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| ©2011@nomadicview |
By Nomad
When the Supreme Court handed down its historic decision in Citizens United v. Federal Election Commission on January 21, 2010, some legal analysts and political commentators warned that it would, in effect, open the floodgates for unlimited campaign contributions from corporations. Others championed the decision as a victory for free speech.
Democratic congressman from central Florida, Alan Grayson, said that following this decision, “only huge corporations have any constitutional rights... They have the right to bribe, the right to buy elections, the right to reward their elected toadies, and the right to punish the elected representatives who take a stab at doing what's right.”
Richard Hasen, writing for Slate, put it this way:
Today the court struck down decades-old limits on corporate and union spending in elections (including judicial elections) and opened up our political system to a money free-for-all.
...the Court overturned long-standing precedent, ruling that banning corporations from using money from their general treasuries for express advocacy was an unconstitutional violation of First Amendment political free speech rights. The majority opinion also struck down the electioneering communications rule as it applies to corporations. As a result, corporations and unions may now spend as much as they want on independent expenditures, in a way that could help the candidate of their choice, right up until Election Day.
As the presidential election of 2012 looms, all of us will be able to watch with our own eyes the impact of this decision. Even now the signs are ominous. Let’s take a closer look at one candidate, Mitt Romney, examining his source of campaign funding and a few of his top name contributors.
Restore our Future
Politico explains how this virtual piggy bank works:
Its statement of organization filing with the Federal Election Commission declared that it intended to “raise funds in unlimited amounts.” According to FEC requirements, it must, however, disclose its donors.Restore Our Future, a group run by Romney officials from his 2008 bid, was funded exclusively by 90 wealthy donors, most of which have also given to the former Massachusetts governor’s presidential campaign account.But with no limits on the contributions to such entities as Restore Our Future, the contributors were able to give huge chunks of money – not a single check was under four figures and most were in the five and six-figure range. There are also no restrictions on how donors can give to the SuperPACs and three of the four $1 million contributions came from organizations instead of individuals.
Additionally, it is legally required to operate separately from the campaign. This is a delicate matter too. What is the exact definition of “separately”? After all Restore Our Future was established by three of Romney’s 2008 campaign advisers, Carl Forti, Romney’s national political director; Charlie Spies, who was the Romney campaign’s chief finance officer and counsel; and Larry McCarthy, who was a member of Romney’s media team. Is separation even possible in this situation?
Although the PAC raised and spent no money in 2010, by the first six months of 2011, Romney’s PAC had raised $12.2 million. Mind you, the organizers had not even formally announced its creation until June 23. Obviously the press release was merely a formality. The word was out.
In any case, it was Romney himself who gave the game away in Iowa in August when, while being heckled, he said, "Corporations are people, my friend. Of course they are. Everything corporations earn ultimately goes to people. So -- [audience laughter] where do you think it goes? Whose pockets? Whose pockets? People's pockets. Okay -- human beings, my friend.”
Anyway, I wanted to take a moment to investigate some of the top contributors to Restore our Future PAC in order to see whether the imagined fears about the Citizens United decision have materialized. Can we draw any generalities by examining the contributors?
Mystery Man
Michael Isikoff, an investigative reporter for NBC, obtained campaign and corporate records showing that Mitt Romney’s PAC, Restoring our Freedom, received a million dollars from a mysterious corporate entity, W Spann LLC, earlier this year. Upon a closer examination he soon learned that the sole purpose for this company’s existence was, in fact, to pass along a million donation.
The company, W Spann LLC, was formed in March by a Boston lawyer who specializes in estate tax planning for “high net worth individuals,” according to corporate records and the lawyer’s bio on her firm’s website. The corporate records provided no information about the owner of the firm, its address or its type of business.
Ms. Cameron Casey, the young Harvard lawyer, established the company on behalf of an unnamed individual on March 15, 2011. The donation was then made on April 28 and the company was formally dissolved on July 12. During that time, the company apparently conducted no other business. One clue emerged, however. According to the article, the address in Midtown Manhattan was shared by Bain Capital. Romney, in fact, founded and served at as CEO of Bain Capital. Bain Capital is a private equity firm which buys undervalued companies and turns them around so they can become profitable. This can mean a lot of things depending on the company, anything from re-structuring to layoff of employees. This firm was the source of Romney’s personal fortune, estimated somewhere between $190 million and $300 million. It was also his cash cow for his unsuccessful 2008 presidential campaign, providing him with $45 million of the $110 million he spent.
Los Angeles Times reporter, Bob Drogin paints a none-to-pretty picture of operations at Bain Capital under Romney’s leadership,
"From 1984 until 1999, Romney led Bain Capital, a Boston-based private equity group that earned jaw-dropping profits through leveraged buyouts, debt hedge funds, offshore tax havens and other financial strategies. In some cases, Romney’s team closed U.S. factories, causing hundreds of layoffs, or pocketed huge fees shortly before companies collapsed."
That’s not to say that this kind of thing happened in every case. Many companies that Bain Capital took on ended up stronger and more profitable. And many were forced into bankruptcy. One of his work-colleagues had this to say:
"They're whitewashing his career now," said Marc B. Wolpow, a former managing director at Bain Capital who opposes Romney's White House bid. "We had a scheme where the rich got richer. I did it, and I feel good about it. But I'm not planning to run for office."
After NBC made this discovery, two groups, Democracy 21 and Campaign Legal Center, requested the Justice Department to investigate the matter of the mystery company and its secret owner/contributor.
That’s when a businessman came forward to admit that he was the mystery donor. Ed Conard, a former executive at Bain Capital, retired from the company in 2007, but still maintained an office at its Manhattan street address. Conard had, in fact, made numerous donations to the Romney campaign in the past. Some of those, even without the dummy company, were close to edge in terms of legality. After calls for an official inquiry, the amended mid-year report on donor contributions filed by Restore Our Future in August stated that Conard, not Spann LLC, was responsible for the $1 million donation.
Romney himself brushed off the matter lightly, saying, “I think the whole controversy with regards to his contribution certainly sort of disappears when he came forward and said he was the contributor.” It certainly..sort of.. disappears? Of course, it was quite another story back in 2008 when Romney said, regarding the importance of full disclosure of the source of funding:
“Political spending has been driven into secret corners, and more power and influence has been handed to hidden special interests.”Proof that four years in political terms is a very long time, I suppose..
The creation of a dummy company with a imaginary business addresses and no employees has raised quite a few ethical questions. The two main legal problems are noted by Paul S. Ryan, writing for The Hill’s Legal Blog,
The scenario raised at least two possible legal problems for Conard and W Spann. First, federal law prohibits making a political contribution “in the name of another”—i.e., federal law prohibits a human from making a contribution to a Super PAC in the name of a shell company. In other words, federal law prohibits using straw donors.Second, federal law requires a group that has the major purpose of influencing elections, that receives contributions or makes expenditures exceeding $1,000 in a calendar year, to register with the FEC as a “political committee” and to file periodic disclosure reports regarding where the group gets its money and how it spends that money.The reason for these laws is simple. The Supreme Court has long recognized the right of voters to know the true identity of those funding our electoral process. Accurate disclosure advances two compelling government interests: fostering a well-informed electorate and preventing corruption.
One of the most perplexing points was Conard’s desire for anonymity. Why? Perhaps it was merely a test, a trial run? Perhaps to determine how well the FEC was planning to enforce these regulations.
UPDATE: Our sources have perhaps thrown some light on the reasons why Conard would prefer to remain anonymous.
Mr. Conard was previously a Director of Wasserstein Perella and Company, an investment banking firm that specializes in mergers and acquisitions, and a Vice President of Bain & Company heading up the firm?s operations practice area. Mr. Conard is a director of Unisource Worldwide, Inc., Broder Brothers, Sensata Technologies, Inc. and Boys & Girls Harbor. In 1999, Unisource was acquired by Georgia-Pacific Corp., now owned by Koch Industries. Since 2002, Bain Capital has held a 60 percent ownership of Unisource, and Georgia-Pacific retains 40 percent ownership.The Latter-Day Saints
The use of phony companies, like W Spann LLC, to donate to super PACs was also revealed in a similar case. Two companies out of Provo, Utah, Eli Publishing and F8 LLC, contributed $1 million each to the Restore Our Future PAC .
Suspicions of investigative reporters were alerted when it was learned that both companies shared the same downtown Provo address and contributions were given on the same day. They soon learned that both of these corporations didn’t appear to actually do any business, had no online sites and no staff. The accounting firm at the address had no information about either company. When a local TV news reporter visited the address, there were a lot of blank looks, polite smiles and shrugs.
A records search reveals that the same address is also home to trusts set up by the families of Blake Roney and Steven Lund, executives at Nu Skin enterprises and major Romney contributors in the 2008 campaign. Later Lund, denying that there was anything suspicious claimed that the company was established to aid in the publishing a book. The other company, F8 LLC, was founded by another lawyer with ties to Nu skin, Jeremy Blickenstaff.
Despite the fact that current estimate of Blickenstaff's law firm's annual revenue is $500,000, through the front corporation, he was able to deliver $1 million to the Romney campaign. Blickenstaff also happens to be the son-in-law to Steven Lund which might explain things.
According to the online biography, Steven Lund currently serves as Vice Chairman of the Board of Directors for Nu Skin Enterprises. Previously, Mr. Lund served as President and Chief Executive Officer from 1998 to 2003 and before that as President and Chief Executive Officer of Nu Skin Asia Pacific (NSAP) from November 1996 to May 1998. Mr. Lund also served as Executive Vice President of Nu Skin International (NSI) since its inception in 1984.
The Campaign Legal Center has this to say about Lund and NuSkin:
The booming skin care business has made Lund a very rich man. He was Nu Skin’s CEO for five years, owned $31.9 million in company stock and was paid $1.2 million in compensation last year, according to the company’s proxy statement.The article also points out that since its founding in 1984, the company had grown to a staggering $1.5 billion in annual sales. The road has, however, been bumpy.
Nu Skin, faced a series of investigations in the early 1990s into its business model and the financial and health claims made by its distributors. It paid a $1.2 million settlement to the Federal Trade Commission in 1994 over health claims made for its products and still operates under a consent decree with the commission. The possibility of tightened federal regulation could pose a threat to profits.But friends dismissed any suggestion that Lund’s donations to Romney would be aimed at averting harmful federal regulations or investigations.
Rep. Jason Chaffetz, a Utah Republican, worked for over a decade with Nu Skin. He claims that although Lund supported his campaigns, there was no back-scratching.
Blake Roney was also an executive at Nu Skin. Blake Roney, 53, is the Chairman of Nu Skin Enterprises. Blake was one of the founders of the company and its President and CEO from its inception in 1984 until 1996, when he took on the Chairman position.
According to a biography at Forbes, his salary last year was $791,667.00, and add to that, a bonus of $37,664.00 and add to those figures a sizable non-equity incentive plan compensation $865,032.00. All of this comes to a hefty, $1,712,026.00. But where did all that cash come from?
Nu Skin Enterprises is a multi-level marketer of personal care products using global network of some 800,000 independent distributors, sales reps, and preferred customers. It is run something like Amway. Interestingly, approximately 86% of the revenue, during the year ended December 31, 2010, came from markets outside of the United States.
Multi-level marketers (MLM) , like NuSkin, have their share of critics. Robert L. FitzPatrick, president of Pyramid Scheme Alert and co-author of the book, False Profits: Seeking Financial and Spiritual Deliverance in Multi-level Marketing and Pyramid Schemes warns:
Mother Jones has this say about Nu Skin(R)esearch has shown that the MLM business model, as it is practiced by most companies, is a marketplace hoax. In those cases, the business is primarily a scheme to continuously enroll distributors and little product is ever retailed to consumers who are not also enrolled as distributors...MLM is not defined and regulated like, for instance, franchises are. MLMs can be established without federal or state approval. There is no federal law specifically against pyramid schemes. Many state anti-pyramid statutes are vague or weak. State or federal regulation usually involves first proving that the company is a pyramid scheme. This process can take years and by then, the damage to consumers is done. Indeed, even when MLM pyramids are shut down, often the promoters immediately set up new companies under new names and resume scamming the public.
It supposedly sells vitamins and skin care products ... But virtually none of its revenue comes from selling anything. Instead, its money comes from recruiting a never-ending stream of new distributors who are the primary buyers of the company's products and who pay to attend seminars in the hopes of making big bucks. Of course, most of the people who take the plunge lose money rather than earning it. As a result, Nu Skin has a long and troubled history with regulators dating back to the early 1990s, when several states were investigating the company for operating a pyramid scheme.In 1992, Nu Skin settled a threatened lawsuit with the Michigan attorney general's office and four other states, promising to clean up its business practices and to pay $25,000 to cover the cost of the investigation. It later paid $85,000 to settle a suit with Connecticut, where then-attorney general (and current US senator) Richard Blumenthal had filed suit alleging that it was an illegal pyramid scheme. (Incidentally, during this time when Nu Skin was under fire from state consumer protection officials, its official spokesperson was Jason Chaffetz, who now represents Utah's 3rd District in Congress.)
This was the same Chaffetz mentioned above who claims that Lund helped his campaign but asked for nothing in return. So, we have a former official spokesman for a corporation, running for office with the help of funding by the corporation, who now claims that there was no undue influence by the corporation. And there’s more information about its problems with the FTC.
Nu Skin also got into hot water with the Federal Trade Commission for making false claims about its products, including weight loss supplements and baldness cures, and for misrepresenting the earnings new distributors would make. (The FTC alleged that Nu Skin failed to disclose that new distributors made virtually no money, despite its promises of easy wealth.)In 1994, the company settled a case with the FTC and signed a consent order promising not to engage in false advertising and to stop misleading potential distributors, among other things. In 1997, it paid $1.5 million in civil penalties for violating the order. These actions are one reason that for the past decade, 85 percent of the company's distributors are in Asia, where the market is not yet over-saturated with distributors and consent orders don't apply, according to company critic Jon Taylor, the head of the Utah-based Consumer Awareness Institute. Taylor used to be a Nu Skin distributor himself.
Another shared interest of this group of contributors, outside of business, is religion. Both men are listed as prominent Mormon businessmen, along with Mitt Romney, and both helped to finance a PBS series “The Mormons” which presented the Church of Latter-Day Saints in a favorable light. Another famous Mormon name that supplied money to the Romney campaign- but without the questionable use of phony corporate entities to hide behind- was the Marriott family. According to USA today, Marriott International Inc. CEO J.W. Marriot Jr. gave a half-million dollars to Romney's group, as did Marriot's brother, Richard Marriot, the chairman of Host Hotels and Resorts. Richard Marriott said in an interview with The Boston Globe:
“We’ve just been supportive of him,’’ Marriott said. “If he wants us to help out on certain things, then we’re willing to help.’’
The Mormon connections may (or may not) be significant. However, it is important as a matter of perspective, to note that it is not merely a matter of personal faith. The organization of the Church of Latter-Day Saint can be quite complicated to outsiders but it is safe to say that the contributors to Restore our Future from this group are not your average church members.
Taking a three-year break from Nu Skin beginning in 2003, Steven Lund, for example, served as president of the Atlanta mission of the Church of Jesus Christ of Latter-day Saints. One spokesman for the Mormon Church said Lund is now a member of the Fifth Quorum of the Seventy, one of the highest levels for a part-time church officer and in charge of churches for tens of thousands of Mormons. He reportedly owns a rare copy of The Book of Mormon.
In 1997, John Willard Marriott, Jr., another million dollar donor mentioned above, was called by the church to be an Area Authority Seventy and member of the Fifth Quorum of the Seventy. A Seventy is a kind of regional authority for the Mormon Church and The Quorums of the Seventy "are also called to preach the gospel, and to be especial witnesses unto the Gentiles and in all the world". Regarding the other million dollar contributor, the Mother Jones article notes:
The MogulBlake Roney is such a church supporter that he commissioned a Mormon sculptor to carve giant pieces of stone into replicas of the original sunstone capitals that were part of the legendary 19th-century Mormon temple in Nauvoo, Illinois. He put them in his front yard in Provo.
For man like Paulson, a million dollars is a sum that would hardly be missed at all.
Paulson, a hedge fund manager, is the founder and President of Paulson & Co., a New York-based hedge fund. (Surprisingly perhaps, this Paulson is no relation to former Goldman Sachs CEO and U.S. Treasury Secretary Hank Paulson.) He was ranked 39 on the 2011 Forbes list of the world's wealthiest people with a net worth of almost $16 billion.
His keen sense of what’s going- and what is about to happen- on Wall Street has allowed him to make some breath-taking profits while critics have charged Paulson with making a profit on the misery of the masses.
For example, unlike firms like Merrill Lynch and Citigroup, which were making enormous profits by packaging and trading blocks of risky home loans, Paulson gambled against the conventional wisdom and when the bubble collapsed, he was amply rewarded. He was not responsible but he certainly benefited. And that should surprise nobody.
That’s what people like Paulson do. People like Paulson see crisis, meltdowns and economic disasters as opportunities to make money.
Here’s a peek at the man and his methods from early 2008, courtesy of Dave Goldiner, New York Daily News staff writer,
The Queens-born hedge fund titan scored big by making complex investments that would reap huge profits if housing prices drop and mortgage foreclosures rise. As the housing market tanked, Paulson made $2.7 billion in the first nine months of 2007 to lead all hedge fund bosses. Things are looking even better for him in '08 as real estate prices crumble and millions of Americans struggle to stay in their homes."I've never been involved in a trade with such unlimited upside," Paulson, 52, boasted to The Wall Street Journal.The publicity-shy Paulson,.... eschews the workaholic Wall Street ethos and tries to get home to his $15 million townhouse on the upper East Side in time for dinner...
Despite his regular New Yorker roots, Paulson made his biggest splash as a prophet of doom for American homeowners.
"Mortgage experts were too caught up" in their own happy talk, Paulson told The Journal. Perhaps feeling twangs of compassion, Paulson donated $15 million to a nonprofit group that helps troubled homeowners keep their homes.He could afford it. Last year alone, Paulson earned a whopping 5 billion dollars.
How can a single person earn so much? A brilliant investor is John Paulson, the most successful depository of the world leads. He made a capital in 2007 and in 2008 when the real estate and mortgage market in the USA, then the investment banks and finally the world economic trend broke in first. In 2009 it changed the horses on time, put on gold, mines and oil shares as well as U.S. benches....
In 2007 John Paulson & Co. made a profit of 15 billion dollars more than the economic performance of Bolivia, Honduras and Paraguay together with more than twelve million inhabitants. Paulson personally earned more than four billion dollar and thus more than J. K. Rowling, Oprah Winfrey and tiger of Wood together. So that not enough: “King Midas” made five billion from 2008 by the beginning of 2009 for his enterprise as he is called reverent on Wall Street. Losses stand for banks and other enterprises on the other side in the amount of three billions dollars. The stock markets lost globally more than 30 billions in between. The consequence: The most serious recession since the second World War.
While Paulson may be the largest contributor, he has, unlike the previous examples, been open about his donations. Furthermore, others from Wall street and beyond have examined Romney and liked what they’ve seen.
Dan Freed, writing for The Street, a Wall Street news site, has looked over the super PAC’s contributor list and noted:
Other financial services industry donors to the group include Moore Capital CEO Louis Bacon, who gave $500,000, former JPMorgan Chase (JPM_) CEO Bill Harrison, who donated $10,000, and IntercontinentalExchange(ICE_) CEO Jeffrey Sprecher, donor of $230,000.Senior executives from private equity firms KKR & Co.(KKR_), Apollo Management and Bain Capital, which Romney co-founded in 1984, were also among the donors, as was Sun Capital co-CEO Marc Leder, who gave $125,000.Putnam Investments CEO Robert Reynolds gave Romney $100,000, while Edmund Kelly, who retired last month as CEO of Liberty Mutual Group, chipped in $1,000. Eric Varvel, Credit Suisse(CS_) COO of Investment Banking and a major donor to Romney's 2008 campaign, gave $100,000 to the PAC.
Is it all that unreasonable to think that when somebody is generous enough to give you a million dollars in order to make all of your rather large ambitions come true that they would not ask something in return? Or, in the same way, that you would not feel a bit disposed to see things from their point of view.? Or, to be, at least, somewhat more responsive when called upon to repay the favor?
Citizens United
While the Supreme Court Justices were debating the complicated issues that arose from the Citizens United case, there was one key point that caused even the dissenting judges to relax their objections to the idea of unlimited spending and its potential harm: the mandatory disclosure of the contributor names and affiliations.
Mandatory disclosure plays a big part in the Court's majority reasoning that unregulated expenditures will not cause undue harm to the integrity of elections.
Incidentally, this was the only part of the Citizens United decision that Justice Clarence Thomas disagreed with- the disclosure of campaign donor names. He felt that disclosure could lead to violations in privacy or intimidation, which might limit an organization or corporation's free speech. Michael Dorf, a Cornell Law School writer on constitutional law, regarding Justice Thomas’ concerns about disclosure leading to intimidation, notes
(T)hat's true only if one takes the leap from anonymous speech for natural persons to anonymous speech for corporations. Yet the sort of threats and intimidation that one might legitimately think entitle natural persons to anonymity when speaking or even when spending money on speech, are quite different for a corporation. The fear that a corporation might lose customers if it is known that it supports the Democratic or Republican candidate in some election is hardly comparable to the sorts of fears that could chill speech by natural persons.
Regardless of what Mitt Romney might tell his unruly hecklers, corporations are not people.
Already even before the first major test of the Citizens United decision- from the theoretical to the practical, we witness causes for concern: The use of dummy corporations to hide the actual donor's name from open disclosure, private investors whose financial motives may not be in the best interest of the nation as a whole, and contributors whose narrow religious interests which may not represent the majority view and, possibly, foreign contributors whose particular agenda may conflict with the good of the nation.
In his opinion Justice Kennedy writes, "With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters."
True enough, but the disclosure system they describe doesn’t yet exist. The current disclosure system is insufficiently “rapid and informative” and does not make effective use of modern technology.
This is why blogs and other online sites are so important in keeping the public- people like the readers here- informed. Readers have their own parts to play by getting the message out with Facebook and Twitter and by creating their own blogs to re-post and disseminate the information. It’s also the reason why it is essential to keep the Internet free from all encroachments by corporations and special interests with a strong Net neutrality amendment to the Constitution.
Obviously, disclosure and exposure alone will not make such fantastically misguided rulings like Citizen United any less damaging but at least, we can know who our politicians are actually representing and the reasons.
And we can let others know in order for all of us to vote accordingly.
Update: By special request. I really enjoy the laughing in the background.
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