Catastrophe (30 page)

No-Bid Contracts Exchanged for Campaign Cash

In many states, there seems to be a very close correlation between companies that are awarded huge no-bid contracts by governors and those that contribute big bucks to the campaigns of those same governors.

It’s happening all over.

It’s called pay to play, and it means just what it sounds like: if you want to play in the highly lucrative state contract system, you have to pay.

That means making campaign contributions—big ones. And, for the most part, it means corruption.

According to Craig Holman, a public interest lobbyist for
Public Citizen
, “pay-to-play” is an “act of official corruption or the appearance of public corruption. Even where there is no agreement between contractor and government official, large donations from people who win contracts raise an appearance of a problem with the public.”
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And that appearance of a problem is spreading through statehouses all over the country.

Take a look at Pennsylvania, where Democratic governor Edward Rendell awarded a no-bid contract to advise the Pennsylvania Housing Finance Authority to David Rubin, the head of CDR Financial Products, after Rubin made $40,000 in campaign contributions to Rendell.
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Rubin has been in the news lately. It seems his company was awarded another no-bid contract in New Mexico—for $1.5 million, after making a $100,000 contribution to Governor Bill Richardson’s campaign committees.
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Rendell, Richardson, and Rubin all deny any wrongdoing. But Rubin’s company is under investigation by a federal grand jury in New Mexico to determine whether there was, in fact, a pay-to-play arrangement.

We’ve all watched the drama in Illinois, where the wacky former governor, Rod Blagojevich, allegedly tried to sell Barack Obama’s old Senate seat. He also granted a $300,000 state contract to suggest minority contractors for state highway projects.
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Guess who got that one? Roland Burris, the guy Blago named to Obama’s Senate seat, perhaps because Burris had given Blagojevich $20,000 in campaign donations.
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And it’s not just governors who are involved in these questionable contracts; the practice continues throughout the food chain of elected officials, from congressmen to attorney generals to mayors.

Several years ago, the Department of Homeland Security awarded a no-bid contract to the American Association of Airport Executives, its Transportation Security Clearinghouse division, and Daon, an Irish biotech company. Tom Ridge, the former director of Homeland Security, was a director of Daon. The contract, potentially worth hundreds of millions of dollars, assigned the groups the task of issuing secure identification cards to millions of transportation workers.

But it wasn’t Ridge who pushed for the contract. It was Congressman Hal Rogers (D-KY) who sponsored an earmark for the project. Not everyone shared Rogers’s glowing view of the American Association of Airline Executives. According to the
New York Times
, questions were raised by critics of the contract about “how the association, with little experience in high-technology secure identifications and biometrics, could handle such a task.”
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How did Rogers get interested in the issue? Maybe it happened when he and his wife went on a free trip to Ireland that was cosponsored by the association and Daon. Or maybe it was on one of the many other trips Rogers and his wife took on the association’s dime—trips that cost a total of almost $70,000.
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Or maybe it was the $18,000 in campaign contributions.
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(For
more information about Rogers’s many travels at the expense of special interests he befriends, see our book
Outrage.
)

After all these kindnesses, Congressman Rogers was only too happy to do a favor for a friend.

But he’s not alone. Both parties participate in pay-to-play schemes.

The City of Indianapolis was trying to raise cash by selling off 1,100 properties—including police stations, maintenance buildings, and parks. The
Indianapolis Business Journal
reported that the Republican mayor of the city, Gregory A. Ballard, gave the contract to a guy who had given $25,000 to the campaigns of Indiana’s Republican governor, Mitch Daniels, and who had hired a lawyer who is the mayor’s “right-hand man.”
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That’s what friends are for!

Sometimes you need special qualifications to get your hands on the goodies you want. Qualifications, for instance, such as being married to then–Michigan state attorney general Jennifer Granholm, now the state’s governor. Her husband, Daniel Mulhern, got nearly $300,000 in no-bid “leadership training” contracts from Wayne County while Jennifer was the county’s chief attorney.
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Want to invest $25,000? You may be too late. Before he was removed from office, you should have given the money to Rod Blagojevich. He knew how to take care of campaign contributors. As the
Chicago Tribune
reports, three-quarters of the 235 people who donated that much or more to his campaigns received special favors, such as “lucrative state contracts, coveted state board appointments, or favorable policy and regulatory actions.”
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No-bid contracts are the latest gravy train for state and local governments throughout the country. There is no reliable estimate of the scope of the practice, but it’s making negative headlines from New Mexico to South Dakota to Pennsylvania to Indiana to Illinois to Michigan.

Most government contracts are awarded only after closely monitored competitive bidding. Typically, those who want the business submit sealed bids. The public officials shepherding the process aren’t supposed to confer with the bidders; they are supposed to open all the bids at the same time, and the lowest bidder gets the contract. Obviously, there have to be exceptions: federal law, for example, allows no-bid contracts where only one firm
is able to do the work, in an emergency, or where one firm demonstrates that it has “a unique and innovative” concept for the work.
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But give a politician a fat piece of candy like a no-bid contract to dole out, and chances are good that he’ll give it to his favorite—and a politician’s favor usually rests on those who donate generously to his campaign.

But wait
, you may be thinking,
isn’t that illegal?
It depends on the transaction. If the public official specifically links the donation to his campaign to the contract, he’ll wind up in prison. But if all that happens is that (first) A gives to B’s campaign and then (second) B awards A a no-bid contract, it can be hard for prosecutors to prove any linkage between the two events. If both sides use winks and nods instead of words—and nobody’s videotaped or recorded—the deal can be hard to prosecute.

Such pay-to-play shenanigans may not be illegal, but that doesn’t mean they’re not corrupt. And corruption is eating away at our faith in democracy, a catastrophe in the making.

We can’t sit back and wait for public prosecutors to police our system. It’s too hard to prove a corrupt arrangement in court. But we can use publicity to identify the culprits and bring them before the court of public opinion.

You’ll notice that this chapter goes after both Democrats and Republicans. That’s because neither party has a monopoly on corruption—and both could use a thorough housecleaning.

Let’s look in greater detail at the larceny going on right under our noses:

SENATOR ROLAND BURRIS (D-IL)

For example, there’s the man whom former Illinois governor Rod Blagojevich appointed to fill Obama’s seat in the Senate: Roland Burris. Blago appointed Burris after federal prosecutors taped him trying to sell the seat to suitors such as Congressman Jesse Jackson, Jr., and others. Blagojevich got the right to name Burris, despite his pending prosecution, because the Illinois legislature refused to pass a bill requiring a special election to fill the seat—probably because they were worried about a Republican victory—and because it took its sweet time impeaching him and ousting him from office.

Did Burris pay for his seat? Many times over. Roland Burris, a former Illinois attorney general, has been on the giving and receiving end of dubious favors for more than a decade.

One thing about Burris is for certain: he gave as good as he got!

He gave:
When he was attorney general, Burris doled out no-bid contracts like any good Chicago pol. In 1992, his office signed about $4 million in such deals for outside legal help.
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More than half that amount—$2.25 million—went to lawyers and firms that had anted up and donated to Burris’s attorney general campaign or the main Democratic fund-raising committee.
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After leaving his seat as state attorney general, Burris kept his position as a top money source for Governor Blagojevich, hosting a fund-raiser for him and donating, through various companies, at least $20,000 to his campaigns.
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He gave, but he also made sure he got. As a private citizen (and generous campaign donor), Burris received more than $1 million in no-bid consulting contracts from Illinois state government agencies controlled by the governor.
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The cushiest one was a $290,000 contract to scour the state looking for firms that might qualify for state Department of Transportation contracts under the affirmative action program.
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Companies from all over the United States hired Burris to arrange state business for them. A Philadelphia firm, Loop Capital Markets, received more than $750,000 in pension bond business after it hired Burris for $5,000 per month to steer projects its way.
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Another company, ACS Healthcare Solutions, hired Burris for $240,000 and landed an $18 million contract with the Cook County public health system to help collect unpaid bills. But ACS ran into big trouble in Las Vegas, where it was named in the indictment of a public hospital official. That led the county to pull the contract.
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More fortunate was Central DuPage Hospital, which hired Burris and his partner, Fred Lebed, to win “approval from state hospital regulators to build a $140 million cutting-edge cancer treatment center, even though the board had initially opposed the idea and approved building a similar facility just a few miles away.”
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But Central DuPage got the approval it sought by arguing that there “was room for more than one proton center in the Chicago region [even though] there are only five such facilities operating in the United States.”
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Probably Burris’s most suspect transaction came as he left private life to become state attorney general. His old law firm, which had no history of working for the state, gave him a “buyout” of $100,000, allegedly for work
he had done before he became attorney general.
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Once in office, Burris turned around and gave his old firm $436,000 of no-bid state legal work!
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Nothing like a nice clean quid pro quo!

Most governors try to appoint men and women who mirror their philosophy of government. Blagojevich sure found his man.

FORMER GOVERNOR ROD BLAGOJEVICH (D-IL)

Of course, Burris’s activities are only the tip of the iceberg called Rod Blagojevich, whose name has become a national synonym for political corruption. Blagojevich had been a colorful regional figure for years, but he really achieved national prominence late in 2008, when FBI wiretap tapes were released that revealed him crassly evaluating how much he should get paid for appointing someone to President-elect Obama’s Senate seat.

But why were the feds tapping Blago’s phone in the first place? Why had they bugged his office? The wiretaps were there because Blagojevich was under investigation for his long history of selling contracts to political donors. Selling the U.S. Senate seat was just his latest ploy.

We’ll probably never know the full scope of his corruption, but what we do know makes quite a story.

And on and on. If Blagojevich had a job or a contract within his power to award, it seems, it was available in exchange for campaign contributions. The price? Twenty-five thousand dollars—not a princely sum, but a little here and a little there, and soon you’re talking about real money!

GOVERNOR ED RENDELL (D-PA)

At least they caught Blagojevich. As of this writing, another governor is still in office despite awarding no-bid contracts to special friends, former colleagues, and donors. Governor Ed Rendell of Pennsylvania, a former Democratic National Committee chairman, has come under withering media criticism for giving out legal and consulting contracts without bidding, but not without demanding favors from the recipients.