An unresolved question: Can contractors contribute to candidates’ super PACs?

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The Federal Election Commission on a party-line vote recently decided not to sanction a federal prisons contractor. The company, GEO Group, had made a big contribution to the Donald Trump political action committee in 2016. Where can contractors contribute politically, and where can they not? Bloomberg Government senior editor Ken Doyle has been following this question closely, and joined Federal Drive with Tom Temin to discuss.

Interview transcript:

Tom Temin: Good to have you on.

Ken Doyle: Yeah, thanks for having me.

Tom Temin: Tell us about this GEO Group case. Who are they? And I guess they were an early supporter of Donald Trump, and they had good incentive for supporting him, didn’t they?

Ken Doyle: Right. The thing that’s really striking about this is that their first contribution to a super PAC supporting Trump came a day after there was announcement by the Obama administration in August of 2016 that they wanted to end the use of private prisons, which is GEO’s business. They have a multi-billion dollar business running prisons for the federal and state governments and detention centers. And they very clearly, I think, saw that they had problems under Obama and felt that Trump would help them and a contributed to the super PAC. They ended up contributing about $2 million to a Trump super PAC and several other Republican super PACs after 2016. In a move that’s pretty unusual for sort of corporations in general, and especially for contractors.

Tom Temin: I guess the question, then, was it a violation of campaign law? And there the Federal Election Commission was divided.

Ken Doyle: Exactly. That’s the key question. So there’s been a law on the books for many years that says that people that receive government contracts are not supposed to make political contributions, because of the obvious fear of sort of pay to play that somebody is either pressured to give or gives to try and influence contracts. And that law, which is now enforced by the Federal Election Commission, has really become kind of ridden with loopholes. And the latest one is that if you just simply have an affiliate with a different name and no other real separation, that you can just use that affiliate to make the contribution and it doesn’t count as a contribution from a contractor. And so this was a key development where the staff of the FEC, the general counsel said that there needs to be some restriction, there needs to be some separation between the entity making the contribution and the contractor and the Republican commissioners on the FEC said, no, they didn’t think that they really said that, that was just precedents from previous cases, and so they reversed it.

Tom Temin: I guess, if you keep having enough offsets, then it becomes more like money laundering than the direct contribution.

Ken Doyle: Yeah, right. That was certainly the view of the staff and the Democratic commissioners who said yes, can’t just have an artificial separation that doesn’t have any real meaning. There have been cases in the past where a company that has some contracts with the government, but it has another entity that’s separated from those contracts that’s made contributions. But to have a major contractor like this, giving large amounts to super PACs is really a fairly new development. And it was a very long FEC case and investigation and the way that it’s come out, it really leaves things open for some similar companies possibly to be asked to make contributions.

Tom Temin: We’re speaking with Bloomberg Government senior editor Ken Doyle. And I guess in some ways, it’s analogous to the way that large contractors keep separate offices and separate staffs for lobbying than they do from their marketing and sales function. In some ways that happens. So what do we know about the degree to which any other contractors contribute to PACs and super PACs?

Ken Doyle: Well, there have been some previous FEC cases, there was a company called Ashgrid, there was another Navy contract. Within the last few years, there have been a number of cases. And in most of those previous cases, they were settled and the company paid a fine. They usually said we just weren’t aware of this restriction. And there was a company that contributed to a Hillary Clinton super PAC, there were other companies that contributed to a super PAC supporting the Republican congressional candidates, candidates on both sides. Most of these cases have been settled, and that restriction on contractor contributions was upheld. So this is new, because you have a major contractor that is being allowed to give now. And by the way, it has been legal for corporations in general to support candidates since the Supreme Court, same as Citizens United decision in 2010, which said a corporation could spend money to influence federal elections. But this was a further restriction on contractors that was upheld, generally, even after that Citizens United case. I think that’s what’s significant about this. This was one of the sort of last limits on corporate money and campaigns, and it seems to be now have eroded away.

Tom Temin: And what about companies that have large commercial practices, in addition to large government practices? A company like GEO is only going to sell to government because I don’t think any corporations run prisons so far as we know, but then a lot of the software and manufacturing companies are on both sides.

Ken Doyle: Sure. Exactly. And there are companies an awful lot of big companies, maybe most or almost all have some sort of dealings with the government. So in that sense might be considered contractors, but differences that these other companies that had separate business, they could say, well we have enough revenue from other sources, we’re not using money that comes from the government. I mean, it’s debatable whether the rules should be stricter than that. And some people think that they should be. But clearly you could see a distinction of companies that have commercial business, or just saying what we’re like other companies, we can have a PAC, we can have lobbying offices, we can do the same things and not just take money from the government and spend it on politics, which is the thing that I think that the contractor restrictions have, that was the intent of it, that you shouldn’t take money from the taxpayers and then try to influence and get more money.

Tom Temin: And I don’t have detailed knowledge of this. But my impression is that the large companies tend to make contributions to both sides, Democrats and Republicans, more paying protection than actually pursuing any particular policy.

Ken Doyle: Right. I mean, that’s absolutely true. And certainly with PACs, PAC money is separate from corporate money in the sense that it’s money that’s given by employees and sort of kept in a separate account and can be contributed directly to candidates. But there are some companies that make direct contributions. Certainly, almost all the major companies have PACs that give to candidates, but they do tend to, as you say, be pretty even handed. And clearly the downside of something that, what GEO was doing where they were using their corporate money really only on kind of one side of the ledger supporting Trump and Republicans. The downside is that if your team loses in the next election, you may actually be damaged by that. That’s why I think companies in general are sort of reluctant to get too involved in this stuff. And if they do, they try to be, as you say, pretty even handed on how they deal with it.

Tom Temin: Ken Doyle is senior editor at Bloomberg Government. Thanks so much for joining me.

Ken Doyle: Thanks a lot. Appreciate it.

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