Extortion (9 page)

Politicians report making hundreds of phone calls between legislative votes, committee hearings, and nightly fund-raising receptions (sometimes multiple receptions in the same night). Closed-door fund-raisers in Washington are ritualistic events with their own set of unwritten rules. The media and the general public are not invited in. And an “invitation” to one of these events is a little like the studio boss being “invited” to reconsider his decision not to include Johnny in his movie. You can choose not to attend the event, or choose not to donate, but you may very well suffer the consequences.

In the days leading up to the contentious Dodd-Frank financial reform bill vote, Congressman Joseph Crowley, a member of the powerful House Ways and Means Committee, held four fund-raising events targeting financial institutions that stood to gain or lose from the vote. The day before the final vote, Crowley held two fund-raising events, including a cocktail hour hosted at a lobbyist’s home. Of the forty-two guests who showed up, thirty-one were lobbyists for the financial reform bill or their coworkers. After cocktails, Crowley then went to a dinner with thirteen other lobbyists who were working on the financial reform bill. The cost to attend was $2,500 for PACs or $1,000 for individuals. Emails from his campaign show that he specifically targeted financial industry lobbyists for donations. Crowley raised $90,000 in one night.
⁴

The day before the final vote on Dodd-Frank, Congressman Tom Price of Georgia, a member of the Financial Services Committee, solicited donations at a “Financial Services Industry Luncheon.” It was organized with the input of Bank of America employees, who helped to write the invitation list. All but three of the individuals who attended Price’s luncheon were lobbyists for the bill.
⁵

Congressman John Campbell of California, also a member of the House Financial Services Committee, asked representatives of several large financial institutions—Bank of America, Chubb Corporation, MasterCard, and New York Life—if they wanted one-on-one meetings about the bill. Campbell also held a “Financial Services Dinner” in October 2009, one day before the markup of the bill in committee. Like Price and Crowley, Campbell also held multiple fund-raising events in the days before the final vote.
⁶

John Hofmeister, the former president of Shell Oil, recalls, “If you are invited, you are expected to be there. There is an implicit aspect of the request that makes that clear. And when you get there, you better show up with a check.”

Hofmeister’s description of these events resembles a shakedown. Not much needs to be said, unless you fail to comply. “You are standing in the room, and there is a glass bowl in the center. You are supposed to place your check in that bowl. Someone who works for the politician is watching from the corner to make sure everyone puts their check in the bowl. It’s public. If you don’t—they are going to come and ask you why. That is the expectation.”

And if you fail to pay your tithe? Politicians will be very blunt, says Hofmeister. “‘Why am I meeting with you?’ they will ask. ‘What have you done for me?’”

Many executives and corporate PACs do what Hofmeister did—they purposely give to both sides. It’s kind of like paying protection money to two rival gangs. “I made it a practice to give to each side equally,” he told me. “If you want access or to raise something with them that concerns you, they check to see if you are a donor before they meet with you.”

Politicians spend so much time raising money because that is how you win elections. Outspending your opponent is no guarantee, of course. American politics is full of examples of wealthy candidates going down in flames. But the evidence is pretty overwhelming that money matters. Nine out of ten times in the House of Representatives, and eight out of ten times in the Senate, the candidate who spends the most money wins.
⁷

Campaigning has always required money to reach voters. Back in 1757, a young fresh-faced former Army lieutenant named George Washington ran for a seat in Virginia’s House of Burgesses. He “provided his friends with the customary means of winning votes” by delivering a quart and a half of cider, wine, and beer to each of the 391 voters in his district.
⁸

Today you can substitute media advertising and data sets for wine and beer as the best way to reach voters.

Most politicians absolutely hate raising money. Many will echo the words of former congressman Walter Minnick of Idaho, who said, “It’s absolutely the most distasteful thing to do as a congressman, or a senator, or a candidate.”
⁹
Connecticut’s Senator Chris Murphy laments having to squeeze fund-raising events between floor votes and says, “The conditions under which we labor are pretty depressing.”
¹⁰

This very fact, that politicians generally hate raising money, is a good reason to keep the current system. Having to raise money is one of the few things that keeps these people humble. As former senator Slade Gorton recalls, “I felt that for all of us who were senators, and who were being treated as minor nobility, that the fact that we had to go ask people for money was very healthy and that it gave you at least a slight degree of humility.”
¹¹

The problem is not that politicians need to raise money; the problem is in how they do it, and in how they can redirect funds once they have them. Reformers want to restrict fund-raising (some even call for taxpayer-funded elections) because they believe that fund-raising is ultimately about “buying votes.” But the reality is that there is little evidence that vote-buying actually goes on in the way most people think it does. Three political scientists compared more than forty studies on the links between PAC donations and votes and found that, “in three out of four instances, campaign contributions had no statistically significant effects on legislation or had the ‘wrong’ sign—suggesting that more contributions lead to less support.”
¹²

Two other scholars looked at a large amount of academic data on campaign contributions and congressional voting and concluded that, with the preexisting views of politicians factored in, there is very little evidence that campaign contributions directly influence voting.
¹³
So why give money? If you are a CEO and you are spending millions of dollars on lobbying, without any statistically significant result, you are letting down your shareholders. Why do it?

Because you think you have no choice. Campaign contributions are not about buying votes, they are often about extortion. Legislators have the bargaining power, and they largely initiate solicitations of money. It isn’t a bribe. In white-collar crime, the distinction between bribery and extortion is often based on the determination of “which party initiates the exchange.”
¹⁴
This also explains why many corporate executives and PACs largely give to incumbents regardless of party. A challenger can’t do very much to them. But if they fund only the losing candidate, there might be hell to pay from the winner. If it’s a close election, execs might hedge their bets and give to both candidates to secure protection from both sides.
¹⁵
Of course, once an election is over, there is only one extortionist left. Corporate PACs send money “disproportionately to incumbents, majority party members, and those serving in leadership positions, especially those on the most powerful committees.”
¹⁶

Committee chairs and ranking party officers (leader, whip, etc.) face their own pressure to extort. The underground money economy of the Permanent Political Class works in hidden ways. When newly elected members of Congress come to Washington, D.C., they often find that they—much to their surprise—are already in debt. And we aren’t talking about the national debt.

Both Democrats and Republicans in the House of Representatives have created a largely hidden system of “party dues” that requires members to extract money beyond their own campaign donations to fund their respective parties.

These party dues are not voluntary. Members are not asked to pay—they are required to pay. And paying those dues greatly influences which committee or subcommittee assignment they get.

We want to believe that committee assignments are based on knowledge, expertise, and background. But a member of Congress will end up on a powerful committee like the House Ways and Means Committee or Financial Services Committee only if he or she can raise money. The more powerful their committee assignments, the more money members are expected to extract from the industries they have oversight over or regulate. For a newly elected member of Congress on a weak committee—for example, the Ethics Committee, which is considered the least attractive committee for a variety of reasons—the annual party dues can run around $150,000. And for those on a powerful committee? The sky is the limit. Those in leadership positions or on powerful committees can be expected to raise $600,000 or more as part of the system.

The Democratic and Republican Parties both have internal party dues lists in the House of Representatives that make it very clear that leadership positions and committee assignments come with a price tag.

For the Democrats, being the ranking member on an exclusive committee like Ways and Means or House Financial Services will run you $500,000 in the 2013–2014 election cycle, according to internal party documents. Being the ranking member of a less powerful committee means giving the party $250,000. If you’re happy being a rank-and-file member, you only need to raise $125,000.
¹⁷

The Republicans have a similar system. At the National Republican Congressional Committee, they actually post the price list for each Republican member of Congress on the wall. If you are behind in what you need to pay, it is marked in red for everyone to see. The list is broken down into sixths for any calendar year. So Congressman Fred Upton, chairman of the powerful Energy and Commerce Committee, is required to raise $990,000 for this election cycle for the party.
¹⁸
Congressman David Camp, chairman of the powerful Ways and Means Committee, is expected to do the same.
¹⁹
Congressman Lamar Smith, chairman of the less prestigious House Judiciary Committee, is expected to kick in $405,000, according to party documents.
²⁰

Democrats have a “members points system” that rewards congresspersons for collecting cash and attending party fund-raisers. The amount of money raised is extraordinary and separate from the fund-raising they do for their own campaign committees. Congresswoman Nancy Pelosi, according to internal Democratic Congressional Campaign Committee (DCCC) documents, raised a stunning $52.9 million for the party in 2011–2012. Speaker of the House John Boehner raised even more.

Raising money is what helps an ambitious member of the House rise in the ranks far more than ideas or competence. For example, according to DCCC documents for the 2011–2012 election cycle, Congressman Joe Crowley of New York was a vice chairman of the DCCC in that election cycle and raised over $8 million. As a result, he is now the Democratic Caucus vice chairman.
²¹
Congresswoman Alyson Schwartz also raised millions and in early 2013 was reappointed to the powerful House Ways and Means Committee, after being removed the cycle before.
²²
On the other hand, the failure to raise funds means the possibility of being cut loose. Congressman Gary Miller of California, according to internal Republican Party documents, was more than $359,000 behind in his 2012 dues and was not going to receive support through the party’s “Patriot Program,” a “goal-oriented program” that offers extensive support and assistance for those seeking reelection, even though Miller is in what some analysts have said is the most vulnerable district in the country.
²³
(Internal party dues documents from both parties are reprinted in Appendix 1.)

But you get what you pay for. Built into these valuations is the implicit extortion value of the seat. Sitting on the House Financial Services Committee means you can extract lots of money from wealthy financial institutions. But a slot on the Ethics Committee gives you little opportunity for extortion—except perhaps from your fellow members of Congress who are facing ethics investigations. Members of the Ethics Committee can and do receive donations from their colleagues and party leadership! The modern congressional-assignment pricing system is very much like the old Tammany Hall machine in New York City. At its height, Tammany could charge a candidate a fee to allow him to run for office (which meant winning that office, since New York City was a one-party town). If you wanted to be a senator, you paid. Once you were in office, you could earn back your investment through graft.

Today’s Congress is similar. It’s a largely pay-to-play system. Politicians who get on a powerful committee but refuse to pay their dues will get yanked from the committee no matter how knowledgeable they might be on the relevant issues. House Minority Whip Steny Hoyer suggested such a thing might happen when several members on powerful committees weren’t raising enough money. He threatened them with a “separate vote on their panel [committee] assignments if they fail to pay their party dues,” reported the
National Journal Daily
. One of Hoyer’s top aides told the magazine, “You sit on an exclusive committee and you have a responsibility to do more.” It was a thinly veiled reference to extracting more money.
²⁴