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Sunday, January 23, 2022

Lev Parnas is only the latest scandal in a history of American campaign finance missteps

Lev Parnas, a former business associate of Rudy Giuliani, was convicted last week on six counts related to an illegal campaign finance scheme where a Russian oligarch’s money was used to pay for political contributions made in hopes of political favors. A fake company funneled hundreds of thousands in contributions to pro-Trump campaign committees including the America First Action Super PAC — and then the conspirators lied about it to the Federal Election Commission.

Parnas coincidentally has also acknowledged participating in Giuliani’s effort to pressure Ukrainian officials to investigate Joe Biden in 2019. This news reminds us of how corrupt our campaign finance system can be as well as how vulnerable the United States can be to foreign influence because of it.

We’ve known for over a century that campaign finance is fraught with corruption.

President Teddy Roosevelt lambasted corruption of both the Republican and Democratic parties by monied interests, the Tillman Act of 1907 prohibited corporations from directly contributing to political campaigns, the Nixon era saw various devices used to circumvent this prohibition on corporate campaign contributions, and in 2009, the Supreme Court in Citizens United v. FEC held that corporations were “people” with free speech rights including unlimited spending on electioneering communications on the eve of an election.

Recently, two more developments have shown how corrupt the campaign finance system has become.

According to a Daily Beast review of Federal Election Commission records, Rep. Claudia Tenney, R-N.Y., allegedly spent tens of thousands of dollars from her campaign on businesses she either owned or in which she held an executive position.

Tenney reported $130,120 in income from these businesses in 2020. We all know this trick — former President Donald Trump spent millions of campaign dollars at his own resorts and hotels — not to mention the hundreds of thousands of taxpayer dollars spent by the Secret Service at Trump properties whenever he visited.

On the other side of the aisle, Rep. Ilhan Omar, D-MN., allegedly spent almost $3 million of her campaign money paying a political consulting firm that just happened to be owned by a man who is now her husband.

All of these transactions are arguably — emphasis on “arguably” — legal. Although candidates are not allowed to convert campaign funds to personal use, they are permitted to spend campaign money at their own businesses, provided fair market value is paid for goods and services. Establishing fair market value, however, is not always easy and the appearance of gifting undermines public confidence in candidates and in government.

All of these transactions are arguably — emphasis on “arguably” — legal.

The better approach would be for Congress to enact a law flatly prohibiting transactions between campaigns and businesses owned by candidates and relatives of candidates. A political campaign website after all is not a personal Go Fund Me page for the candidate, friends, and family.

Meanwhile, Representative Fortenberry, R-NE., has been indicted for lying to federal investigators in an investigation into illegal contributions to his reelection campaign by a Nigerian billionaire, Gilbert Chagoury. Chagoury, a foreign national is prohibited by federal law from contributing to U.S. elections, and in a deferred prosecution agreement earlier this year admitted that he intended his funds to be used to make contributions to candidates. Chagoury also admitted to making illegal conduit contributions in the name of another individual.

The federal investigation then turned to Representative Fortenberry who then allegedly lied to the investigators. Fortenberry is charged with one count of scheming to falsify and conceal material facts and two counts of making false statements to investigators.

These are just two of the dozens of campaign finance scandals we have every year. The intersection of money with our representative democracy has become so pervasive and obscene in scale that many Americans believe we no longer have a government that represents anyone but the super-rich.

This should not be a partisan issue. In 2016 I published a book and a New York Times op-ed on why conservative voters, if not conservative politicians, are just as worried as liberals and moderates about money in politics. Indeed, the fastest way to bloat the federal budget with unnecessary spending is to allow lobbyists to raise millions for Members of Congress who put pet projects into spending bills. Among the biggest campaign contributors are military contractors, construction, and higher education, but other industries making money off of the federal budget play the campaign finance game as well. Campaign contributors capture of legislators and regulators affects oversight of the banking sector, fossil fuels and other industries. Regulatory breakdown greatly increases economic, environmental, and social costs because government officials aren’t doing the jobs they were elected and appointed to do.

The answer is threefold. First, activist Supreme Court justices — none of whom has campaigned for elected office — need to stop striking down campaign finance reform legislation. Money is not free speech, and corporations are not “people.” Citizens United and its progeny are among the worst Supreme Court cases ever decided, cementing corruption into our political system the way Plessy v. Fergusson cemented segregation into public education. The Supreme Court needs to reverse itself on campaign finance or mounting public anger will accelerate calls to reform the Court itself. If a constitutional amendment on money in politics is necessary, so be it.

Supreme Court justices — none of whom has campaigned for elected office — need to stop striking down campaign finance reform legislation.

Second, Congress should pass whatever legislation it can to get money out of politics, putting the onus on the Supreme Court to strike down yet more laws. The two types of scandals mentioned above can be addressed by the Federal Election Commission — the first by prohibiting financial transactions between campaigns and persons and entities related to the candidate, and the second by devoting more resources to enforcement of existing statutory prohibitions on foreign contributions to U.S. political campaigns.

Congress also needs to mandate more disclosure of money in politics, including dark money organizations that fund attack ads prior to elections as well as other nonprofit groups that engage in the political process, often coordinating with political campaigns behind the scenes, whether such coordination is strictly legal or not.

Third, as I proposed in 2016, we need to bring a lot more small-dollar donors into politics by giving ordinary Americans a tax credit for political contributions up to $200 to the candidate of their choice.

How much impact would such a tax credit have on the federal budget? We can’t tell for certain, but there would be less wasteful federal spending if politicians depended more on small-dollar donors who elect them, as opposed to the monied interests at home and abroad that think they should choose our government for us. Americans who pay taxes deserve a government that represents them, not one beholden to the cesspools of money that dominate our political landscape today.

Kaylie Pferten
A pilot of submersible crafts in a former life, now married to my husband David and writing about investment advice.

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