Philadelphia Inquirer

Burlco Contractors Back GOP By Backing Loans

The Philadelphia Inquirer — Thursday, September 4, 2008

By Maya Rao
INQUIRER STAFF WRITER

Insurance company Anderson Jackson Metts last year wrote two checks to the Burlington County Republican Committee totaling $37,000, the maximum allowed under state election law.

Then, in the midst of a fiercely competitive campaign season, company president Tony Mahon joined 19 others guaranteeing $15,000 each on one large bank loan taken out by the Republican organization.

The company's donation and the loan guarantee - which together equaled one-fifth of Anderson Jackson Metts' county contract, the only government contract it reported to the state that year - offer an example of how the powerful Burlington County GOP helps fund campaigns.

Under a longtime arrangement, the committee almost annually has 20 people in its inner circle guarantee a loan of $200,000 to $300,000. The guarantors, including people who work for companies that hold contracts with county entities, frequently sign off on the loans after they or their companies write campaign checks for thousands of dollars.

The New Jersey Election Law Enforcement Commission considers a loan guarantee a campaign contribution until the loan is repaid, and guarantors are responsible for paying their portion of the loan if the committee defaults, although officials say it never has.

The commission says the practice is legal, but Burlington County Democrats contend that the extensive use of loan guarantors is yet another, less-scrutinized instance of pay-to-play, a system in which campaign contributions are traded for government contracts.

Democrats are not the only ones who object.

"Ultimately, there was an enormous pressure on me – and I know others have felt the same – to do this," said State Sen. Diane Allen (R., Burlington), who last guaranteed a loan in 2006. "If you receive money from the party to run, they basically hold that over your head and want you to sign guarantees."

The system raises concerns about conflicts of interest and campaign-finance restrictions, said Jim Walsh, program director for the government watchdog organization New Jersey Citizen Action. It appears to be a "roundabout way of getting somebody else to back a loan for you," he said.

The loan guarantees are all recorded in public state campaign-finance records, and Burlington County Republican chairman Bill Layton said the process was transparent.

Layton, himself a guarantor, said that the party used many guarantors to divide the risk evenly, and that people who signed their names on the loans were exercising their First Amendment rights. People contribute to the committee, he said, because they believe in the county government's record on spending and taxes.

An Inquirer review of 2006 and 2007 state election records for the Democratic and Republican committees in all 21 counties found that only the Burlington County Republican Committee used a system with extensive loan guarantees.

During that period, Sterling Bank in Mount Laurel lent the Burlington County GOP $550,000. The Republicans have taken out loans from the bank, backed by a group of guarantors, in eight out of the last nine years.

In 2007, two executives of EJA & Associates – one the the chief executive officer and the other identified by a company receptionist as chairman of the board – each guaranteed $15,000 in Republican loans. The insurance company, which earned $4.4 million from contracts with county entities last year, already had given the county committee $15,000 in regular campaign contributions.

And three employees of the law firm Capehart Scatchard, including former county GOP chairman Glenn Paulsen, each guaranteed $15,000 of Republican committee loans. The firm was prohibited from making direct contributions to a county party committee last year under the state's pay-to-play law because it held contracts with the state. The company that year earned $1.5 million from contracts with a range of county government entities.

The EJA officials, John and Eric Aloi, did not return messages seeking comment, nor did Anderson Jackson Metts.

Paulsen said that Capehart Scatchard had hundreds of employees, that contributions by employees were separate from those by their employer, and that the loan guarantees had been "completely transparent and completely in accordance with the law."

He said the loans had helped the GOP defend the county "against outside influences, in particular the Camden County Democrats, who historically exported money in an effort to take over Burlington County government."

Other recent guarantors include George Nyikita, who guaranteed loans when he was executive director of the Burlington County Bridge Commission; a bridge commissioner, Priscilla Anderson; several attorneys for the county's Board of Social Services who already had given heavily through traditional contributions; Charles Lambiase, who has done business with the county and is the county GOP's treasurer; and various retired and current elected officials.

On Aug. 20, the Burlington County Democratic Committee posted a scathing nine-minute video on its Web site, www.burlcodems.com, that called the investors "Paulsen's 20," saying the guarantors had received $30 million since 2006 in government contracts, salaries and pension credits. That number, however, was driven into the millions by a few companies' large contracts and included municipal contracts in GOP-controlled towns. Most guarantors don't draw more than $120,000 in government salaries.

County Democratic chairman Rick Perr said that guarantors' "having their guarantees backed up by the fact they have contracts is another subtle way in which the donation process is manipulated."

"I know historically that people have loans, but I never heard of the situation in which loans are taken out in such large amounts and guarantors are pretty much uniformly on the payroll of the government," he added.

It is not uncommon for committees to receive loans, and the Burlington County Republicans are hardly the only organization to invite scrutiny over loan practices.

A Democratic state Senate candidate and mayor from Union County last year received hundreds of thousands of dollars in loans from people who depended on him for their jobs, the Newark Star-Ledger reported.

In 2003, a flurry of last-minute loans to the powerful Camden County Democratic Committee, many for the $37,000 legal limit and together worth $1.2 million, helped state Senate candidate Fred Madden eke out a victory in the Fourth District.

Atlantic County Republican chairman Keith Davis said his organization had not used loans because he did not like being in debt. He sharply criticized Camden County Democrats, though, for "wheeling their money into Burlington and Atlantic to try to take over their counties" and put their "fat cats" on the payroll.

The Camden County Democratic Committee did not return a call for comment.

Burlington County's GOP committee and its candidates for county office this year have raised more than $130,000 in traditional contributions from people or entities that hold county contracts, records show. Layton said he was unsure whether the Republican freeholders running for election – Aubrey Fenton and Stacey Jordan – would propose tougher campaign donation limits for contractors, though the Democrats have already pledged to do so.

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