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Government Corruption Arrests in NJ: Abuse of Nonprofits, Conduit Contributions, and A Network of Crooked Officials
Thursday, July 23rd, 2009
Robert Wechsler
A few local government ethics issues come together in the story
behind the arrest today of 44 people in a political corruption and
international money laundering ring based in New Jersey. The story is
best told, so far, in the
press release of the U.S. Attorney for the District of New Jersey.
Among those arrested are three mayors and a deputy mayor, two state assembly members, four rabbis, and numerous housing inspectors, investigators, aides, political consultants, and unsuccessful political candidates. I wrote about the last series of arrests in this ongoing investigation a couple of years ago.
For local government ethics purposes, there are three important issues: nonprofits, conduit campaign contributions, and the existence of a network of crooked local government officials.
The Abuse of Nonprofits
Nonprofits pop up in this blog far too often for my taste. In this instance, the proceeds of all sorts of criminal endeavors, including bank fraud and counterfeit goods, were laundered through synagogue and related nonprofits. This points, once again, at why government ethics practitioners have to pay close attention to relationships of officials with nonprofits, as unappetizing as it is to be and to seem critical of organizations we would prefer to admire.
Conduit Campaign Contributions
Conduit, or conversion, contributions are political contributions from straw men and women, that is, people who are handed money to give to candidates. It's the opposite of the more commonly discussed bundling. One could call it unbundling. The difference is that, whereas bundling gives too much influence to a small number of people, who could not otherwise buy such influence where there are individual contribution limits, unbundling, although it serves the same purpose, is a crime. And because it's a crime, there are no disclosure requirements. It's the perfect end run around campaign finance laws, at least if you don't get involved with someone who's turned state's evidence.
I should point that the only instances of conduit contributions that became public today were instances where one cooperating witness was involved. The fact that many officials were doing this implies that this is a common practice, perhaps even a "best practice" among a certain kind of official.
One advantage public campaign financing has over disclosure requirements and contribution limits is that it prevents this sort of gambit. If no one can give anything but a tiny contribution, who will bother with conduits, bundling, and other apparently legal approaches. Bags of cash will still be handed over inside Cadillacs, but there are many officials whose ethics won't accept this, but will accept semi-legal campaign contributions.
Network of Crooked Officials
The most frightening part of what the authorities found was a network of "trusted" local and state government officials, former officials, candidates, and advisers, who were known, at least to the principal fixer in this case, to accept bribes in return for help in approving a developer's project. The fixer, a state government administrator and former local government zoning commissioner, set up introductions with these officials, in return for $30,000.
The existence of such a network implies that a developer or contractor could go to just about anyone in the network to obtain referrals to the people who could smooth his way in return for cash bribes or conduit contributions. In fact, in this case, the first introduction came from an alleged money launderer, himself a developer. His introduction was to a building inspector, who then introduced the cooperating witness to the person who turned out to act as a fixer.
This image of at least countywide networks of crooked local officials and, possibly, a statewide network, leads one to believe that there is a local government official underworld, where the trusted officials are the ones on the take.
Yes, this is New Jersey, home of the Sopranos. But New Jersey hardly has a monopoly on government corruption. Its officials are likely following "best practices" invented elsewhere or, if they were indeed invented in New Jersey, they've probably shared them with their colleagues in other states.
What the FBI has unearthed will undermine people's trust in government even in New Jersey (if there was much left), but also elsewhere. It is important to create ethical environments in local governments wherever possible, because officials such as these do not thrive in such environments, and they certainly don't learn the ways of the underworld there. They are the outsiders, and therefore have little or nothing to sell.
Robert Wechsler
Director of Research-Retired, City Ethics
---
Among those arrested are three mayors and a deputy mayor, two state assembly members, four rabbis, and numerous housing inspectors, investigators, aides, political consultants, and unsuccessful political candidates. I wrote about the last series of arrests in this ongoing investigation a couple of years ago.
For local government ethics purposes, there are three important issues: nonprofits, conduit campaign contributions, and the existence of a network of crooked local government officials.
The Abuse of Nonprofits
Nonprofits pop up in this blog far too often for my taste. In this instance, the proceeds of all sorts of criminal endeavors, including bank fraud and counterfeit goods, were laundered through synagogue and related nonprofits. This points, once again, at why government ethics practitioners have to pay close attention to relationships of officials with nonprofits, as unappetizing as it is to be and to seem critical of organizations we would prefer to admire.
Conduit Campaign Contributions
Conduit, or conversion, contributions are political contributions from straw men and women, that is, people who are handed money to give to candidates. It's the opposite of the more commonly discussed bundling. One could call it unbundling. The difference is that, whereas bundling gives too much influence to a small number of people, who could not otherwise buy such influence where there are individual contribution limits, unbundling, although it serves the same purpose, is a crime. And because it's a crime, there are no disclosure requirements. It's the perfect end run around campaign finance laws, at least if you don't get involved with someone who's turned state's evidence.
I should point that the only instances of conduit contributions that became public today were instances where one cooperating witness was involved. The fact that many officials were doing this implies that this is a common practice, perhaps even a "best practice" among a certain kind of official.
One advantage public campaign financing has over disclosure requirements and contribution limits is that it prevents this sort of gambit. If no one can give anything but a tiny contribution, who will bother with conduits, bundling, and other apparently legal approaches. Bags of cash will still be handed over inside Cadillacs, but there are many officials whose ethics won't accept this, but will accept semi-legal campaign contributions.
Network of Crooked Officials
The most frightening part of what the authorities found was a network of "trusted" local and state government officials, former officials, candidates, and advisers, who were known, at least to the principal fixer in this case, to accept bribes in return for help in approving a developer's project. The fixer, a state government administrator and former local government zoning commissioner, set up introductions with these officials, in return for $30,000.
The existence of such a network implies that a developer or contractor could go to just about anyone in the network to obtain referrals to the people who could smooth his way in return for cash bribes or conduit contributions. In fact, in this case, the first introduction came from an alleged money launderer, himself a developer. His introduction was to a building inspector, who then introduced the cooperating witness to the person who turned out to act as a fixer.
This image of at least countywide networks of crooked local officials and, possibly, a statewide network, leads one to believe that there is a local government official underworld, where the trusted officials are the ones on the take.
Yes, this is New Jersey, home of the Sopranos. But New Jersey hardly has a monopoly on government corruption. Its officials are likely following "best practices" invented elsewhere or, if they were indeed invented in New Jersey, they've probably shared them with their colleagues in other states.
What the FBI has unearthed will undermine people's trust in government even in New Jersey (if there was much left), but also elsewhere. It is important to create ethical environments in local governments wherever possible, because officials such as these do not thrive in such environments, and they certainly don't learn the ways of the underworld there. They are the outsiders, and therefore have little or nothing to sell.
Robert Wechsler
Director of Research-Retired, City Ethics
---
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