Extortion
Authors: Peter Schweizer
Table of Contents
America’s Most Expensive Tollbooth
The Underground Washington Economy
Sample Chapter from THROW THEM ALL OUT
Copyright © 2013 by Peter Schweizer
All rights reserved
For information about permission to reproduce selections from this book, write to Permissions, Houghton Mifflin Harcourt Publishing Company, 215 Park Avenue South, New York, New York 10003.
The Library of Congress has cataloged the print edition as follows:
Schweizer, Peter, date.
Extortion : how politicians extract your money, buy votes, and line their own pockets / Peter Schweizer.
pages cm
ISBN
978-0-544-10334-4
1. Political corruption—United States. I. Title.
JK
2249.
S
34 2013
320.973—dc23
2013026342
e
ISBN
978-0-544-10330-6
v1.1013
To
Bernadette Casey Smith and Owen Smith
with humble thanks for their friendship, support, encouragement
,
and wisdom over the years
1
Introduction
“Throw Fear”
You’re only as good as your last envelope.
—
SILVIO DANTE
,
The Sopranos
, 1999
T
HE POTOMAC RIVER
that snakes by Washington, D.C., was given its name by the local native Americans centuries ago. Potomac was the name of a local tribe. According to some accounts, the word means “the place where goods are off-loaded,” or “the place where tribute is paid.” As journalists say, that latter meaning is a fact too good to check.
It is often said that “money is corrupting politics.” And as ever, this is true. Outside interests, from labor unions to large corporations, are influencing and distorting our government in the search for favorable policies. And these interests are well prepared to push money and special favors into Washington, D.C., in order to get them.
But a deeper, more sinister problem that has been overlooked better explains the dismal state of our national government:
politics is corrupting money
. While we have focused on the power that
contributors have over officials, we have largely ignored the power that
officials have over contributors. We have focused on the
buyers
of influence (those outside special interests), but paid little heed to the
sellers
of influence—bureaucrats and politicians.
In short, we have come to believe the problem in Washington is a sort of legalized bribery. If outside interests can only be held at bay, we can and will get better leadership.
But what if we are wrong? What if the problem is not bribery . . . but extortion? What if the Permanent Political Class in Washington, made up of individuals from both political parties, is using its coercive
public
power to not only stay in office but to threaten others and to extract wealth, and in the bargain pick up
private
benefits for themselves, their friends, and their families?
What we often think of as the bribery of our national leaders by powerful special interests in Washington may actually make more sense understood as extortion by government officials—elected and unelected. Far from being passive recipients of money and favors, they make it happen. They leverage their positions to shake the money tree for themselves and their political allies. And as we will see, they do so using a variety of methods, many of which you probably have never heard of before.
The assumption is that we need to protect politicians from outside influences. But how about protecting ourselves from the politicians?
Journalists and academics look at politics through a mythical lens that harkens back to Aristotle and Plato: politics is the business of producing correct policies. We may dispute what is correct, but in the traditional view, that is the goal of the process. Media reports on government actions, whether debates, legislation, or regulation, almost always present them in terms of pure policy. New laws are for a specific purpose, perhaps even a noble one.
But what if that isn’t the real point of the exercise? What if politics is really largely about fund-raising and making money? The commercial motives of the Permanent Political Class in acting or not acting are rarely questioned and virtually never fully understood.
Popular culture takes the same naive approach. We all love the image of Jimmy Stewart in
Mr. Smith Goes to Washington
—the idealistic new senator seduced and targeted by powerful outside interests. “Lost causes are the only ones worth fighting for,” Stewart’s character says as he fights the lobbyists and the political machine. Virtually every new candidate for office runs as an outsider, vowing to take on special interests. If only he can resist those outside forces, everything will be okay. When bad things happen in Washington, we assume the problem is that our national leaders have given in to seductive outside forces, the “special interests.” From time to time we erect laws and rules to protect politicians from these temptations.
But what if we have it backwards? What if the greater culprits are
inside
the halls of power in Washington rather than on the outside?
Some at the heart of Washington power have hinted at this cold, hard reality. As Edward Kangas, former global chairman of Deloitte Touche, put it: “What has been called legalized bribery looks like extortion to us. . . . I know from personal experience and from other executives that it’s not easy saying no to appeals for cash from powerful members of Congress or their operatives. Congress can have a major impact on business. . . . The threat may be veiled, but the message is clear: failing to donate could hurt your company.”
1
Former Microsoft chief operating officer Robert Herbold told me, “You’re crazy if you don’t play along. They will go after you.” Ray Plank, the founder and former chairman of Apache Corporation, has seen his company cough up to both parties for fifty years.
2
He told me that campaign money and lobbying contracts are “protection money. It’s what you expect from the mafia.”
3
Former politicians who once played the game now admit the same thing. As former senator David Boren puts it, “Donors . . . feel victimized. Now that I’ve left office, I sometimes hear from large donors that they feel ‘shaken down.’”
4
Former senator Russ Feingold admits, “It’s not like businesses and business leaders call up politicians and beg them, could I please give you some money? It goes the other way, which is that people are called constantly by politicians when you have a system like this, or their representatives, or their allegedly independent agents. And it’s more like extortion than it’s like bribery.”
5
One survey of corporate executives conducted by the Committee for Economic Development found that half gave to political candidates because they “fear adverse consequences for themselves or their industry if they turn down requests.”
6
Politics in modern America has become a lucrative business, an industry that has less to do with policy and a lot more to do with accessing money and favors. As we will see, bills and regulations are often introduced not to effect policy change, but as vehicles for shaking down people for those money and favors. Indeed, the motive on both sides often has nothing to do with creating a “correct” policy, but instead is often about maximizing profits.
Raising campaign money is not just about winning elections and staying in power. As we will see, the Permanent Political Class has come up with all sorts of creative ways to transfer those funds into other pockets, which can be accessed to enhance their own wealth and lifestyle. And they have carved out convenient loopholes in the law that allow lawmakers to legally convert votes into cash.
The same goes for lobbying. Hiring a lobbyist aligned with a powerful politician is more important than hiring a lobbyist with a certain expertise or experience. Hiring a former staff member or family member is better still. It’s the favor that matters. Sometimes such favors are requested by politicians. Other times they don’t need to ask out loud. Several powerful politicians have multiple members of their immediate family (spouses and children) who make big money from lobbying.
7
Over the course of American history there have been repeated attempts to restrict the flow of money going into political parties and campaigns. Contrary to what you might have been told in school or by the media, the advocates of these efforts have not just been good-government, public-spirited citizens. They have also been corporations and individuals tired of being shaken down.
At the turn of the twentieth century, extortion was a widespread problem in Washington. The method was perfected by Mark Hanna, who served as President William McKinley’s chief fund-raiser. (Hanna once famously said, “There are two things that are important in politics. The first is money and I can’t remember what the second one is.”) Issuing a blunt warning to large businesses, Hanna gave them an “assessment,” an “invoice” of sorts, that they were expected to give to the Republican Party. If they failed to pay it, they would face big trouble. Standard Oil was assessed a $250,000 fee. Banks were expected to pay a fee of 1 percent of their capital.
8
By 1900, when McKinley was up for reelection, the White House was able to shake down the business community for $2.5 million (over $67 million in 2012 dollars). It sounds relatively small by today’s hyperbloated standards, but at the time it was huge.
By 1904, the problem had become exponentially worse after the political class systematized the extortion technique: Teddy Roosevelt appointed George Cortelyou, who was the U.S. secretary of commerce and labor, to head up the Republican National Committee. In his cabinet capacity, Cortelyou had oversight of the Bureau of Corporations, which was responsible for investigating any corporations whose business crosses state lines. As the
New York Times
put it at the time, “the chief of the Department which has become the custodian of corporation secrets [was] put at the head of the partisan committee whose principal function [was] to collect campaign contributions which come chiefly from great corporations.”
9
In one instance, several Chicago packing companies under investigation by the government’s Bureau of Corporations were hit up for $50,000 in campaign donations.
10
Cortelyou’s demands became so great that companies decided to do something about it, in the form of the Tillman Act of 1907 (named for its champion, Senator Benjamin “Pitchfork Ben” Tillman, now mostly remembered for his racist, segregationist beliefs). The Tillman Act made it illegal for businesses to give campaign contributions to federal candidates. Many corporations were tired of being extorted, and they enthusiastically supported the bill. As one Republican official noted after the law passed, corporate leaders were “entranced with happiness. . . . [T]hey are now in a position to throw us unceremoniously out of the door if we ask them for a penny. . . . They mean to take advantage of the laws forbidding them to give money for political purposes.” (In the 1940s, the act was amended to apply to unions.
11
) A
New York Times
editorial entitled “Happy Corporations” at the time quoted a “great financial authority”: “‘[We] welcome . . . this legislation with very much the same emotions with which a serf would his liberation from a tyrannous autocrat.’” The
Times
went on: “[The act] will lessen a very mean and sordid practice of blackmail. The beneficiaries of [regulation] will still find methods of furnishing the sinews of war to the party that controls their favors, but the great number of corporations that have suffered extortion through weakness and cowardice will have their backbones stiffened, and parties will be put to it to fill their coffers by really voluntary contributions.”
12
