Political Contributions and Government Contracts: A Fine Line

Political Contributions and Government Contracts: A Fine Line
By: Chris Freind

BULLETIN

While Americans voted in record numbers in last week’s election, surveys show that the electorate’s view of politicians is near an all-time low. Many harbor the mentality that "they’re all crooks," believing corruption and back- room deals are commonplace between political figures and their big-money contributors. Some cases clearly have crossed the legal line, but for the most part, "business as usual", unethical as it may seem to many, continues unimpeded at the state and local level. Legality and ethics are distinctly separate issues.

To be sure, there are numerous examples of illicit activity which have solidified the cynical mindset of voters. Several prominent members of former Philadelphia Mayor John Street’s inner circle were indicted, and some convicted, of "pay-to-play" schemes. City Treasurer Corey Kemp was convicted on 27 charges, including extortion and honest services fraud, and several businessmen were convicted of conspiracy and fraud. Ronald White, longtime confidante and fundraiser of Mayor Street, was indicted but died before his trial commenced.

Philadelphia State Senator Vince Fumo, one of the most powerful politicians in Pennsylvania, is currently on trial facing 139 criminal counts dealing with public corruption.

And in Harrisburg, twelve individuals have been charged in the "Bonus Gate" scandal in which legislative staffers stand accused of receiving taxpayer-funded bonuses for performing campaign work. Two defendants have agreed to plead guilty and are cooperating with the government. More indictments are expected in the coming months.

Pay-to-play is a term which generally relates to the illegal practice of giving political contributions in return for government contracts. Violators can be prosecuted under an array of charges, including the federal Honest Services Fraud Statute, which stipulates that it is a crime to engage in a conspiracy to deny taxpayers the honest services of their elected officials.

Investigators and prosecutors, however, face a significant hurdle since it is inherently difficult to prove pay-to-play activity. Without "smoking guns," such as explicit tape recordings or written documents clearly demonstrating a quid pro quo arrangement, prosecutions are rarely undertaken. Rather than being labeled "pay-to-play," relationships between financial backers and elected officials are viewed as the cost of doing business with the government. Many politically connected companies feel that contributions "keep them in the game." Elected officials need only to tell them that they will be considered. No guarantee of a contract is necessary.

While this type of activity gives the appearance of impropriety, skirting the line of ethical business practices, it remains the predominant manner in which business is conducted.

Several prominent examples:

While a state senator, Vince Fumo was also a partner at the Dilworth Paxon law firm. For obvious reasons, Mr. Fumo was not "in the law office" on a regular basis, but was compensated because of his status as a political rainmaker. For example, he is generally acknowledged as having been instrumental in bringing the firm such prominent clients as Independence Blue Cross, the Pennsylvania Turnpike Commission, and the Pennsylvania Higher Education Assistance Agency (PHEAA), all of which are closely connected with state government. Sen. Fumo had close friends at each entity, and even sat on the boards of PHEAA and Blue Cross. Despite this, spokesmen for these organizations uttered the standard line that Mr. Fumo had no bearing on the entity’s choice of Dilworth as their law firm.

Another instance raising significant ethical questions is Governor Rendell’s relationship with Ballard Spahr, the law firm for whom he worked prior to his 2002 election as Governor. Since Mr. Rendell assumed office, Ballard has received millions in legal fees from entities tied to the Governor. Specifically, from 1999 to 2001, Ballard received $25,000 from the Delaware River Port Authority (DRPA), including just $480 in 2001, but since Rendell’s election in 2002, has received $2.7 million. After becoming Governor of Pennsylvania, Rendell appointed himself Chairman of DRPA. Gov. Rendell’s former Chief of Staff, John Estey, and former Deputy Chief of Staff, Adrian King, are partners at Ballard, and both serve in prominent roles at DRPA. Mr. Estey is the Chairman-designate, voting on behalf of the Governor, and Mr. King serves as Outside Counsel. The Ballard firm is the largest recipient of legal fees from the Port Authority.

The Ballard firm has also received over $2 million in no-bid contracts for work related to the Pennsylvania Turnpike. Ballard attorneys have contributed nearly $500,000 to the Governor’s campaigns. The Philadelphia Future Political Action Committee, registered at the Ballard offices and whose Treasurer is former Ballard Chairman David Cohen, donated $471,000 to Mr. Rendell.

Chris Freind can be reached at [email protected]