making local government more ethical

The Black Boxes Known as Campaign Vendors

ProPublica ran an excellent article yesterday by Kim Barker and Al Shaw about campaign, PAC, and Super PAC coordination and self-dealing, primarily at the presidential level. What is so special about the article is that it follows the money to where it is being spent. The authors found that many PAC and Super PAC vendors are the same vendors, or different vendors owned by the same people, as the presidential campaigns'. In other words, presidential consultants are also PAC consultants or vendors.

This is also a problem at the local level, especially with local public financing programs, where coordination with PACs is less of an issue (the money is spent on other campaigns). What is prohibited is the taking of funds from PACs. What happens instead is that PACs sometimes pay a candidate's consultants and other vendors, including landlords and utilities when they share an office.

But that's only one of the ways local candidates use vendors to get around prohibitions and limitations.

While candidates cannot usually pay their relatives with campaign funds, they can often do this indirectly through vendors, especially since vendors don't have to make disclosures about who owns them or whom they hire. And PACs are generally not limited in the same way. Pay to play contributions to an affiliated PAC can be used to pay an official's relatives, or the relatives of major contributors.

The ProPublica article discusses the murkiness of some campaign vendors, which are created just for the campaign. This probably does not happen too often at the local level, but even established campaign vendors are black boxes. Money goes into a designer, printer, pollster, ad producer, or mailer from many campaigns (usually from one party's candidates and often from one state or area) and mailers, ads, and polling results come out. It is hard to know who paid for what. Or even when.

Here's what that black box can be used for. An established city council member has little or no opposition in this year's election. He could spend nothing and win. But he wants to be mayor, and to be mayor he needs to have lots of people obligated to support him. A good way to do this is to raise lots of unnecessary money and spread it around to other council candidates and PACs. But there are limitations on this, especially where there is public financing. What the council member can do, however, is raise lots of money, pay it to the usual campaign vendors, but only get a percentage of the mailers and ads that money could buy. The rest of the money can sit in an account at the vendor, ready to be shifted into another campaign or PAC's account whenever the council member wants to make a gift over the legal limit.

In short, campaign funds can be laundered through vendors.The council member uses campaign funds he doesn't need in order to line up supporters for the next mayoral election (or a mayor for the next congressional or gubernatorial election). The vendors get extra business. The other council campaigns and PACs get more money than they could raise themselves. It's in no one's interest to tattle. Without full disclosure, it is hard for anyone to know this is happening.

It is not enough to follow the money from contributor to campaign. The money also needs to be followed through vendors. Substantial vendors should not be black boxes. They need to be opened up:  their accounts, their ownership, and their employees and contractors, to the extent they have special relationships with the candidates or the top campaign staff.

Robert Wechsler
Director of Research, City Ethics