of corruption at the national level and intoxicating liquors. Although well- scandals affecting the presidency, such as intentioned, the Amendment was ill- those involving the Grant administration conceived, as it sought to make illegal what in the 1870’s, most of the corruption in the many, if not most, of the citizens not only US at the time was found at the local level. enjoyed but felt was their right. Although Most famous, perhaps, was New York’s the Amendment tried to eliminate the Tammany Hall, which involved political supply of alcohol, it clearly did not party leaders, politicians, and business eliminate the demand for alcohol. As a interests in collusion to control lucrative result, a thriving underground enterprise government contracts. This corrupt sprung up virtually overnight to supply the activity centered on kickbacks, extortion, demand. This enterprise established the election fraud, and bribery. But a growing Mafia as a major criminal force in the US, consensus among reformers and the and with it, widespread corruption of law population as a whole saw this corruption enforcement. Such corruption was not only as ultimately detrimental to both politics accepted by many citizens but encouraged, and the economy. This consensus led to as it made access to the forbidden the Pendleton Act, which created the first intoxicating liquors much easier. The end federal civil service system in the US. As of prohibition in 1933 did not mean the end a result of this movement, bribery and of organized crime nor the end of corruption other forms of corruption decreased in law enforcement, as organized crime substantially, although it was still to be merely shifted its activities and corruptive found at the city, county and state levels, influence to other forbidden but desired often through political parties. commodities and activities, such as Nevertheless, the reform movement spread gambling, loansharking, prostitution and to all political jurisdictions and, by the drugs. The US has never completely early part of the 20th century, the more shaken loose of the corruptive influences blatant forms of corruption had been of the era of prohibition. But political corruption and scandals at the national * Professor of Political Science, University of Hawaii level, at least, decreased; there were no at Hilo, United States of America. major scandals during the Roosevelt,

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Kennedy or Johnson administrations. Act was passed in 1977, and the Ethics in Government Act in 1978. The movement The US has not, of course, eliminated led to a significant increase in the number political scandals. Perhaps the most of state and local officials charged under famous political scandal involving federal law with corrupt practices, a corruption in high offices in recent history number that reached almost 500 in 1986. was the so-called “Watergate” affair involving President Richard Nixon. This Despite reform, corruption continued. scandal started with what, at the time, The “Abscam” scandal of 1978-80 involved seemed to be a simple burglary of FBI agents posing as Arab sheiks who Democratic Party headquarters in the offered various government officials, Watergate building in Washington, DC. including senators and representatives, The burglars were caught in the act and money for help in obtaining favorable an investigation soon connected them to immigration rulings. Most of this was Nixon’s re-election campaign staff (the recorded on videotape. Six representatives burglars had been trying to obtain and one senator were convicted of bribery. information on Democratic campaign And in 1986-89 two representatives and strategy). President Nixon ordered that many other officials were convicted of money be given to the burglars so that they racketeering, tax evasion, bribery, fraud, would not talk about his involvement in the grand larceny, and perjury for accepting crime. There then followed one cover-up payoffs from military contractors in what after another. The President used the was called the “Wedtech” scandal. In 1987, Internal Revenue Service, the FBI, and five Senators obstructed federal regulators other federal agencies against those he in their investigation of a savings and loan thought were leading the efforts to involve company that had been had been looted by him in the conspiracy. He had a very long its owner, Charles Keating, of $2 billion. “enemies” list. Largely due to an Those senators received a total of $1 million aggressive press, all of the details of in campaign donations from Keating. But corruption in the office of the President the senators, called the “Keating Five”, were brought to public attention. were never charged with any crime or Congressional hearings not only brought ethical violation because, while they could to light the many details of the burglary influence federal regulators, they had no and cover-up, but also of illegal campaign direct control over them. One of those contributions made to Nixon’s campaign senators, John McCain, is now a committee. This ultimately resulted in the Republican candidate for the presidency. House Judiciary Committee voting for impeachment, and the President’s More recently, President Clinton was resignation soon thereafter - the first time accused of accepting large campaign in US history that an American president contributions from several Chinese resigned from office. businessmen in return for favorable treatment of China on a variety of matters, As is often the case in major scandals, including the sale of satellite technology. some good resulted in the form of tougher US intelligence agencies allegedly laws and new protections. The Federal intercepted information in early 1995 Election Campaign Act of 1971 was indicating interest on the part of the strengthened after Watergate, and the Chinese government in spending money to Federal Elections Commission was support certain candidates for office in the established. The Foreign Corrupt Practices coming election, an issue raised by

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Republican legislators but not proven until for being appointed an ambassador. subsequent indictments and trials. The money, however, seems to have bought little The examples cited above are, of course, other than access to the President. high level corruption. Just how much corruption is there in the US at all levels? Early this year, the New York Times We only have official figures on reported reported that China had stolen highly corruption, so the amount of unreported classified nuclear weapons information corruption remains unknown, but the data from the Los Alamos laboratory, we do have gives us some idea of how cases information that allegedly allowed the of corruption compare to other offences. It Chinese to make rapid advancement in is interesting to note that the most their nuclear weapons program. Although widespread crime reporting system in the the theft allegedly took place in the mid US, the FBI’s Uniform Crime Reports 1980’s, during the administration of Ronald (UCR), does not even list corruption or even Reagan, it was charged that the theft had bribery it either Part I offences, those not been detected until 1995, that the deemed to be the most serious, or Part II President had not been informed until April offences, those less serious. Nor does data 1996, and that nothing was done to from state courts list corruption or bribery investigate the alleged theft until 1997. in its data. When we look at data collected Congress was not informed until 1998. by the Department of Justice’s Bureau of Republicans charged that the failure of the Justice Statistics, however, we do find cases Clinton administration to follow up on the of bribery and of other forms of corruption. theft and to promptly notify Congress was Under the general category of “other,” a due to campaign contributions funnelled category that also includes racketeering through Chinese businessmen in the US and extortion, we find that in fiscal year by the Chinese government. To date, none 1996 there were a total of 405 federal of these allegations have been proven, and bribery suspects, of whom only 168 were it would seem to be a highly partisan issue. prosecuted in US District Courts. Of the remainder, 212 were not prosecuted and 25 Earlier this month, it was revealed that were dealt with by federal magistrates (the Secretary of Labor, Alexis Herman, was equivalent of a misdemeanor case). It is under investigation for influence peddling difficult to determine the exact reasons that and soliciting illegal campaign 212 suspects were not prosecuted. Using contributions for the Democratic National slightly different data, for the 232 Committee when she was a White House defendants whose bribery cases were aide during Clinton’s first term. She was terminated in fiscal year 1996 we find that appointed to her current post by Clinton 90.1% of the defendants were convicted, in May 1998. Although the investigation most of them by a jury, and 16 of the 23 is still under way and she has not been who were not convicted had their cases charged with any crime, this is an example dismissed, with only 7 going to trial and of how working for a campaign can result being found not guilty. in appointment to a high post. If she did solicit large campaign contributions, it may Using data from fiscal year 1998, we find well have been a factor in her being that official corruption cases have been appointed to her present position. It is well broken down into separate offences. known, for example, that individuals who Corruption in federal law enforcement make very large contributions to a resulted in 52 cases and 74 defendants, and presidential campaign may do so in return of the 46 terminated during this period, 44

414 113TH INTERNATIONAL TRAINING COURSE VISITING EXPERTS’ PAPERS were through a finding of guilty. One of national legislators have belonged to one should also note that there were significant or the other party. In both parties one can numbers of state and local corruption cases, find the wealthy as well as those from the vast majority of which ended in findings modest backgrounds, but over the past 30 of guilty. While these figures are alarming, years some things have changed. they must be viewed in perspective. A total of 902 officials were convicted of offences Running for political office, or for re- involving abuse of public office in 1996. election thereto, in the US is now very These figures should be compared to the expensive. The average cost of a winning total of over 53,000 defendants convicted campaign for the US Senate in 1996 was in federal courts alone in FY 1996. $4,692,100 and $673,739 for the House, Corruption in the US, then, is a problem, with the most expensive campaigns for but it is not as much of a problem as many each house costing $14.5 million and $5.6 other crimes, and as a consequence, does million respectively. The 1996 Clinton and not alarm the public as much as other Dole presidential campaigns spent over crimes, especially crimes of violence. $230 million, not including almost $70 million in ads paid for by the Democratic II. ELECTIONS IN A DEMOCRACY and Republican parties. All of the campaigns nationwide in 1996 cost an A fundamental tenet of a democratic estimated $2.7 billion. A great deal of this society is free and open elections, with few money is spent on television restrictions on access to political office. advertisements - the Democratic National Age, citizenship and residence are the Committee alone spent about $44 million primary limitations on candidacy for on such ads (this does not include the political office in a democracy. The United money spent by the Clinton campaign States is a democracy, and prides itself on itself). Television advertising can be very the diversity of its elected politicians, expensive - up to $500,000 per minute. diversity measured in terms of gender, age, ethnicity, race, religion, and political Needless to say, only millionaires can ideology. A democratic political system may finance their own campaigns for national be multiparty, or it may consist of two office. This means that most aspirants for parties, which is the case of the US. office and incumbents running for re- Although over the past two hundred years election must rely on contributors, third parties have elected their candidates contributors who usually expect something to local, state and national office, the US in return for their contributions. That is considered a two party system, “something” may be as simple as a dominated by the Democrats and the politician whose political views are Republicans. Most agree that neither party consistent with those of the contributor, it is ideological in nature, but it is also true may be access to the politician not enjoyed that the Democrats are more on the liberal by lesser contributors, or it may be an side and the Republicans on the explicit quid pro quo - paying for favorable conservative side of most issues. The consideration on an issue over which the Democrats, for example, support social politician has substantial control. In the welfare programs and government last century and early part of the 20th regulation of business, while the century, the practice of selling votes was Republicans tend to favor less government fairly common. Today it is practically and more free enterprise. Over the last 100 unheard of, but many argue that campaign years, all presidents and the vast majority contributions amount to the same thing.

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III. SOURCES OF CAMPAIGN the letter but not the spirit of the law. FINANCING Because this money is supposedly used to promote issues, it need not be reported, While political opponents may try to unlike other contributions. influence voters by alleging foreign influence on domestic politics, in fact the Money contributed to political parties vast majority of campaign funds come from and not specified for a particular candidate domestic sources. The single largest is called “soft money,” and there are contributors are corporations and Political virtually no limitations on how much can Action Committees (PACs). In the 1996 be given or how it is spent, as long as the campaign, for example, a tobacco company spending is on “issues,” voter education, - Phillip Morris - contributed $4,208,505 party building, etc. Soft money raised by million, 21% of which went to Democrats the two major parties more than tripled and 79% of which went to Republicans. The from 1992 to 1996, where it amounted to second largest amount - $4,017,553 million over $260 million. There are, nevertheless, - came from the American Federation of restrictions on soft money contributions, State, County and Municipal Employees, and the Democratic National Committee 99% of which went to the Republicans. admitted that it accepted $2.8 million While large individual donors and PACs illegally or under questionable accounted for almost 32% of all circumstances for the 1996 campaign; it contributions, 31% came from small subsequently returned the money to its donations (under $200). Political parties donors. may legally solicit and receive an unlimited amount of funds. These funds must, under IV. CAMPAIGN SPENDING LAWS a 1979 amendment to federal election laws, be used to publicize the party or present The Federal Election Campaign Act, as issues, and may not be used for the benefit amended in 1974, established strict of specific candidates. This law was upheld disclosure requirements, set limits for by a 1996 Supreme Court decision that said donations, and provided for public that political parties could spend unlimited financing of presidential campaigns. amounts of funds on congressional races Campaigns must list all contributors who as long as they act independently of the give over $200 per year, and cash candidates. This has resulted in party contributions of over $100 were prohibited advertisements that devote a great deal of (as cash contributions are almost time to a candidate and only discuss impossible to trace). Limits for donations “issues” in passing, a method of meeting were set as follows:

To a candidate or To a national To any other Total committee per party per year political contribution primary or committee per per calendar general election year year Individuals $1,000 $20,000 $5,000 $25,000 PACs $5,000 $15,000 $5,000 No limit

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These limits also applied to candidates V. ISSUE-SPECIFIC themselves - they could not even spend CONTRIBUTIONS their own money in excess of the specified Contributions to politicians are not limits. All of the reports by candidates are always made specifically for campaigns but public, and are available on the Federal frequently for favorable treatment on Elections Commission website, and at least issues of interest to the contributor. The one candidate for the presidency, George money contributed, however, must be W. Bush, has provided detailed placed in the politician’s campaign fund contribution information on his own and must be so used. The large amount of website. Bush so far has raised over $50 money contributed by Phillip Morris noted million - the largest amount ever raised by above, for example, was very likely a candidate in a primary election. intended to influence votes on tobacco issues, including an impending The public financing provision allowed government suit against tobacco companies taxpayers to indicate on their federal tax for misleading the public about the dangers return whether they wanted $3 of the of smoking. Issue-specific money was also money they owe the government to be put contributed in great quantities over the in the Presidential Election Campaign proposed Telecommunications Competition Fund. The Fund would then match up to and Deregulation Act of 1995. As the title $250 of each contribution made to eligible of the legislation implies, the act was candidates in primary elections. In order intended to deregulate the to benefit from this, the candidate had to telecommunications industry and thereby agree to spend no more than $50,000 of increase competition, which would their own money. Public funds would not presumably reduce costs and increase be available to candidates who exceeded options for the consumer. Although the Act the limit. Public funding is not available passed Congress and was signed by the to candidates for congress, although limits President, the intended benefits to were set for campaigns for those offices. consumers have yet to appear. The Provisions of the law limiting a candidate’s campaign funds of many legislators, own expenditures, as well as total especially those on the House and Senate expenditures, were challenged in a suit Commerce Committees, benefited greatly, filed by a broad coalition of candidates and however. political organizations in early 1975, and a year later the US Supreme Court handed The benefit to legislators of controversial down its decision in the case of Buckley v. issues that affect large industries should Valeo. The Court found that both the seem obvious: such issues provoke overall spending limits and the limits on a significant increases in campaign candidate’s own spending were contributions. It should be noted as well unconstitutional as a violation of free that most such money is not soft money but speech. The Court recognized that a rather money from PACs, and therefore balance had to be struck between free limited to a total of $10,000 per campaign speech and the prevention of corruption, ($5,000 for the primary and $5,000 for the and stated that contributions to a general election) per person. Because hard campaign are less protected than money is accountable and limited, it is expenditures made independent of preferred for specific issues. But one campaigns. Therefore, contribution limits wonders whether some issues are invented were upheld while money given to political as a means of creating controversy and parties or PACs could not be restricted.

417 RESOURCE MATERIAL SERIES No. 56 therefore increased campaign The same law applies to lobbying, but to contributions rather than for the public get a conviction under the law, 18 USC 207, good. Many of these issues are highly the government must prove, among other complex and, while they have a significant things, that it had a direct and substantial impact on the public as a whole, are often interest in the matter and that the former buried beneath more sensational but official had direct responsibility for the ultimately less important legislation. For particular matter within one year of their the most part, only large corporations, retirement (except for executive branch interest groups, and legislatures play this officials, where the time period is two years game - the “little guy” is left out. if the matter was pending under that person’s official responsibility). There are VI. INDIRECT SPENDING: many laws that govern the activities of LOBBYING current and former government officials. Some of them are listed below: There are methods by which legislators can be influenced on particular issues in 5 USC 2302 Prohibited addition to campaign contributions, the personnel practices most important of which is lobbying. 5 USC 7353 Gifts to federal Lobbying is an important but low visibility employees process, and it can be highly lucrative for 18 USC 201 Bribery of public the lobbyist himself or herself. There are officials and witnesses at least 12,000 registered lobbyists, a 18 USC 203 Compensation to number of whom are former legislators or members of congress, political appointees. While there is nothing officers, and others in illegal or necessarily unethical with matters affecting the individuals and organizations trying to government influence legislators, many feel it is wrong 18 USC 207 Restrictions on former for former legislators and staff members officers, employees, and to get rich as a result of their former status elected officials of the and the access that it brings. The lobbyist executive and is supposed to provide information to the legislative branches legislator as well as argue for a particular 18 USC 208 Acts affecting a cause, but the lobbyist can also help bolster personal/financial a legislator’s campaign fund indirectly by interest bringing together those who want 18 USC 211 Acceptance or something from Congress with those who solicitation to obtain can provide it. Thus, the former legislator, appointive political now a lobbyist, continues to practice the office fine art of seeking campaign money as well 18 USC 666 Theft or bribery as influencing legislation, but now for concerning programs somebody else. receiving federal funds 18 USC 1510 Obstruction of criminal Federal law prohibits most federal investigations employees and elected officials from taking positions in private industry that they These are only a few of the many federal might have been in a position to benefit laws dealing with crimes of official from through their prior position until at corruption. In addition to these criminal least two years after they have left office. laws, there are standards of ethical

418 113TH INTERNATIONAL TRAINING COURSE VISITING EXPERTS’ PAPERS conduct, such as 5CFR2635. unlikely that he would consider money spent on a ‘campaign’ as an investment - VII. WHY THE GREAT DESIRE TO he could never recoup the money spent on GET ELECTED? the campaign, legally or illegally. Why would a person who has such a fortune It is likely that many people run for office want more? What he wants, and what because they genuinely want to serve the many people who run for office want, is not public. They may feel that the many money but power. As chairman of Goldman problems of their constituency are not Sachs, Corzine made important decisions being adequately addressed, or they may and controlled billions of dollars, but he still simply want to be in a position where they had to rely on his elected representatives have a greater impact on society than just to make the decisions that affected the voting. There are those however who seek economic environment in which he worked. office because of selfish motives. The latter It is often the same motivation that makes are probably a minority, but social and attorneys in the US want to be judges - they political commentators are saying that will very likely make less money as a judge, there seems to be an increase in these types but they will have far more power and of people running for office. Note the titles influence. of two recent books on the subject: The Buying of the President, by Charles Lewis, If we accept, then, that many, if not most, and The Corruption of American Politics, candidates for office or for re-election are by Elizabeth Drew. Some politicians are motivated by power, not money, what then deciding either not to run for re-election or of those who make large contributions to for higher office. Christine Todd Whitman, these politicians? As suggested at the governor of New Jersey, recently changed beginning of this paper, it is safe to say that her mind and decided not to run for the many of the contributions are made with US Senate seat being vacated by Senator economic motivation. Corporations, PACs Frank R. Lautenberg. She said the and individual contributors who spend demands of fund raising would interfere large sums of money on those running for with her duties as governor. It also seems political office expect something in return clear that she would have a very difficult for their investments, and this puts time raising enough money to match the pressure on the winning candidate to funds available to Democratic candidate reciprocate. As long as that politician Jon Corzine, the former chairman of wants to be re-elected, s/he must act in the Goldman Sachs & Company, who has a best interests of those contributors. As long personal fortune of about $300 million. as the politician and the contributors do Corzine has already put $500,000 of that not violate any laws, there has been no fortune into his campaign spending fund, corruption as defined by law. But hasn’t while Whitman had raised over $2 million. the political process been corrupted? Nevertheless, Corzine has said would Haven’t the interests of the rich and spend as much as necessary to be powerful been put above those of the poor competitive, and it was clear that Whitman and powerless, the very people who most could not match her fund raising against need the assistance of government? The his fortune. answer, of course, is yes. This also raises the interesting question VIII. WHAT CAN BE DONE? of why a person like Corzine would spend so much to win an election. It is highly The answer to many of the problems

419 RESOURCE MATERIAL SERIES No. 56 cited above is campaign finance reform. There are already enough laws and ethical standards to take care of criminal and unethical behavior, but the fundamental problem - the corrupting influence of money in election campaigns - needs additional attention. There is no shortage of reform proposals, but despite public pronouncements by many political leaders, little progress has been made. Part of the problem is partisanship. The Democrats generally support limits on soft money, while Republicans do not, unless there are restrictions on spending by labor unions (which traditionally support Democrats). Republicans argue for raising the limits on individual contributions, in part because large individual contributions are most frequently made to Republican candidates. But the fact is that the status quo favors those in office, those who are the only ones in a position to bring about change. One current bill, which is backed by Democrats and some Republicans, would prohibit political parties from raising or spending soft money, and would make a clear distinction between issue advocacy and advocacy of a particular candidate. The limits on hard money would also apply to soft money, and there would be stricter disclosure requirements and higher penalties for violations. It is unlikely, however, that this bill will pass before Congress adjourns in October. It is, after all, difficult for those who benefit from existing law to change them, even though a majority of voters want such reform. In the end, we come back to the people, the voters. They elected the current politicians who benefit from an essentially corrupt system and only they can throw them out of office. But will they? Only time will tell.

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