Pay-to-Play - Ledger - Money flows back from contractors thru pols

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Published in the Star-Ledger, Sunday, September 17, 2006

Contractor funds circle back to Democrats
Law restricted donations to county party,
so money now flows through public officials

BY DIANE C. WALSH
Star-Ledger Staff

T&M Associates was one of many firms that consistently and generously contributed to the Middlesex County Democratic Organization.

The Middletown-based engineering firm, which has lucrative contracts with the county and several towns, donated more than $250,000 from 1998 to 2004, according to campaign finance records.

Last year, however, the firm stopped donating to the party organization. It wasn't alone.

At least two dozen of the party's biggest contributors stopped making contributions to the county committee in 2005, the same year the state enacted tough regulations to curb the practice of pay to play, where no-bid contracts are awarded to campaign donors.

In 2005, the county organization raised $900,000 less than it had the previous year.

Reformers say the drop-off in contributions shows pay-to-play reforms are working.

But a closer look at campaign finance records shows the money is still flowing to county Democrats.

Elected county officials -- who previously did not raise money on their own -- suddenly began holding fundraisers. In one year, the county sheriff, the freeholders, and the county clerk raised nearly $450,000. More than $200,000 came from just 12 firms, including T&M, that were major contributors to the party.

Nearly $200,000 also made its way back to the county coffers, since the freeholders and other officials each donated $37,000 -- the maximum allowable contribution -- to the county organization in 2005.

County Democratic officials declined to comment about their strategy for raising campaign funds in the new climate. But they defended their methods.

"Are we following the letter of the law set by the governor and the state? The answer is yes," said Freeholder John Pulomena, who is seeking re-election to a fourth term in November.

His running mate, Freeholder H. James Polos, the former mayor of Highland Park, agreed. He said Democrats "just decided to create individual committees."

The three-time incumbent said the party "thought it was appropriate" to raise funds through separate accounts. "The only discussion we had was how could we effectively raise funds and make sure we comply with all the local regulations, and we certainly have," Polos said.

But Republican State Assemblyman Bill Baroni charged the Middlesex County Democrats found a way to circumvent the pay-to-play law. He said Democrats are taking advantage of a "huge loophole" in the reform legislation.

In addition, the Republican candidates for countywide office last year charged that the Democratic candidates violated the county ethics code by accepting contributions from firms that do business with the county government. They filed a complaint with the county ethics board, which cleared the Democrats. The Republicans have appealed to the state Local Finance Board.

Baroni, who is one of only a handful of Republicans office-holders in Middlesex, said the state regulations and local ordinances created a "patchwork" of rules that failed to break the ties between public officials who routinely award no-bid contracts to consultants who provide large campaign contributions.

Baroni said the pay-to-play reforms failed. "All it's done is alter it and made it harder to trace," Baroni charged. The better solution would be a "comprehensive" pay-to-play regulation that sets limits on all donations, Baroni said.

Harry Pozycki, chairman of the Citizen's Campaign, a statewide organization working to eliminate abuses in campaign fundraising, said comprehensive reforms are needed.

Pozycki commended the nine Middlesex County towns where local pay-to-play ordinances were passed. Many of the towns followed the draft written by Common Cause, an affiliate of the Citizen's Campaign.

"There's no question pay-to-play created an awareness of the art of diversion and pay-to-play brought attention to the fact that now more than ever elected officials are using pay-to-play to stay in office and extend their political power," he said.

Firms that once donated to the Middlesex Democratic organization said they stopped in 2005 because contributions put their businesses at risk. The state campaign finance reforms and many local ordinances, which recently went into effect, disqualify firms from public contracts if they made donations to county parties.

Pete McDonough, a spokesman for T&M, said the state and local pay-to-play regulations are affecting the way firms make political contributions.

"It precludes anyone who wants to do business from making contributions (to the county organization)," he said.

Even Wilentz, Goldman & Spitzer, a Woodbridge-based law firm that has been among the biggest contributors to the party, stopped donating.

Between 1998 and 2004, the firm and its employees donated $390,000 to the county Democrats. But in 2005, the firm did not make a single donation, although its employees gave nearly $59,000 to the party and an additional $30,000 to the individual accounts of county officials.

John Hoffman, the managing partner at Wilentz Goldman, said individuals lawyers can and have continued to donate without violating the pay-to-play ordinance because no one owns 10 percent of the firm.

The law states that if a partner owns more than 10 percent of the firm, those contributions are considered to be made from the firm.

Schoor DePalma, one of the state's largest engineering firms, stopped donating to political campaigns entirely in August 2005. It last contributed the maximum $2,600 to five Middlesex County freeholders and Sheriff Joseph Spicuzzo on June 15, 2005.

Anthony "Skip" Cimino, a spokesman for the firm, said Schoor DePalma stopped giving because there was "little or no consistency" between the regulations. He said it was "too burdensome" to try to navigate through rules.

"Why would you continue in a process that could harm yourself," Cimino said, explaining his firm wanted to avoid any negative publicity that might occur if it violated a rule.

Robert Morrison, one of the partners at Hodulik & Morrison, a Highland Park auditing firm that works for at least 10 towns as well as the county, said the firm has become cautious about political contributions.

"As much as people ask us, we're not going to do something that's going to hurt our business," Morrison said.

Based on the attorney's warnings, Hodulik & Morrison now attaches a carefully worded letter to all political donations. It asks the recipient to return the check if it violates any relevant contribution limits. Morrison said his office keeps careful files on all its donations.

"If there was some blanket rule in the state or a statewide provision for alternative financing I think the entire business community would be happy," he said.


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