NorthJersey.com

Reforms Won't Close Campaign Cash Spigot

NorthJersey.com — Sunday, August 15, 2004

By HERB JACKSON
TRENTON BUREAU

6th of 7 parts (links to all parts of this series in sidebar to right)

UNDER THE INFLUENCE: MONEY IN TRENTON

PART ONE:
Sunday, August 8, 2004

A record $56 million flowed to the winners in last year's legislative elections, much of it from interest groups trying to influence state policy. And the pressure to give keeps growing.

PART TWO:
Monday, August 9, 2004

Can't win in court? Get the law changed. That's a strategy that appears to be working for one millionaire who opened his checkbook to legislative candidates after losing a family dispute.

PART THREE:
Tuesday, August 10, 2004

The Record found that three legislators took more in donations than they were legally allowed to receive from one businessman, but they gave the money back and under the law will likely face no punishment.

PART FOUR:
Wednesday, August 11, 2004

Doctors ramped up their contributions last year as they battled to limit their exposure to big malpractice judgments in court. But lawyers also gave big, and won in the end.

PART FIVE (A) | PART FIVE (B):
Thursday, August 12, 2004

One of the most reliable sources of campaign cash for politicians is other politicians. Money from politicians is used to enforce party discipline or help ambitious candidates make new friends.

PART SIX:
Sunday, August 15, 2004

Who were the top 10 donors to each North Jersey legislator? And who gave the most to the Senate and Assembly Democratic and Republican PACs?

PART SEVEN:
Monday, August 16, 2004

Campaign finance reforms touted by legislative leaders this year will affect only a fraction of contributors, and even they may be able to keep giving money and getting contracts.


THE STAFF

  • Herb Jackson, 42, has covered New Jersey government and politics or directed coverage as an editor for 15 of the past 20 years. A Hudson County native and Rutgers University graduate, he has worked in the Trenton bureau of The Record since 1998. Since February 2002, he has taken readers behind the scenes in Trenton with his column, "Capital Games."
  • Benjamin Lesser, 28, has worked on computer-assisted projects since coming to The Record in November 2000 from The Times Union of Albany, N.Y. While attending the University of Missouri School of Journalism, he worked for the National Institute for Computer-Assisted Reporting. He has also taught classes at Columbia University's Graduate School of Journalism.
  • Editors: Deirdre Sykes, Charles Stile
  • Copy editors: Mike Kozma, Nancy Cherry
  • Graphics editor: Jerry Luciani
  • Designer: Robert Townsend
  • Graphic artist: Bob Rebach
  • Photographer: Chris Pedota
  • When he signed a package of ethics reforms in June, Governor McGreevey declared that New Jersey was taking "significant steps to reduce the influence of money in politics."

    But those reforms will not fundamentally change the way political campaigns in the state are funded.

    An analysis by The Record has found that if the new laws had been in effect during the 2003 legislative elections – when the winners raised an unprecedented $56 million – only a trickle of the flood of money from groups trying to affect state policy would have been plugged.

    And even that might not have occurred, because firms still could sidestep the new restrictions by changing the way they donate.

    The 25-bill ethics package did address a host of issues that had been on reformers' wish lists for years, including broader disclosure laws for legislators and lobbyists and a pilot program for publicly financed elections of legislators.

    But numerous other proposals to change the way Trenton does business went nowhere. For example:

  • Corporations and labor unions can continue to make direct contributions to candidates and committees, even though the state Election Law Enforcement Commission pushed for a ban similar to the one imposed by Congress on federal elections.
  • New Jersey's dubious distinction as the nation's leader in dual office-holding by officials will continue unchecked; the reforms merely created a committee to study the issue.
  • A measure touted as a tough conflict-of-interest ban was approved, but lawmakers themselves continue to be the ones to determine if a personal conflict actually exists.
  • The vast majority of donors face no new restrictions. They include issue-oriented groups such as those fighting gun control or smoking, as well as unions, businesses, and professional groups whose contributions are aimed at influencing laws and regulations, not obtaining government contracts.
  • A law aimed at contributors who do get no-bid contracts – touted as an unprecedented ban on what's known as "pay to play" – has so many loopholes that it may end up affecting a minuscule number of donors.

    "This phony ban on pay-to-play was designed from the very start to fail," said Assemblyman Richard Merkt, R-Morris.

    Many bills praised

    To be sure, many bills in the package were hailed by ethics advocates as long overdue, and they bring New Jersey more in line with other states that have been cited for tough ethical standards.

    Some addressed issues that have been a source of criticism for years, such as the revolving door between government and lobbying. One change requires legislators and top state officials to wait a year after leaving office before beginning to lobby.

    Other laws were aimed at improving weak public disclosure requirements. For example, legislators now must indicate their sources of income within a dollar range; previously, no amounts had to be revealed. Lobbyists also will have to acknowledge their attempts to influence the executive branch for permits and contracts; the old law dealt only with the Legislature.

    "The 25-bill package was the most comprehensive package in over 30 years, and I think as those laws begin to be implemented and become reality, people will see we've made great progress," said Assembly Majority Leader Joseph Roberts, D-Camden, a chief architect of the package.

    He was most proud of the bill signed Wednesday that established a pilot "clean elections" program. It provides public financing for candidates who agree to strict fund-raising limits - stricter than limits in place for publicly financed gubernatorial races.

    Candidates who raise 1,000 contributions of $5 and 500 contributions of $30 could receive the full public financing. In turn, they would be barred from taking any other money or support - including money from party committees or, in the case of incumbents, from campaign funds they had previously raised. In the gubernatorial system, candidates receive matching funds for private dollars they raise up to a limit, but party committees still can chip in on top of that.

    "Even if it doesn't result in a massive overhaul of the Legislature, it allows legislators to think and act and vote on issues without having to worry about whether it's going to affect their contributions," said Staci Berger, a program director for New Jersey Citizen Action, a reform group.

    "A lot of legislation is going to benefit somebody. We want the Legislature to evaluate those proposals independently," she said.

    Leaky plug

    Of all the bills in the reform package, however, the one that got the most attention involved "pay to play" - the much-maligned practice in which lucrative government contracts are awarded to firms that make big campaign contributions. Pressure for a ban grew after a California-based contractor botched the job of overhauling the state's motor vehicle inspection system. A subsequent investigation found that the contractor became the sole bidder for the job after hiring well-connected lobbyists and contributing to key officials and committees.

    The law, which takes effect after the 2006 election, was touted as the toughest pay-to-play ban in the country, a boast that is true as far as it goes. New Jersey's ban does more to limit contributions from contractors than any other state, but only three other states have passed such laws.

    The new law says a firm cannot receive a no-bid government contract worth more than $17,500 if that firm gave a campaign contribution of any amount to the official or officials with the power to award the contract - or to the party committees at the official's level of government - in the previous 12 months.

    But most campaign contributors do not receive government contracts – which means that, even with the strictest enforcement, the new law would have no impact on 22 of the 27 contributors who gave more than $200,000 in the 2003 election.

    And even the remaining five might be able to adjust the way they contribute so that they could continue getting contracts.

    Lawmakers' own fund-raising machines also will hardly be affected because, as a body, the Legislature grants few government contracts directly – even though it helps craft the state budget from which the contracts are paid and approves school and municipal aid that pays for many of the attorneys and architects and accountants who get the local no-bid work.

    Harry Pozycki, chairman of Common Cause New Jersey and one of the driving forces behind pay-to-play restrictions, said a study by his group found that while McGreevey was the Democratic mayor of Woodbridge and Republican Bret Schundler was mayor of Jersey City, 19 percent of their local contributions came from local contractors.

    Pozycki said pay-to-play money is the most corrupting money in the political system.

    "What makes it most corrupting is it is initiated by the career politicians and the party fund-raisers," Pozycki said. "They're pushing the contractors to give more money, so they have to imply there'll be more contracts. And the impact of this corrupting is mostly felt by the taxpayer because it's the contract that's the bait for the contribution."

    U.S. Attorney Christopher Christie noted that the now-imprisoned former Essex County Executive James Treffinger instructed a county official to tell a contractor to increase his price by $10,000 so the contractor could contribute that amount to Treffinger's campaign accounts.

    Limited ban

    To understand how gaps in the new law could still allow pay-to-play money to flow, consider the contributions to the Democratic State Committee from consultants hired by the New Jersey Turnpike Authority.

    The law will prohibit the state, as well as state agencies and authorities, from giving no-bid contracts worth more than $17,500 to firms that contribute to the governor or to his party's state committee.

    Since the Turnpike Authority recently assumed control of the Garden State Parkway, it had two sets of consultants in 2003 – most of whom were contributors to the Democratic State Committee. The law firms were Woodbridge-based Wilentz, Goldman & Spitzer, which gave $51,000 and was paid $1.8 million in 2003, and Teaneck-based DeCotiis, FitzPatrick, Cole & Wisler, which gave $40,000 and was paid $1.5 million.

    Environmental consultant Birdsall Engineering gave $25,000 and was paid $1 million, while another environmental consultant, PMK Group, gave $13,000 and earned $223,000. General consulting engineer HNTB Corp. gave $20,000 and was paid $7.4 million, while traffic engineer Vollmer Associates gave $9,600 and was paid $1 million. Auditor Deloitte & Touche gave $25,000 and was paid $166,200.

    One might assume that since the firms all earned more than the pay-to-play law's $17,500 threshold, none would be able to get future contracts if they continued contributing after 2006. But it's not that simple.

    The law's restrictions apply to contributions from a business or from an individual with an interest of 10 percent or more in the business's profits or stock. That means Deloitte & Touche would not have been able to get the turnpike contract if the pay-to-play law had been in effect because its $25,000 donation came from the firm itself.

    HIGHLIGHTS OF CHANGES:

  • Mandatory disclosure of who pays for "grass-roots" advertising to influence legislation or regulations and for recorded telephone calls about candidates and public questions.

  • Better disclosure of legislators' sources of income, including dollar ranges.

  • Pilot program of publicly financed legislative elections for candidates who demonstrate broad support and agree to strict fund-raising limits.

  • Ban on legislators' voting on bills in which they have a personal financial interest, and increased penalties for violations.

  • Prohibition on state officials soliciting contributions on state property.

  • Reducing from $400 to $300 the level at which a contributor's name must be disclosed, and repealing the law requiring that threshold to be increased periodically.

  • Mandatory training for campaign treasurers about contribution limits and reporting requirements.

  • Ban on legislators, the governor, and Cabinet heads taking jobs as lobbyists within one year of leaving office.

  • Mandatory disclosure of lobbyists' efforts to influence executive branch decisions, including contract awards; previous disclosure laws applied only to lobbying the Legislature.

  • Placing additional members of the public on boards that regulate executive and legislative ethics.

  • Ban on lobbyists' accepting contingency fees to influence legislation or regulations.

  • Random audits of lobbyists' disclosure reports by the state Election Law Enforcement Commission.

  • Ban on no-bid government contracts going to some firms that make campaign contributions.

  • But things are not as clear with the DeCotiis firm. Its $40,000 contribution was made up of 34 checks from 18 different lawyers, and there's no easy way to know which lawyers have an interest of more than 10 percent. Some, including those with the last name of DeCotiis, presumably hold a 10 percent interest. But others may not, and nothing in the law would stop the firm from getting a contract if those other attorneys were the ones giving the money.

    The law actually leaves it to the firms seeking a contract to file a written certification that they are eligible because they did not make any contributions that would trigger the ban. But just in case they did, the law allows them to ask the official who got the money to give it back - thus making them eligible for the contract.

    And, of course, there's nothing in the law to stop Deloitte & Touche – or anyone else – from landing a contract if its individual accountants make contributions instead of the firm itself.

    "This bill was not everything I wanted it to be," said Assemblywoman Loretta Weinberg, D-Teaneck, who sponsored the pay-to-play law and battled with Democratic leaders to make it tougher. "But I do believe that [with a law addressing] no-bid contracts, we'll be able to get at the most egregious allegations that have been made about professional services and pay-to-play.

    "It's better than what was there before and it's better than nothing," Weinberg said.

    Others' reforms

    But others have found ways to be tougher.

    When federal regulators cracked down a decade ago on pay-to-play among underwriters of government bonds – a reform sparked in part by a scandal in the administration of Gov. James J. Florio – they restricted contributions not only by brokerage firms but also by their employees. They also required disclosure of contributions by any lobbyists or consultants hired by the underwriters to help get them work.

    Since that time, contributions to state committees from bankers who underwrite government debt have declined markedly. Some employees of banking firms are still allowed to give, but only if they're not involved in the investment side of the business.

    Those restrictions by the Municipal Securities Rulemaking Board were a model used by the state Investment Council this year when it was crafting a policy to block political favoritism in hiring investment managers for the state's multibillion-dollar pension funds. The council is considering a rule that would bar any contract from going to a firm if the firm, its employees, or a company PAC gave a related political contribution in the previous two years.

    The proposal also tried to bar contributors from getting around the ban.

    "The practices of other states are largely distinguished by the magnitude of their loopholes," council Chairman Orin Kramer of Englewood wrote in a confidential memo. Kramer, a major Democratic contributor, argued for protecting the pension system from political hacks out to make a buck.

    "Probably the most difficult issues surround the multifarious indirect paths through which economic actors purchase political good will," he wrote. "Among high-end sophisticates in the political marketplace, it may take the form of funneling contributions to a low-visibility political committee which then makes independent expenditures or transfers to another committee, known as 'wheeling.'

    "Much more commonly, it involves retaining well-connected intermediaries whose influence arises at least in part from political contributions. ... We do not want investment managers to do indirectly [hiring major contributors as intermediaries] what we disallow them from doing directly [treating their own political contributions as a business development tool]."

    Debate over 'wheeling'

    Critics raised many of the same questions about the state's new pay-to-play law. They complained that it does too little to stop would-be contractors from contributing to legislative leadership committees, which can accept up to $25,000 a year, or to county committees, which can accept up to $37,000. Those committees, in turn, can pass unlimited money on to officials with the power to award a contract.

    It was already illegal to try to get around contribution limits by giving money to someone with the expectation that he would pass it along to the intended candidate. And the reform package increased penalties for doing so.

    Now, if someone evades contribution limits through wheeling, he will be subject to a fine of up to three times the amount of the contribution. And if the evasion is designed to get around the pay-to-play law, the penalty can be as much as the amount of the contract awarded, plus a five-year disqualification from receiving future government contracts.

    But proving such a scheme usually involves one player in the conspiracy agreeing to testify against another. A simpler way, included in a bill that passed the state Senate in March 2003 but died in the Assembly, was to cap how much a contractor could give overall.

    Roberts, the Assembly majority leader, said that approach was unconstitutional. In order to limit a business's eligibility for a government contract, he argued, there had to be a connection between the donation and the person or group with the power to award the contract. He argued that a stricter ban would violate free speech rights.

    Roberts also opposed limits on county-to-county transfers of donations.

    "The Republican Party in Burlington County, for example, wants Republicans around the state to be as strong as they can be, and should be able to send money to a county which is trying to build its party strength," Roberts said, deliberately selecting a GOP example.

    In the final negotiations on the pay-to-play law, Roberts did agree to a ban on county transfers during the first six months of every year, which Senate President Richard Codey, D-Essex, had sought. Such a ban would block a county boss from sending money into another county to influence a primary. But it would still allow party bosses to wheel money around the state to influence general elections in November.

    Some advocates for reform say these kinds of transfers make it more difficult to trace who is actually trying to influence officeholders; they say it could be time to question the wisdom of contribution limits. Among them is Gregg Edwards, a former executive director of the Senate Republican staff who worked on the commission that recommended the first contribution limits on legislators in the early Nineties.

    "Those reforms encouraged people to start sending money to other entities so those entities would then send that money to the intended beneficiary, all of which makes disclosure very difficult," Edwards said. "And to the extent that you make disclosure harder to police, harder to implement, harder to follow, then it's bad for the system."

    Roberts said that if reformers are unhappy with the final pay-to-play law, they would have been even more outraged if lawmakers had tried to dismantle existing contribution limits. Despite criticism of the new law, Roberts believes it and the overall reform effort will be a winning issue with the voters.

    Wish lists

    Overall, ELEC Executive Director Fred Herrmann said, the commission - which is getting a $2 million boost to its budget this year - was pleased with the package. But some reforms that ELEC had repeatedly sought in its annual reports to the governor and the Legislature were not implemented.

    For example, the commission wanted the state to follow the lead of the federal government and 46 other states and ban corporate contributions. It also recommended a ban on unions making direct contributions from their treasuries.

    In federal elections, corporations and unions may only make donations through PACs funded by voluntary donations from employees or members. New Jersey allows most corporations and all unions to make direct donations - as well as operate their own PACs - essentially allowing two bites at the contribution apple.

    Reform advocates have also called for the state to curb dual office-holding, which a researcher at the National Conference of State Legislatures said is more prevalent in New Jersey than anywhere else in the country. Allowing one person to be both a mayor and a legislator, for example, complicates enforcement of the pay-to-play ban: The mayor's local campaign might not be able to receive contributions from the municipal attorney, but the mayor's legislative war chest could happily take the money.

    The reform package was touted as restoring public confidence in elected officials, but events after its passage raised questions about how serious legislators were about policing themselves.

    State Sen. Joseph Coniglio, for example, sponsored a bill to revise conflict-of-interest rules for legislators and increase fines for violations from $1,500 to $10,000.

    Under the old law, lawmakers were allowed to vote on bills that would benefit them financially if they filed a statement saying they had impartially considered them. The new law, which took effect immediately, prohibited such votes.

    "It is long past time that the Legislature begin taking conflicts-of-interest voting seriously," Coniglio, D-Paramus, said when the bill was approved.

    But 11 days later, Coniglio, the former president and finance chairman of a plumbers union local in Lodi, voted for a bill the union had been seeking. It requires public construction projects using prefabricated materials to pay union-scale wages for any plumbing work.

    Coniglio, who retired in May from the local but remains a member, said he had no conflict. "I wasn't going to derive any profit from it," he said.

    Even McGreevey, when he signed the ethics package in June, conceded that he had hoped for more, especially on pay-to-play.

    "We should be proud of the example New Jersey has set for the rest of the nation, but we must also continue to work together to uphold the highest standards of ethical conduct," he said.

    Assembly leaders who devised most of the plan said they would be open to further changes. In particular, Weinberg is planning to push a bill later this year to clarify that municipalities and counties could impose stricter pay-to-play bans than the minimums set by the state law.

    "If the public's faith in government has been eroded, it's been eroded over time, and it will be restored over time," said Roberts.

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