Fine(d) Bedfellows Pt. 1: Worst corporations donate big
This article is part one of two, and part of Sacto Politico’s ongoing “Shame of Our Campaigns” series. For other articles in the series, click here.
On Jan. 6, the sight of far-right mobs terrorizing American democracy inside the U.S. Capitol outraged most Americans. Yet most other days, a far less violent but more effective group strides these same hallways, but instead of Trump flags, zip ties and fire extinguishers, they wield huge amounts of corporate cash to secure more access and control than the rioters could have ever dreamed.
This rich army comprises the tens of thousands of corporate lobbyists and wealthy donors who contributed roughly two-thirds of the record-setting $14 billion spent on the 2019-20 Congressional and Presidential races. According to OpenSecrets.org, this category of donations doubled from $4.2 billion in the 2016 cycle to roughly $9 billion in the 2020 cycle. Plus, throw on top of this another $7 billion spent on federal lobbying over the last two years.
These mind-boggling numbers tend to paralyze any fruitful discussion. So to simplify and better focus discussion, Sacto Politico undertook a unique study of political donations from the nation’s most heavily fined corporation, or the “worst of the worst.” This study has found during the 2019-20 election cycle California’s 53-member delegation to the U.S. House accepted $14.6 million in campaign donations from 420 heavily fined parent corporations and subsidiaries. Heavily fined was defined as being penalized by state and federal governments anywhere from a half million dollars since 2000 up to $63 billion (Bank of America).
This averaged $278,127 per California House member, or nearly a third of all PAC donations they accepted last cycle. Plus, each member of the California delegation accepted donations from an average of 11½ corporations fined $1 billion or more since 2000.
The study cross referenced data from three large databases: the Federal Election Commission, the Violations Tracker of GoodJobsFirst.org, and OpenSecrets.org. California’s 53-member House delegation was chosen as it covers nearly one in every eight House seats and a wide range of urban and rural districts. It also features a member on most all House committees and subcommittees, and both Speaker of the House Nancy Pelosi (D) and Minority Leader Kevin McCarthy (R).
The sample does feature far more Democrats (42) than Republicans (11); however, partisan affiliation is not a key defining variable in corporate giving. Overall, corporate America donates in roughly equal proportions to both parties, with their main preference being for incumbents and members on committees overseeing their industries.
Below are charts for three of the categories examined. Seven members appear on all three Top 10 lists, but McCarthy was by far the king of each category. This included accepting donations from more than half (43) of America’s 83 corporations to have each accumulated fines of at least $1 billion. Also notable is that McCarthy’s counterpart Pelosi appears on just one of these lists.
To enlarge, just click on the charts.
To examine the entire California House delegation, click here.
Worst of the Worst Corporations
Political polls consistently show the vast majority of voters support campaign finance reform. For example, a 2018 University of Maryland poll found 88% of voters believed reducing corporate and big-donor influence was important. This number stayed consistent in both very red or very blue districts. And according to D.C. watchdogs, this aversion to big-donor influence is well-placed.
“The problem is, despite what the Supreme Court says, corporations are not really people,” said Philip Mattera, research director for Good Jobs First, a D.C.-based research organization promoting corporate and governmental accountability. “Any way corporations interact with government is another way they try to influence their treatment by government. The two biggest areas are tax policy and regulatory policy.”
Concerns about corporate influence over government can multiply when one considers just how fined the “worst of the worst” corporations are and the degree to which they finance American politics. To give the public a view of the former, Good Jobs First created its Violations Tracker, a database that brings together and tags hundreds of thousands of records of corporate malfeasance.
The database goes back to 2000 and features more than 3,300 parent corporations, linkable by their subsidiaries. This database helped Sacto Politico determine that 420 corporations that had given last cycle to House members of the California delegation have been fined a minimum $500,000 since 2000. Altogether these 420 corporations totaled nearly a half trillion dollars ($484 billion) in fines and penalties.
The fines detailed in Violations Tracker cover a staggering spectrum of law-breaking across 100 different categories. To name just a few: price-fixing, wage theft, kickbacks and bribery, work- and public-safety violations, false claims submissions, mortgage abuses, environmental violations, toxic securities abuses, investor and consumer protection violations, employment discrimination, anti-money-laundering deficiencies, controlled substance violations, nuclear safety violations, and work visa violations.
“In a sense, Violations Tracker is a database of recidivism,” Mattera said. “It is showing how these companies are involved in misconduct over and over again, and in many different areas.”
For example according to the database, Exxon Mobile has been fined more than $1.5 billion since 2000. This ranks Exxon as the 50th most fined U.S. corporation and covers 388 individual violations across 11 different violation categories, with environmental violations its most common type (295).
Walmart – which will be covered more below – ranks 35th with $2 billion in penalties for 344 violations across 18 categories. Most common were 157 different federal workplace safety or health violations, followed by 42 wage and hour violations, also known as “wage theft.” (For a detailed examination of corporate wage theft, see Mattera’s June 2018 report “Grand Theft Paycheck.”)
Given his extensive experience with business violations, Mattera believes most corporations view regulatory fines not as something to stamp out at all costs, but as just another regular expense built into their business models. Sarah Bryner, director of research and strategy with the Center for Responsive Politics, said she felt it fair to call such repeat corporate violators the “worst of the worst.”
“Fines are an important on-the-record [measuring] stick for corporations,” she said. “It’s one important element in a corporation’s resume of behavior. You could also think of other aspects in the same way such as diversity among board members and charitable giving.”
Bryner’s organization does not take a policy stand on the appropriateness of corporate political giving. The main focus of the Center for Responsive Politics is greater transparency within the fundraising system. But even there, she said the allowance of dark- and semi-dark-money Super PACs – whether funded by corporations or high-wealth individuals – is another area of growing unregulated influence that can undermine democratic norms and principles.
In their 2017 Harvard Business School paper “Why Competition in the Political Industry is Failing America,” Katherine Gehl and Michael Porter observed:
“Our political system isn’t broken… The real problem is that our political system is no longer designed to serve the public interest, and has been slowly reconfigured to benefit the private interests of gain-seeking organizations: our major political parties and their industry allies.”
Every member of Congress will of course reflexively insist no donation has ever influenced them, and yet the entire committee and subcommittee structure of Congress is set up to assist members raise money from the industries those committees oversee.
In the House, this includes roughly 100 subcommittees – an absurd quantity that gives the 435 House members oversight responsibility across as many different industries as possible. This sprawling structure also multiplies the number of available subcommittee chair, vice chair and ranking minority member positions, which provides niche power in their own way.
Given how much heavily fined corporations donate, it’s natural to assume one benefit they’d hope to garner from their political giving is occasional Congressional assistance to keep those fines as low as possible. However, proving such favoritism is extremely difficult.
“It would be very hard to prove, but I’m sure it must go on,” Mattera said. “Those kinds of things just aren’t done in the open. Companies are far more sophisticated than Donald Trump was in trying to get the Department of Justice to do his bidding on the election. That was actually pretty crude.”
Walmart Foreign Corrupt Practices
A source interviewed said one company widely rumored in D.C. to have attempted to directly or indirectly lobby for lower penalties was Walmart, which in 2019 settled a major Foreign Corrupt Practices Act case. Details behind these rumors have always been more circumstantial than specific, but here are the known facts.
Over much of last decade, Walmart was investigated by the U.S. Justice Department and the Securities and Exchange Commission regarding reports of major bribery schemes in Mexico, China, Brazil and India. The New York Times first broke the Mexico part of the story in 2012. In 2016, the U.S. government proposed a $600 million settlement that Walmart rejected. Then in 2019, Walmart agreed to a much reduced settlement of $282 million, an amount readily covered by a corporation with nearly $15 billion in profits last year.
Over the same decade, Walmart’s political action committee – the Walmart Inc. PAC for Responsible Government – gave generously. This included $500,000 in this period to the Democratic and Republican campaign arms in the Senate and House. Another $5.3 million was given directly to U.S. House candidates. In 2019-20 alone, about $1 million was given to 250 members of the U.S. House, or more than half of the chamber.
The obvious question is did all this giving influence the reduced $282 million Walmart finally agreed to pay? Mattera wasn’t so certain. He noted that attempting to pressure or lobby the U.S. Justice Department always risks the appearance of obstruction of justice. Plus the Justice Department is known as the sworn enemy of corporate America.
“The thing is companies already often get very friendly treatment from the Justice Department,” Mattera said. “The Justice Department does not like in most cases to bring criminal charges against companies. Most of the time they let companies resolve the matter with deferred and non-prosecution agreements in which no one has to plead guilty. Companies are also usually assessed a financial penalty they can easily afford.”
Similar questions of influence surround the handling of the Opioid Crisis by Congress. The largest opioid makers and distributors are among the most fined and sued companies in America. They have also become major political donors, contributing more than $60 million over the last decade. This includes more than $300,000 given in the last two years alone to members of the California House delegation and their leadership PACs.
This giving coincided with nearly a half million opioid-related deaths from 1998 to 2016, and the death rate is believed to have spiked again during COVID shutdowns. Despite this, in April 2016 Congress enacted a kneecapping of DEA enforcement power over Big Pharma. This passed Congress by a unanimous voice vote making it a rare bipartisan bill to be unscathed by Washington’s famous gridlock.
Interestingly, once the bill’s relaxing of DEA enforcement powers was exposed by 60 Minutes and The Washington Post, most lawmakers interviewed admitted having never read the bill. Some stated the bill certainly should be fixed, but in the nearly five years since, Congress has yet to reinstitute the DEA powers.
A related footnote: In December, the Justice Department filed a nationwide lawsuit against Walmart for “filling thousands of invalid prescriptions at its pharmacies and failing to report suspicious orders of opioids and other drugs placed by those pharmacies.” In announcing the lawsuit, a U.S. Attorney added:
“Our office prosecuted a physician for illegal opioid distribution. A jury convicted him just last year, and he is currently serving a 20-year prison sentence. As it turns out, that physician expressly directed patients to Walmart to have their opioid prescriptions filled. Walmart’s own pharmacists reported concerns about the doctor up the corporate chain, but for years, Walmart did nothing – except continue to dispense thousands of opioid pills.”
Sadly, unlike with that jailed physician, it’s rare for federal cases against a corporation to result in anything more than a negotiated settlement.
More Study Findings
Despite the huge amounts donated, corporate donors – even heavily fined corporations – don’t donate wildly. They like a good bet. Thus, it should be little surprise Sacto Politico’s research found corporations gave relatively little to new members of Congress and members entering their second term. But after a second term in office, donation totals spike up considerably. This is in keeping with more tenured members having climbed the leadership ladder and occupying more senior roles on committees and subcommittees.
For these reasons, the case of Bay Area representative Ro Khanna stands out. That’s because he’s the only member of the California delegation with at least two continuous terms in office to have not taken a donation last cycle from any corporation fined at least $1 billion.
It’s doubly noteworthy that while he raised $3.8 million last cycle, he did this by accepting roughly $7,000 in donations from 4 non-corporate PACs. By comparison, the California delegation averaged $719,000 in donations from 244 corporate and non-corporate PACs.
Further, Khanna accepted no donations from other candidates’ Leadership PACs. This is significant because some candidates will claim to have taken a no-corporate-PAC pledge, but what they technically pledged was to take no money directly from these corporations. This allows them to still take large amounts of donations from other candidates’ Leadership PACs and joint-fundraising committees that do accept corporation donations.
This was the case last cycle with U.S. Reps. Josh Harder (CA-10) and Katie Porter (CA-45). They both took no direct corporate PAC money, but accepted donations from dozens of candidate Leadership PACs that did. (Khanna was approached for comment on his campaign donation philosophy, but his office declined to participate.)
Sacto Politico’s study also found little difference between the political parties. California Democrats on average accepted more PAC money overall than Republicans ($732,285 to $714,492), but Republicans took slightly more from fined corporations ($323,546 to $294,387).
But the differences were starker when California members of the corporate-friendly New Democrat Coalition were compared to the more anti-corporate Congressional Progressive Caucus, but even then, the differences weren’t as stark as many might expect.
For example, California’s 15 members of the New Democrat Coalition averaged $825,920 in PAC donations last cycle, which was about $190,000 more than the 20 Progressives’ still sizable $633,498 average. This difference, though, narrowed somewhat when donations only from the most heavily fined corporations were reviewed: an average of $340,926 by New Democrats and $198,578 by the average California House Progressive.
Further, while New Democrats accepted donations from an average of 15½ corporations fined more than $1 billion since 2000, Progressives still accepted from an average of 8½ such corporations. Though this was almost half the New Democrat total, office-holding Progressives (save Khanna) are a far cry from the purist position many Progressive voters might prefer or have expected.
This is all another way of saying however you look at the federal campaign finance data – red versus blue, more centrist versus further left – the system is tangled up in corporate green. Until the checkbooks of that well-heeled horde of corporate lobbyists are finally banned from giving to candidates, solemn references by members of Congress to protecting the sanctity of “the People’s House” should not be taken seriously.