Go back to Tracker -- Winter 1999
Tracking the Statehouse Sellout
Suzanne McBride and Janet E. Williams
The Indianapolis Star and The Indianapolis NewsFollow the money.
For more than two years, that has been our motto at The Indianapolis Star and The Indianapolis News.
For the better part of the last two and a half years, we have been writing about money and politics in the Indiana Legislature. The result is an ongoing series, "Statehouse Sellout" (the entire series can be viewed from www.starnews.com/news/special/sellout4.html). The first series ran for five days in February 1996 and detailed how several bills backed by the state's most powerful special interests became law during the 1995 session. It also explained how the careers of two legislative leaders were intertwined with their work as lawmakers and how the state's 1,200 lobbyists determine the legislature's agenda.
In December 1996, we decided to revisit "Statehouse Sellout." We began work in January 1997 on three stories that ran that spring. One article detailed how the tobacco and nursing home industries ensured the legislature would override the governor's veto on two major bills. Another story explained how the newspapers identified more than a dozen corporations that had violated the state's contribution limit law. The final article explained what happened to campaign finance legislation in the 1997 session that would have dramatically changed the system. To no one's surprise, that legislation died.
After those stories were published, the Indiana Election Commission took unprecedented action by holding special hearings and ultimately fining several businesses for breaking the state's laws governing contribution limits.
What next? We decided to examine the issue from another angle. We did what journalists are supposed to do: question the most basic premises. In this case it was lawmakers' mantra that they need lots of special interest money to pay for expensive TV and newspapers ads. Lawmaker after lawmaker insisted that most campaign cash was spent on media advertising and maybe a few glossy campaign brochures. Was this true? Was the media indeed the culprit in driving up the cost of campaigns? We had no idea.
Until summer 1997, we worked with a database of contributions to every legislative candidate. The database, which ultimately covered 1994 to 1996, was compiled in cooperation with the Center for Public Integrity in Washington, D.C.
But this database didn't contain information on a single expenditure.
We knew we had to do it ourselves. We spent about a month typing in every single expense reported in 1995 and 1996 by each of 150 lawmakers. We entered information from four reports for each lawmaker into a Paradox relational database program. But before we started entering the 11,000 expenses, we had to decide how to code the expenses, which ranged from TV ads and cell phones to babysitting and funeral flowers.
We consulted with political scientist Kent Redfield, who had done a similar project at the University of Illinois-Springfield. From there we developed a list of more than 40 codes. For instance, a TV ad was given its own three-digit code, while babysitting got another three-digit code.
All the codes were then grouped into categories. The 200s were direct campaign expenses such as TV ads and campaign staff. The 500s codes were indirect or unrelated expenses, which included flowers, wedding gifts, babysitting and other such interesting expenses. Another broad category covered transfers of cash from one lawmaker's campaign to another candidate's coffers.
Once all the data entry was finished, the fun really began. We analyzed the data to determine how much lawmakers had spent on particular expenses and to detect patterns of spending.
The analysis revealed that lawmakers spent only 20 cents of each campaign dollar on getting themselves elected. The bulk of their money was spent on items or services that had little or nothing to do with a legislator's election. Much of it went to other candidates. This practice, known as transfers, is banned in several states but not in Indiana. And of course, some of it went to babysitters, athletic ticket vendors and car dealerships.
The expense stories ran for four days in August 1997. After that, lawmakers asked us if "Statehouse Sellout'' would ever end. Not yet. We began work on the fourth round of stories, which were published in January 1998.
In round four, we did an analysis of all the legislation that went to the governor's desk in 1997. Each of the 262 bills was coded to show which special interest groups would be most affected by the legislation. The legislative database was then run against the 1995-1996 contribution database to determine if any of the sponsors had received donations from those groups.
We found that nearly every lawmaker who sponsored legislation got money from the special interest groups most interested in that bill. If we had a few more months, we would have expanded the bill database to include all introduced legislation. We suspect this pattern would have been even more pronounced, with lawmakers who got the most money having the best luck in getting their bills passed.
Another story detailed how several lawmakers got bills passed that helped them or their employers, or in one case would have punished a not-for-profit group that had fired the legislator.
The final article shed some light on the three men who gave the most money to legislative candidates in the 1996 election cycle. Until we worked on the story, readers knew little if anything about these mystery men. Although they gave tens of thousands of dollars to lawmakers, few seemed to know much about them.
As it turned out, one man who owned a fireworks business had been sued by the federal government and could no longer sell the product in his home state of Missouri. Another man from Dallas was closely linked to an Indiana insurance executive who is barred from contributing because his company owns a riverboat license. And the third man, the only one who lives in Indiana, made part of his fortune peddling a sex drug that is now banned in the United States.
In March 1998, a few days after the legislature adjourned for the year, the newspapers published three more stories on the subject. Readers learned that state leaders aren't interested in changing Indiana's campaign finance laws. Reforms in other states have passed only after major scandals rocked those legislatures. Another story explained what effect the First Amendment has on contribution limits. And the third article gave readers a forum in which to air their feelings on the subject. A record 2,400 readers completed a short survey that ran with the round four stories. Many of those readers sent letters and dozens of others called. No other story in the history of either newspaper has elicited the tremendous response of "Statehouse Sellout.''
Much to the dismay of many politicians, our commitment to covering the influence of money on state politics continues. Our goal is to incorporate the techniques we developed on this project into our daily coverage of issues at the Indiana Statehouse. The public deserves no less.
Suzanne McBride can be reached at (317) 635-7580 or by e-mail at smcbride@starnews.com.
Janet E. Williams can be reached at (317)633-9888 or by e-mail at jwilli5112@aol.com.
Developer Stalls Regulators
Toni Whitt
The Virginian-PilotUsing campaign finance records, The Virginian-Pilot detailed how a developer kept an unregulated insurance business alive for five years, despite regulators' attempts to shut it down.I chronicled relationships between the businessman and the politicians and the politicians' efforts to help with the venture lobbying the U.S. Department of Labor and introducing bills to keep the plan alive.
A look at The Virginian-Pilot's campaign finance database (search the database from www.crp.org/vpap or www.pilotonline.com/voter) revealed that a state senator, Kenneth Stolle, had received at least $110,000 from Edward Garcia, a Virginia Beach developer. It wasn't easy to see the contributions in the campaign finance reports until I did a search on addresses after receiving a tip from a source. The contributions weren't listed by the individual contributor's name, rather they were listed under the names of a number of Garcia's businesses, all located at the same address. Garcia gave only $280 under his own name.
I called the State Corporation Commission to find out who owned the businesses and found out that all of the businesses belonged to Garcia, a controversial businessman in the area.
I then called the senator to find out what the businessman might have coming up before the state legislature. Sen. Stolle told me that the only thing he knew about were some problems with United Benefit Administrators but they were mostly problems on the federal level.
I did several searches on the Internet for United Benefit and then finally turned to news researcher Diana Diehl for help in finding articles about the company. She found an obscure article from an insurance trade journal that detailed problems with UBA and its insurance company, Centurion. The article was written after the company had filed a lawsuit against the labor department.
I went back to a source at the State Corporation Commission and asked for any information they had on Centurion and UBA. While they were searching those records, I went over to federal court to find out what was listed in the lawsuit. That's when I discovered that the police union was a partner in the insurance plan.
The lawsuit also contained copies of the insurance application forms and a letter from the labor department to a U.S. senator and to a congressman who had apparently gone to bat for the company.
I used www.tray.com to look up the federal campaign finances. I looked back two years for contributions from anyone named Garcia. I wanted a broader search because I wanted to see if Garcia had gone outside the state for help with his company, which he had. While I got more Garcias than I wanted, it was fairly easy to pull out what I needed. I put together a chart in Excel of who had received contributions there were a lot more names than had been included in the lawsuit.
I decided to start with the police union's president, who was also a trustee for the insurance company to find out what he could tell me. I also knew the union, a non-profit organization, would have tax forms (990 c 5) that might give me a clue about the company's relationship and financial set-up. (Handouts 547 and 728 from IRE's Resource Center offer pointers on using 990s. Many others are available check out www.ire.org/resources/center/handsearch.html)
The union source gave me most of the background and then sent me to the company's comptroller who had acted as the company's lobbyist. She filled me in on the meetings with politicians and some of the other details.
I also found that Centurion was considered a non-profit and immediately asked for copies of those 990s. We also wrote to the labor department to get the LM-2 forms that unions are required to file. The LM-2 forms yielded less information than the 990s, but they did confirm what I had. (Mike McGraw offers tips on using LM-2 forms in his chapter of The Reporter's Handbook, 2nd Edition.)
In the meantime the State Corporation Commission faxed me what they had on UBA and Centurion, including a ruling from the State Supreme Court when it ordered the company shut down and fined it $30.
After that it was simply interviewing all of the parties. Some of the politicians didn't call me back. But by then we had enough documents to write the story without their comments. I made sure to double check all of the campaign finance data I had gotten off of the web. I had seen a couple of donations recorded twice on the same day from the same person in some cases making it look like they had taken more than the legal limit on federal donations. In the end, it appears the donations were all within the limits.
The best tip for doing similar stories is to use campaign contributions simply as a starting point. I make a habit of checking every piece of legislation introduced against campaign contributions. I regularly check all high-level appointments against the appointee's contributions. If I see large or strange contributions, I double check the numbers and then try to find out what's behind them. Some things to look for are contributions from the same address but different names and those from variations of the same name, which can tip you off that a family may be giving (it's especially interesting if children's names are listed). Also, look out from contributions from unusual sources, such as contributions from developers to an anti-development candidate. (We wrote about such a story this year, when a former city councilman ran for the legislature and changed his position.) Finally, I look for trends. I try to take contributions from industries and rank them by amount. I know the largest givers will usually have some hot legislation coming up.
For the Garcia story I had lots of documents to back up what I found. The contributions were just the beginning of the reporting. Reporters have to go beyond the contributions, to legislation, letters, lawsuits and other documents to find out what they mean.
Toni Whitt can be reached at (757) 446-2754 or by e-mail at whitt@pilotonline.com
The Virginian-Pilot has worked with the Virginia Public Access Project in acquiring databases.
A search engine for the database is available at www.pilotonline.com/voter
Mortgaged House of Representatives
Andrew Wheat
Research Director,
Texans for Public Justice
Some legislators became visibly upset in January when public interest groups published the first comprehensive study of campaign contributions to the 150 members of the Texas House.
"Mortgaged House: Campaign Contributions to Texas Representatives" (available from www.onr.com/tpj) concluded that the Texas House is awash in special-interest money that elbows out the interests of regular Texans. Of the $14.6 million that House members raised in the 1995-1996 election cycle:
- 80% came from outside the district of the recipient members
- 48% came from just nine of Texas' 2,618 ZIP codes (the lucky ZIP codes correspond to central business districts in Houston, Dallas and Austin)
- 62% came from political action committees and businesses as opposed to individual Texans
- 95% of the money came in contributions of $100 or more (while 37 percent came in contributions of at least $1,000).
Such findings would have been disturbing enough. What really gave members conniptions, however, was that researchers crunched a set of such numbers on each member. Having all these numbers in a database made it possible to "benchmark" members, comparing the fundraising of each representative to that of his or her peers.
It is one thing to report that whopper checks of $1,000 or more accounted for 75 percent of the $174,000 Rep. Suzanna Hupp, R-Lampasas, raised. It is another thing to point out that Hupp is just one of three members who derived such a large share of her war chest from these big checks.
Similarly, "Mortgaged House" discovered that Democrats Pete Patterson of Brookston, and Diana Davila of Houston, are the only members who took more than 90 percent of their money from businesses and PACs.
The report found that 18 members raised at least 95 percent of their money outside of their districts. Democrat Senfronia Thompson led this pack, failing to raise a dime in her Houston district. In fact, just 11 of the 150 members raised more than half of their money at home in the district.
This out-of-district data got under members' skins most. Republican Rep. Carl Isett, who raised 71 percent of his money outside of his Lubbock district, argued that the city of Lubbock is technically split between two districts but he likes to think that he represents all Lubbockites.
Taking Isett at his word, researchers recrunched his numbers, only finding 83 percent of his money coming from inside Lubbock city limits.
Other members wrapped themselves in the entire Lone Star flag, arguing that they represent all of Texas. Why stop there? Wrapping oneself in Old Glory would rationalize out-of-state contributions even those of damn Yankees. Hell, if President Clinton is a global citizen, what besides federal law is wrong with him taking money from Asian corporations? And who can quibble if orbiting Senator John Glenn takes money from Klingons in another galaxy?
Defending her reliance on PACs and businesses for 77 percent of her money, Rep. Leticia Van de Putte, D-San Antonio, told the San Antonio Express-News that many PACs today represent mom-and-pop businesses rather than big corporations. To illustrate her point, Van de Putte said a local tattoo parlor recently teamed up with other body painters and piercers to influence the legislature.
Piercing through such red herrings, "Mortgaged House" did analyze the House's largest contributors; the tattoo lobby didn't leave its mark among them.
Far and away the biggest PAC in Texas is Texans for Lawsuit Reform (TLR). It advanced its push for weaker civil justice laws by doling out $604,795 to House candidates. An earlier study found that TLR gets almost half of this money from just 18 wealthy Texas families, most of which have direct commercial interests in weaker tort laws.
Texas is one of just seven remaining states that allow unlimited contributions to candidates, political parties or PACs (the other states are Iowa, New Mexico, North Dakota, Utah, Virginia and California). The three groups that sponsored the report, Public Citizen's Texas Office, the U.S. Public Interest Research Group and Texans for Public Justice, recommended that the legislature limit the corrosive influence of special-interest money by passing two kinds of reforms.
First, the groups recommended limits on contributions to candidates and to PACs (U.S. law has limited individual contributions to federal candidates to $1,000 since 1974). Second, the groups called for complete and timely filing of campaign contribution data via the World Wide Web.
Most legislators continue to file paper reports with the Texas Ethics Commission. To research "Mortgaged House," researchers armed with calculators had to camp out at the Commission, crunching each member's reports by hand. First they crunched contributions by amount (less than $100, $100 to $999 and greater than $1,000). Then they calculated two totals, one for individuals' contributions and another for those by PACs or businesses. Finally, a percentage of out-of-district money was calculated by comparing contributor ZIP codes with a list of legislative district ZIP codes provided by the Office of Legislative Council.
The sponsors released the report (funded by the Margaret Cullinan Wray Charitable Trust) in advance of a January 30 House hearing on campaign finance reform. Members of that panel spent more than an hour laying into witness Tom Smith of Public Citizen's Texas Office. One member chewed Smith out for releasing the report without first clearing the numbers with each member of the Houseeven though the data came from the members' own reports. Summarizing the hearing in an editorial, the Austin American-Statesman wrote, "The committee savaged the report that detailed accurately how House elections are financed now, then focused on the flaws, no matter how minor, in proposals to change the system."
At the federal level, as in the several states, the incumbent beneficiaries of the status quo can hardly be expected to enact serious reforms. That is why citizens are leading the push for serious limits on campaign contributions through direct-democracy ballot initiatives at the state and local level.
"Mortgaged House" and other studies can be found on Texas for Public Justice's website.
Andrew Wheat can be reached at (512) 472-9770 or by e-mail at trigo@onr.com
"Mortgaged House" can be downloaded from the Texans for Public Justice Web site at www.onr.com/tpj
Using Statistics
Christopher H. Schmitt
San Jose Mercury NewsIt's the ultimate question when journalists focus on campaign cash and elected officials' behavior: Can you prove categorically that the money directly influences votes on particular bills?
Ultimately, no, unless a politician cops to the charge or gets caught trying to trade money for votes. But short of that, we recently enjoyed success in using a method known as regression analysis to show campaign contributions are often a strong predictor not only of aggregate behavior, but also of individual votes on individual bills.
The analysis, which focused on 10 major bills from a session of the California Legislature, showed the more money individual lawmakers took from interests pushing a particular position on a bill, the more likely they were to vote that position. By contrast, factors such as party affiliation and political philosophy did little to predict how legislators would vote.
Overall, our experience showed once again that relatively sophisticated analyses like regression can successfully find their way into the paper, and without readers needing a degree in statistics to understand the conclusions.
Together, the bills in question represented more than $1 billion worth of potential or actual benefits to a range of interests, and involved a sweep of issues including tax breaks for financial institutions and other businesses, prices paid to dairy farmers, windfalls for insurance agents and relaxation of state pesticide regulation.
The bills involved 917 separate votes by 114 legislators who received $1.6 million in contributions from major interests that were party to the legislation.
When all the crunching was done, we found campaign contributions were a predictor of votes half the time.
"If they weren't having any effect, it shouldn't have shown up at all," said Stanton Glantz, a University of California-San Francisco researcher and statistical expert, who assisted us. "When you have something where you've got an overwhelming interest group up against a disorganized public, the money really works."
Glantz, in fact, was key for us, and therein lies a good piece of advice. While we felt comfortable with the idea of using a regression, we knew it was important to have someone who really knows this stuff give us a reality check. Glantz, who has done considerable work researching the effect of contributions on policy, and who was interested in what we were attempting, graciously agreed to help. If you ever attempt something like this, chances are you'll be able to find someone locally who'll help you out, too.
What, actually, is regression? It's a technique in which "explanatory factors" are matched against a variable selected for study in this case, individual votes on individual bills. A computer creates a mathematical model of how well the factors can account for, or "explain," outcomes observed. For explanatory factors, we compiled data for each legislator showing their party affiliation, their ideological ratings by various interest groups (both conservative and liberal), ratings on their effectiveness and intelligence compiled through a poll by a leading political magazine, and total contributions received from moneyed interests affected by each bill in question.
An interesting twist to note is that we used a "logistic" regression, which is a special kind of regression for when the variable under study has only two possibilities in this case, yes or no. In other types of regression analyses, the variable under study can have a continuous range of values.
It's worth noting another potential roadblock: Not everyone in the newsroom will see the worth of such analyses. In our case, there was considerable discussion of whether the results were sound enough to print. The lesson here is that you may need to do some education within your own walls on how these analyses are done and how the results can be read.
Finally, as fruitful as our analysis ultimately was, it's important to note its limits. It does not because it simply can't conclusively prove that money alone caused lawmakers to vote as they did. It shows only there is a strong link between the level of contributions and lawmakers' votes, after adjusting for the other factors that might account for votes observed.
Indeed, that's why many believe analyses like this one cannot answer politics' version of the chicken-and-the-egg question: Do favorable votes produce big contributions, or do big contributions produce favorable votes?
Nevertheless, money is a powerful lure, and at some point, its influence can't be attributed to chance. "There is no immutable certainty that a person who receives the money is voting as a result of the money being given, but if it's true you have a preponderance of evidence, (then) that's a pretty strong case," said Herbert E. Alexander, a University of Southern California political science professor and head of Citizens' Research Foundation, a non-profit group that studies the role of money in politics.
Christopher H. Schmitt can be reached at (408) 920-5048 by e-mail at cschmitt@sjmercury.com.
Tip Leads to Probe, Expulsion
Walter F. Roche Jr. and Scott Higham
The Baltimore SunThe story began with a routine tip and it ended with the first expulsion from the Maryland General Assembly in 201 years. The last to be expelled: a state delegate for cheating at cards in 1797.
No one was more surprised than the reporters who investigated state Sen. Larry Young.
After examining the business dealings of Young, one of the most powerful legislators in the state, and publishing a report on Dec. 3, 1997 that charged him with using his public office to benefit the corporations he controlled, Maryland's ethics panel opened their own probe (Partial text of the stories is available from www.sunspot.net/archive/search).
Young welcomed the investigation and attacked The Sun. He and his supporters protested at the paper. They held civil rights rallies in Annapolis. They said the paper was "lynching'' a prominent African-American legislator and proclaimed that we were racists who belonged to the Ku Klux Klan.
On Jan. 12, the ethics committee, chaired by an African-American, issued its report. The panel found that Young traded his position as the chairman of a health care subcommittee to benefit himself and his corporations. He accepted $250,000 in consulting and other fees from health care companies and others with business interests in Maryland. He used the public's money to support his corporations and his private employees.
Four days later, the Senate expelled the 24-year veteran of the State House.
The story began last fall, after Young's name surfaced during the paper's research into the Baltimore Liquor Board, a panel steeped in corruption. Young held enormous influence over the agency. Sources claimed he was abusing his position for personal gain, and camouflaging his activities behind the banner of helping his African-American community.
We began by assembling every available record on Young and the names of current and former members of his legislative and campaign staffs. We gathered campaign finance reports, ethics disclosure statements, and travel and office expense reports.
We ran his name and those of his key staffers through civil and criminal court databases. We checked Autotrak for corporate ties by name and address, and we checked through Uniform Commercial Code filings for Young, his staffers and affiliated corporations.
A key element of our searches was to identify pieces of legislation Young oversaw. He held two key positions-chairman of the health subcommittee and chairman of a panel that handles gubernatorial appointments. By identifying the bills, we were able to focus on several health care companies, the types of favors they were seeking, who they hired as lobbyists, their ties to Young and the role the former senator played in the legislation.
Young also hosted a weekly radio talk show and wrote a newspaper column. We became devoted followers. Coupled with what we were learning through the records and former staff members, the talk show and column became valuable sources. Young frequently made comments that were startlingly revealing.
From our research, several patterns began emerged.
It became clear that Young was running corporations, profit and non-profit, out of his legislative office in West Baltimore, where the rent was paid by the state. We also found that the phone numbers listed for Young's corporations were the same numbers being billed to state taxpayers. Through private business and state payroll documents, we discovered that members of his legislative staff, paid by the state, were also working on his corporate staffs.
From records in the state comptroller's office, we discovered that Young and one of his corporations had been paid by Coppin State College for consulting work. The college at first denied a consulting contract with Young, but later, after we refiled our records request, they produced the documents.
We found that the state-funded college had paid more than $30,000 in consulting fees to Young. Neither the senator nor the college could produce any evidence that Young performed any services, including the senator's claim that he was raising money for needy African-American students.
The story began to take shape. So did evidence of possible criminal wrongdoing.
Since we already knew what cars he and his staffers drove (through state motor vehicle record checks), we were able to watch his office and his patterns. Young's office was in an office building with a large parking lot. We stayed in the lot and observed the building entrance. By talking to former staffers, we were able to fill in the blanks of his routine.
Documents from Young's office revealed that one of his corporations, the LY Group, was receiving $300 an hour to perform consulting work for a company that was competing for millions of dollars in state contracts.
The lobbyist for that firm, Merit Behavioral Care Corp., was one of Young's closest allies. The same firm also had been caught in a fund-raising scandal involving Maryland Gov. Parris N. Glendening.
Merit also was funneling thousands of dollars to one of Young's non-profit corporations, the National Black Health Study Group. The group, which had lost its corporate charter, was about to hold its annual conference in Las Vegas. We arranged to be on the plane with Young when he flew to Vegas. We tracked Young for three days. On the last day of the conference, we walked in on a seminar that was being hosted by Merit. We also followed Young to a Charlotte, N.C., conference, which was underwritten by a U.S. Energy Department grant.
More details began to emerge. Motor vehicle records revealed that the owner of an ambulance company had bought a Lincoln Continental for Young while he was in a position to influence legislation affecting the company. An inadvertent disclosure from Young himself revealed that his full-time chauffeur was also a full-time employee of the city of Baltimore. The driver also was on the payroll of a legislator who shared office space with Young. We were able to demonstrate that the public was paying the salary of his private driver.
Since the initial investigation was published and the General Assembly voted to expel Young, the FBI and the State Prosecutor's Office have been investigating the former senator. Federal and state grand jurors have been subpoenaing documents, and they are expected to start hearing testimony later this spring.
Walter F. Roche Jr. can be reached at (410) 332-6175 or by e-mail at wally.roche@baltsun.com
Scott Higham can be reached at (410) 332-6922 or by e-mail at highamhut@aol.com
UPS Delivers Contributions
David Barnes
Traffic World MagazineThe next time you see a brown United Parcel Service truck plying its rounds, think political clout. As one of the largest contributors to members of Congress, UPS is as much a presence on Capitol Hill as its brown step vans are commonplace in communities across the nation. Between 1986 and 1996, the Atlanta-based company contributed $11,268,649 to federal lawmakers through its political action committee, UPSPAC. The company contributed $1.3 million to lawmakers in 1997, according to copies of campaign finance reports available on the Federal Election Commission's Web site (www.tray.com/FECinfo). The PAC is funded by contributions from the company's supervisors, managers and executives via monthly payroll deductions. The manner in which UPS regularly solicits its managerial employees to contribute to the PAC got the company in trouble with the FEC last year. UPS agreed in December to pay a $9,000 fine to settle a four-year-old complaint by a former UPS supervisor who said he felt intimidated into contributing to the PAC. In a consent agreement made public Dec. 22, UPS acknowledged it had not explicitly stated to employees that they would face retaliation for failing to contribute to the PAC. UPS agreed to pay the fine but continued to maintain that it always has and always will make it clear that employee contributions to its PAC are voluntary.
On the surface, the FEC's bland announcement three days before Christmas seemed innocuous. As a reporter for a weekly business magazine covering the freight transportation industry, however, I pay close attention to UPS' political activities. Big Brown maintains a staff of a dozen lobbyists and public relations experts in a brick office building three blocks from the U.S. Capital building. UPS lobbyists and the lawmakers they seek to influence also have access to the company's plush townhouse (located even closer to the Capital building) for $500 and $1,000-a head fund-raisers. UPS is also active in the American Trucking Associations, which Fortune recently ranked one of the top lobbying forces in Washington. The company doesn't like to talk about its political activity, other than its highly publicized hiring of welfare recipients as part of President Clinton's "Welfare to Work" initiative.
Having done numerous stories about the company's aggressive campaign giving, as well as the equally aggressive campaign spending of the Teamsters Union which represents UPS drivers I was curious to see what I could learn about UPS's fundraising efforts. Entering the FEC's offices across the street from FBI headquarters, I was handed the two thick folders comprising the agency's record of the UPS case. Because the case was newly settled, the files had not been transferred to microfilm, making it easier to read.
The folders were a treasure trove, tracing as they did the history of the 1993 complaint by then-UPS supervisor Michael Kohr of Princeton, Ill, who described the company's "strong armed" method of obtaining "voluntary" contributions to UPS PAC. Kohr claimed that he and fellow supervisors were forced to sit through numerous staff meetings during which regional managers complained about the level of PAC contributions from their northern Illinois district. While upper management insisted that contributions were confidential, Kohr was concerned that the employee identification numbers marked on the PAC donation cards were used to track which employees were contributing. UPS said the employee identification numbers were used to make sure that the contributions were deducted from the right paychecks and that its accounting department shared the information only with the FEC. The company insisted it told employees both orally and in writing that contributing to the PAC was strictly voluntary.
This finger pointing was not very interesting, but then I hit pay dirt. Buried in the back of one file folder was a partial transcript of a 1990 videotape the company used at its PAC solicitation meetings. The transcript include exhortations by then-UPS Chairman Oz Nelson to contributions to the PAC to help fight rival Federal Express, which had outspent UPS in the 1988 election cycle.
Going back to my clip files, I learned that 1987 and early 1988 were a crucial time for the two package delivery companies. FedEx wanted to eliminate intrastate regulation of the transportation industry and had lost a 1986 congressional effort to preempt states authority over rates, routes and services offered by overnight air carriers. The company did better at the Department of Transportation the following year, winning a bitter battle with UPS to provide small package service to Japan in 1987.
UPS and FedEx pulled out the stops to win political support for their business agendas in 1987 and 1988. Both companies dramatically increased the size of their PAC war chests in 1987. UPSPAC raised $567,328 in 1986 from company employees. FedEx took in $334,334. During the 1988 election cycle, FedEx employees donated $1,139,978 to FEPAC. UPS employees, by contrast, gave $905,482 to their PAC. To ensure the company was not outspent, UPS continued to push its employees to contribute to the PAC. According to the FEC file, the percentage of UPS employees donating to the PAC increased from 38 percent in 1988 to 61 percent in 1990 and to 69 percent in 1991. UPS spokesman Segal said the increased employee participation in the PAC had nothing to do with company pressure, insisting that the company was rapidly growing during the period in question and that new employees were interested in helping the company's political agenda.
The two companies continue to compete in both the booming package delivery business and in the equally booming area of campaign contributions. In 1988, UPS was the 33rd largest contributor to federal lawmakers, donating $771,769. FedEx ranked 43rd, giving $537,537. In 1996, UPSPAC's $2,957,935 in contributions made it the 15th largest donor to federal candidates. FEPAC ranked 39th, with $1,594,195 in contributions.
I'm currently considering several follow-up stories, including comparing lists of contributors to UPSPAC over several election cycles to try and discern any trends. When I tackle that story, I'll make use of the Center For Responsive Politics' Web site (www.crp.org), which offers the most up-to-date electronic listing of campaign contributions.
For a reporter looking for some fresh story ideas, I'd suggest using the Center's databases to check who is giving to your lawmakers. If several employees of a company are giving to your local congressman, you may want to call and ask why. Bob Mitchell, an editor at Thomson Newspapers' Washington Bureau broke the story of how top executives of New Enterprise Stone and Lime Co. and their spouses were illegally reimbursed for their political contributions to House Transportation Committee Chairman Bud Shuster, R-Pa. The company benefited from the numerous road contracts Shuster won for his central Pennsylvania district. Mitchell's story sparked an FEC investigation that resulted in one of the agency's largest ever fines imposed against company officials in 1995. New Enterprise is still politically active, but has shifted much of its largesse to House Surface Transportation Subcommittee Chairman Tom Petri, R-Wis., who reports to Shuster.
David Barnes can be reached at (202) 661-3371 or by e-mail at David_Barnes@trafficworld.com.
Slugging It Out the Old Fashioned Way
Suzanne Espinosa Solis
San Francisco ChronicleIt was a tedious and unlikely check of 14 years of public records that produced this story (available from www.sfgate.com and the CFIC Library at www.campaignfinance.org/stories/local.html).
A retired fire captain in the city of Richmond (15 miles northeast of San Francisco) led a campaign to defeat a local ballot measure to build new fire stations and an earthquake-safe 911-Emergency system. My editor, Trapper Byrne, asked me to profile the man.
Darrell Reese, the retired fire captain, controlled a political action committee of the Richmond firefighters union and used this money to finance many campaigns over the years to support or oppose ballot measures, city council candidates and even a county supervisors race far from the city of Richmond.
Rumors suggested Reese was directing donations from industry and developers through the union fund and political action committee to business-friendly canidates and issues. But no one had any evidence. California's Fair Political Practices Commission (filing schedules and candidate forms are available at the Commission's site at http://infra1.dgs.ca.gov/fppc), which investigates campaign finance fraud, had no records of previous wrongdoing.
It was a good thing I didn't know much about Reese when I started. I had been covering Richmond for about four months. This meant I had few sources and a weak sense of Richmond's political history. The Chronicle, which had been covering Richmond for about four months, had few stories in its archives. I had to start from scratch.
One of the first things I did was to check the union's campaign disclosure records financial balance sheets filed with the local elections department, in this case Contra Costa County, which kept the papers in bulky manila folders. I began with the oldest form in the file, a 14-year-old document, and worked my way up to the most current. It was tedious work but a good way to see the financial history of the political action committee and any patterns in whom or what the union supported or opposed.
Back at my desk, I spent days on and off reviewing the campaign disclosure forms. All the analyzing was done the old-fashioned way a lot of reading and re-reading and comparing one year to the next, making note of different things. Detecting a break in the pattern of who was contributing was not easy because the amount of information was overwhelming. The questions popping up in my thoughts as I looked at the documents kept me going. I used a pocket calculator and took notes. I broke down the number of contributors and paid more attention to exactly who was contributing.
That's how I was able to spot a break in the pattern of who contributed to the union. That's when the story began to change from a profile to a gotcha-piece.
After 14 years of reporting contributions from working firefighters, the union had suddenly in the last few months begun reporting contributions from retired firefighters. The inclusion of 94 retirees doubled the contributors list and also lowered the donation amount for each contributor to about half of what it had been in previous years. While most contributions varied in amount from person to person, the Richmond firefighters union showed a strikingly unusual thing. Each firefighter, whether retired or active, had contributed the exact same amount down to the very cent. Unless the contribution is an automatic deduction from a paycheck or pension check, that's a pretty incredible feat. Even if the contributions were deducted automatically, why would a retiree suddenly start contributing to a union's political action fund, especially after being long gone and living in another state? I used telephone books, a 411-information service and our library researchers to obtain phone numbers for many of the 94 retirees on the list. After the first several phone calls to the retirees, I was energized. I called my editor who came over for a few days to help me analyze the records.
As I called, the retirees' stories began sounding alike; they didn't donate to the union anymore let alone to a political fund. They had retired years ago and were living on a budget. One retiree scoffed when I told him the union claimed he donated $157.42. "Tell them to send it back to me,'' he said.
Fellow Chronicle reporter Kevin Fagan and I spent a long morning at Richmond City Hall fingering through more than 100 payroll deduction records for each and every unionized firefighter in the city. Those public records showed how much each employee had agreed to have deducted automatically each month for the union. That was one way to double check how the union raised money for its various funds.
Reese admitted he used the retirees' names to bypass the $250 contribution limit set by a new state law, Proposition 208. He quickly amended his campaign disclosure forms to remove the retirees altogether from the contributors list. But the incident sparked the state's Fair Political Practices Commission to open a probe of the union's political action committee.
Furthermore, Reese's attempt to explain where the $15,000 came from after admitting that the retirees had not contributed it was that this money was raised by the firefighters' annual circus fundraiser, which until then had been presented as a fundraiser to sponsor events for poor children. Reese's explanation enraged the public: "As far as I'm concerned, the use of our money to save the Richmond voters millions of dollars (in unbuilt fire stations) is a very charitable activity."
Suzanne Espinosa Solis can be reached at (510) 372-5722 or by e-mail at espinosas@sfgate.com.
Reese admitted he used the retirees' names to bypass the $250 contribution limit set by a new state law, Proposition 208
Checking the Record Against the Rhetoric
Lance Williams
San Francisco ExaminerWhen a Beverly Hills millionaire began running for governor of California as a foe of special-interest politics, the San Francisco Examiner sought to learn how the political newcomer's rhetoric squared with his actions as a corporate tycoon.
The result was "High Flying Politics," (available from www.sfgate.com and www.campaignfinance.org/stories/federal.html) an investigative profile of leveraged-buyout specialist Al Checchi, whose willingness to spend down his $600 million fortune on TV ads has given him a real shot at winning the 1998 Democratic gubernatorial nomination.
The Examiner's story, published Nov. 30, 1997, compared candidate Checchi's clean-government campaign pitch with the record he compiled as co-chairman of the board at Northwest Airlines, which he and his partners acquired in a contentious 1988 corporate raid.
Perhaps not surprisingly, the story found a disconnect between rhetoric and record.
On the stump, Checchi has railed against big-money lobbies for having undue influence on government. He has urged a ban on soft-money donations, vowed to "break with the status quo and challenge the special interests'" and complained that "access to government continues to be bought and sold on the auction block."
But as the Examiner put it, "Federal records show that in the years Checchi was at the helm, Minnesota-based Northwest emerged as one of the most potent political money machines in the heavily regulated aviation industry, spending millions to seek tax breaks, win new air routes and obtain relief from costly proposed federal regulations."
The story detailed how Northwest under Checchi had "spent more than $5.6 million lobbying federal lawmakers and agencies on issues vital to the airline's bottom-line," and had made more than $1.5 million in campaign donations. Its soft money donations were tops among U.S. airlines, the records showed.
The story also noted Checchi's personal campaign donations, including an occasion in 1996 in which he gave $100,000 to a Democratic soft-money account shortly after Northwest had successfully lobbied the Clinton administration to obtain a non-stop air route to Beijing.
As the self-financed tycoon-politician is increasingly common in American politics Ross Perot and erstwhile California Rep. Michael Huffington also come to mind IRE members might be interested in learning how the Examiner went about scrutinizing Checchi's record.
My first task was to document Checchi's campaign comments on soft money and special interests. This was easily done via the candidate's press packet and Nexis. (Transcripts of radio interviews were particularly useful.)
Northwest's political donations were obtained from the Center for Responsive Politics' Federal Election Commission information web site (www.tray.com/FECinfo).
For data prior to '93-'94, I used the Federal Election Commission's Direct Access Program, and downloaded the campaign finance data for Northwest, Checchi, etc. The DAP is inexpensive and easy to use. I prefer the FECinfo site because it is faster.
I put all the campaign finance data into a DBF file to organize it. In addition to the data I downloaded, I input committee assignments for congressional recipients of donations from Northwest that allowed me to document the trend about donations matching up to aviation-related legislative committees. To analyze donation trends, you must know lawmakers' districts and committee assignments; the Congressional Yellow Book provided that.
It quickly became clear that Northwest targeted its donations to lawmakers from Minnesota or Michigan, Northwest's twin hubs, or to those who serve on committees that review laws vital to the aviation industry's bottom line.
The next step was to learn the airline's legislative agenda. Northwest's annual report and proxy statement, obtained from the investor relations department, provided clues, as did a Nexis search of Detroit and Twin cities' papers. But the best information was contained in the federal lobbying reports filed by Northwest with the clerk of the House of Representatives. The only way I know to obtain these documents is to send someone to B106 in The Cannon House Office Building in Washington and have them consult the indexes; copies are 10 cents per page.
The reports detailed Northwest's lobbying expenditures; the more recent ones listed specific bills and regulatory matters on which the airline lobbied as well.
After that, it was some grim telephonic slogging to learn which issues were most important to Northwest, and why. Some committee staffers, lobbyists for public-interest groups, and lawmakers and lobbyists who opposed Northwest on particular issues were helpful in psyching this outóas were Checchi's political opponents.
Since the story, Checchi has continued to spend heavily on TV ads. His campaign caught a lucky break last month when popular U.S. Sen. Dianne Feinstein declined to run for governor. That left Lt. Gov. Gray Davis, a weaker candidate, as Checchi's main opponent.
But there was also bad news for Checchi, as a court overturned a political reform law that had sharply limited political fund-raising in California. The law didn't apply to candidates who could pay for their campaigns out of their own deep pockets, and it had been thought that Checchi would be able to outspend his opponents by a wide margin. But with the limits rescinded, Davis, an accomplished fund-raiser, is likely to be able to match Checchi dollar for dollar. The winner is likely to face Dan Lungren, the Republican attorney general.
Lance Williams can be reached at (415) 777-7878 or by e-mail at sfxwilliams@mindspring.com.
New at CFIC
Jack Dolan
CFIC CoordinatorWhat if I told you that 27% of Kansas Gov. Bill Graves' campaign contributions in the '94 election came from outside of Kansas? Great tip, if you are a reporter in Kansas. But what if I could also tell you the percentage of out-state contributions to every other sitting governor, attorney general, secretary of state, state senator, or representative? And what if I could prepare you a list of the big contributors common to all of them? Better yet, what if I could teach you to do all this yourself quickly and easily at a single Web site?
Welcome to the thinking behind IRE and NICAR's Campaign Finance Information Center (www.campaignfinance.org). Our goal is to create a single repository for contributions and expenditures databases from state races across the country and build an on-line search engine you can use to track contributors across state lines.
Thanks to the generosity of citizens action groups across the country, the site already has of downloadable data from Illinois, Indiana, Minnesota, Ohio, and Wisconsin. We also have data directly from state boards of election in Michigan, Kansas, Florida, Idaho, and Kentucky. For states with their own on-line search engine, we have direct links. The CFIC "universal" search engine that will query the separate databases simultaneously should be up in the next few weeks.
The biggest challenge with the effort so far is the diversity of information we receive for different states. While groups like the Center for Responsive Politics go to great lengths to identify contributors' occupations and employers, state boards of election are far less eager to press for disclosure of contributors' economic interests. In Kansas, for example, the database has a contributor name field (often blank) and nothing else. So unless you know the name of every tobacco executive in the state, tracking contributions from the industry would be tough.
Even if you knew all their names, however, you would still have a problem. Few states go to the effort of standardizing the names that appear on contribution forms, so 3M might appear as "3M," "Three M," or "Minnesota Mining and Manufacturing." Accounting for all of these irregularities, and coding the search engine accordingly, is a real challenge.
One problem many reporters face when asked to write a campaign-finance story is "Where to begin?" So we've set up an on-line campaign finance story library. Thanks to the IRE members and their old clips, we have a pretty good start. We have two exceptional series from The Indianapolis Star/News (their data is on our site) and the Times-Picayune (New Orleans). If you've done a story using campaign finance records, and we've missed it, please let us know and we'll add it to our library. In the coming weeks we hope to have our on-line search engine ready so you can search all of our databases as though they were one. You will be able to track contributors across state lines to find out where a given interest is spending its money. You will also be able to compare campaigns for the same office in different states to get some perspective on the size of your local candidate's war chest.
Another feature in its infancy at CFIC is a set of on-line tutorials to help reporters without much Web or data experience begin to master the skills required of the modern investigator. These will include lessons from NICAR's on-the-road training program, our boot camps and new lessons designed specifically for learning to handle the data on the CFIC site.
Jack Dolan can be reached at (573) 882-1982 or by e-mail at jack@nicar.org.
The Campaign Finance Information Center is always adding new resources to its Web site.
