November 2, 2013

State House for Sale: Big businesses pay off in jobs, political contributions

Scores of companies – from public utilities to drug companies and the liquor industry – contribute to the campaigns of individual S.C. candidates in a melding of corporate money and public policy that is banned in 21 states and in federal elections.

Hugh Leatherman, the chairman of the powerful S.C. Senate Finance Committee, has embraced the label “Senator Boeing.”

Brian White, chairman of the equally powerful S.C. House Ways and Means Committee, poses with the Michelin man on his website.

Gov. Nikki Haley, who says she gives corporate executives her personal cellphone number, has a former BMW executive as her Commerce secretary, driving what she says is the No. 1 priority of her administration – job creation.

There is good reason for S.C. politicians to feel an affinity for Boeing, Michelin and BMW. The three companies and tire maker Bridgestone have created – or promised to create – almost 8,000 jobs in work-starved South Carolina since 2008. In return, the four also have received – or stand to get – more than $800 million in state incentives and tax breaks.

But that’s not all.

Since 2008, the four companies also have contributed almost $600,000 to the campaign coffers of S.C. politicians, political action committees, political parties and caucuses, S.C. Ethics Commission records show.

Read all of the stories in our series, State House for Sale, by clicking here.

The four companies also have given another $228,000 to the operating funds of the four Republican and Democratic caucuses in the S.C. House and Senate. Unlike contributions to political campaigns, which are capped by state law, there is no limit on donations to the caucus operating funds, which use the donations to hire staff, pay for travel and hire consultants to support political campaigns and drive legislative issues.

Scores of other companies – from public utilities to drug companies and the liquor industry – also contribute to the campaigns of individual S.C. candidates in a melding of corporate money and public policy that is banned in 21 states and in federal elections.

“The influence of that money is outrageous,” said Lynn Teague, advocacy director of the S.C. Chapter of the League of Women Voters, which has been fighting for ethics reform in South Carolina for years. “It gets lawmakers to return their calls when regular citizens can’t.”

Lewis Gossett, president of the S.C. Manufacturers Association, which represents about 5,400 manufacturers statewide that employ about 350,000 workers, says those corporate contributions are not an effort to buy legislative votes on a particular issue.

“I don’t think campaign contributions, when done properly, have any quid pro quo or should they,” Gossett said. “It’s illegal. It’s unethical, and you don’t want to go there. (Instead,) we look at folks and their general support for manufacturing and the people who work in the manufacturing plant.”

Ethics reform advocates don’t buy that.

They insist the corporate contributions reported to the State Ethics Commission are just the tip of the iceberg in a political system that favors big business over others. Beyond their reported contributions, those critics say, companies can:

•  Give unlimited money to “super PACs” that then spend it to support or oppose candidates or issues
•  Enter into unreported contracts with politicians or their companies
•  Make contributions through limited liability corporations that don’t bear a company’s name, making the donor’s identity nearly undetectable in South Carolina
•  Give money through board members, executives, employees and their families, a practice that obscures the donation’s business tie
•  Pay lawmakers by hiring them as consultants, as the Columbia-based Wilbur Smith engineering firm did with then-state Rep. Haley. South Carolina is the only state in the nation that doesn’t require lawmakers and local officials to disclose the sources of their private income.

“There is no limit to the amount you can give a lawmaker or local official,” said former state Sen. Mike Rose, R-Dorchester. “You just hire him.”

The amount of state incentives that companies can get for locating and expanding in South Carolina – estimates place Boeings’ incentives and tax breaks at $570 million over the next decade – raises the stakes in the marriage of corporate money and state and local government, critics charge.

The incentive packages are brokered in secret, actual amounts are rarely fully disclosed and the public is never told if the companies deliver the number of jobs promised, those critics say.

“The danger is the secrecy itself,” said Ashley Landess, executive director of the libertarian-leaning S.C. Policy Council. “It’s what you can’t see that’s important. You won’t see the quid pro quo.”

State officials say the incentives work and are a good deal for taxpayers.

“Authorized by the General Assembly, incentives are just one part of a very successful economic development strategy in South Carolina that has brought 39,000 new jobs and $9.5 billion in new investment to our state since 2011,” the state Commerce Department said in a statement. “We will continue to use every possible economic development tool at our disposal to foster additional investment and job creation by both new and existing companies. As specifically designed, incentives are performance-based, safeguarding the taxpayer’s investment.”

‘Corporations are people’

Companies do not play so large a role in the politics of other states.

Twenty-one states ban direct corporate-to-candidate campaign contributions, including North Carolina, Texas and Michigan, according to an ongoing study by the National Conference of State Legislatures. The federal government has banned direct corporate contributions to candidates since 1906.

Six states – Alabama, Virginia, Missouri, Nebraska, Utah and Oregon – allow unlimited corporate contributions.

The rest of the states fall somewhere in between. Washington state, for instance, allows a company based in that state to make a maximum $1,800 donation.

South Carolina, like 15 other states, allows corporations to give to politicians at the same level as voters.

“In South Carolina, corporations are people,” said state Sen. Luke Rankin, R-Horry, chairman of the Senate Ethics Committee.

That means that businesses can give up to $1,000 per election to a state senator, state representative or local official, and $3,500 per election to a candidate for statewide office, as well as caucuses and political action committees.

However, individuals and companies can give unlimited amounts to the operating funds of political caucuses. The caucuses, in turn, can spend the money on salaries, travel, communications, advertising and consulting.

The caucuses and committees have to disclose who gives them money and how much – $10,000 by a company during a three-month reporting period is not uncommon. They also have to report the total they spend. But the groups are not required to itemize or disclose what or who they spent the money on.

That, critics say, allows the lines between caucuses and candidates to blur into meaninglessness.

“It makes no sense to argue that staff, consultants and hired agencies who work for these campaign entities are somehow separate from the campaign work, or that contributions beyond the legal limit are permitted to pay a consultant to a PAC and that none of it has to be disclosed because it doesn’t go directly to a candidate,” said the Policy Council’s Landess. “If the staff and consultants are separate from the campaign machines for which they work, then what exactly are they paid to do and why are they permitted to take in contributions to do it?”

Corporate money can enter the political system in at least one other way and be unaccounted for – leadership political action committees, or PACs.

Operating funds for leadership PACs – such as the Palmetto Leadership Council, a committee often linked to House Speaker Bobby Harrell, R-Charleston, and others operated by House leaders – are not listed on the Ethics Commission disclosure website, meaning the public doesn’t know who gives them money, how much or how it is spent. (However, campaign donations to the leadership PACs and campaign expenditures – as opposed to their operating funds – are disclosed.)

Harrell repeatedly has denied being involved with or controlling the Palmetto Leadership Council.

In a written statement to The State, Harrell said he supports corporate campaign contributions as a freedom-of-speech issue.

“When it comes to regulating an issue so closely connected with our right to freedom of speech, I believe it is better to err on the side of caution and that our citizens would rather have stronger accountability measures put in place than overly restrictive regulation of their rights,” Harrell wrote. “So when it comes to responsibly regulating money and political speech, greater transparency through more disclosure has consistently provided some of the best and most effective policies.”

‘Best policy is full disclosure’

Generally, companies give campaign contributions to be a part of the “fabric” of the state’s political landscape and cultivate an understanding among lawmakers about the conditions that manufacturers need to be successful, said Gossett of the S.C. Manufacturers Association, adding he couldn’t speak for any individual corporation or company.

Gossett, whose association operates the S.C. Manufacturers Association Good Government Fund with about $75,000 to spend during each election cycle, added South Carolina needs large manufacturers more than the large manufacturers need S.C. politicians. “It’s not the state letting you come here,” he said. “It’s the companies choosing to come here in a competition between states.”

Some level of campaign contributions by companies and businesses is valuable if properly reported, said Dave Woodard, a professor of political science at Clemson University and a Republican political consultant.

“Money is going to find its way into the system,” he said. “I don’t care if they give money. I just want it documented. Accept that as a fact of life and expose what is going on.”

Republican Gov. Haley agrees.

“Governor Haley feels the best policy is full disclosure,” said campaign spokesman Rob Godfrey. “She has no problem with businesses being allowed to donate to candidates, as long as those donations are fully disclosed to the public.”

‘Make our views known’

Some corporate political contributions, including contributions by some of the state’s biggest job creators who also receive large General Assembly-approved incentives, are fully disclosed.

BMW, which in January 2012 announced a $900 million, 300-job expansion of its Spartanburg County plant, has given nearly $241,587 to political causes since 2008, when the State Ethics Commission started listing contributions on its website. All of the money went to parties, caucuses and PACs except for a $640 donation to Greenville County Sheriff Stephen Loftis’ re-election campaign last year.

BMW also has donated $137,000 to the operating funds of the legislative caucuses.

State incentives for BMW’s 2012 expansion have not been fully calculated. But a $400 million, 400-employee expansion in 2002 drew $103 million in incentives, including a new $40 million interchange on Interstate 85. That figure did not include tax credits or job-development credits.

Since 2008, the biggest recipients of BMW’s campaign contributions have been the Senate Republican and Democratic caucuses at $48,500 and $40,000, respectively, and the House Republican and Democratic caucuses at $36,500 and $20,000, respectively. The company also gave the state Democratic Party $35,000 and the Republican Party $17,247. The Palmetto Leadership Council got $21,000.

“From the company’s beginning, BMW Manufacturing has participated in the legislative process by primarily sponsoring legislative caucuses and statewide parties each year. As a practice, BMW Manufacturing does not contribute to individual candidates,” Sky Foster, manager of the company’s corporate communications, said in a statement.

•  Michelin North America, which in April 2012 announced 500 new jobs in Lexington and Anderson counties, has given more than $179,250 to 52 individual politicians and 11 different advocacy groups since 2008.

It has also given $3,500 to legislative caucus operating funds.

The S.C. Policy Council, using county cost-benefit assessment reports, calculated the cost to taxpayers in incentives and tax credits for Michelin’s Anderson plant alone was more than $78 million. Incentives for its Lexington expansion have not been calculated.

Since 2008, the biggest individual recipients of the company’s campaign contributions were 2010 Republican gubernatorial candidate Gresham Barrett and 2010 Democratic gubernatorial candidate Vincent Sheheen at $7,000 each, and 2010 Republican attorney general candidate Leighton Lord at $5,000. The company also recently gave Haley $3,500 for her re-election campaign but so far has not donated to Sheheen, expected to run again against Haley in 2014.

Michelin’s biggest group contributions went to the Republican and Democratic parties at $25,000 and $20,000 respectively, the Palmetto Leadership Council at $18,500 and the S.C. Manufacturers Association Good Government Fund at $17,500.

Efforts to get a comment from Michelin were unsuccessful.

Bridgestone Americas, which, in 2011, announced a $1.2 billion new plant in Aiken County creating 850 new jobs, has given more than $172,050 to 26 individual politicians – mostly those in leadership positions and the Aiken County delegation – and six groups since 2008.

It also has given $64,500 to the legislative caucuses’ operating funds.

The Policy Council, using Aiken County’s cost-benefit assessment reports, calculated Bridgestone’s incentives package as being worth $57 million.

The biggest individual recipients of Bridgestone’s campaign contributions were Haley at $9,000 and former Republican Lt. Gov. Andre Bauer at $7,000. The House Republican Caucus received $33,500 while its Democratic counterpart received $3,500. The Senate Democratic and Republican caucuses received $30,000 each.

“As part of our overall engagement in communities where we live and work, Bridgestone Americas and its political action committee donate to various candidates and legislative organizations in a transparent fashion to speak with one voice and make our views known on key issues affecting our company and our teammates,” Steven Akey, the company’s vice president for governmental affairs, said in a statement.

‘Proud ... corporate citizen’

South Carolina’s biggest recent job creators and biggest recipients of incentives – Boeing and Continental – lag the other companies in direct political giving, records show.

Continental, which received an estimated $237 million in incentives including a direct $35 million grant from the state for its Sumter tire-making plant that will open early next year and eventually employ 1,600, reports no political contributions. A spokeswoman said the company has a policy of not contributing to campaigns.

Boeing – which announced plans to build a $750 million plant in the Lowcountry to build its Dreamliner passenger jets creating 3,800 jobs in 2009 and, more recently, announced a $1 billion expansion that will create another 2,000 jobs – has given $65,500 to S.C. politicians and groups in campaign contributions, and $23,000 to the legislative caucuses’ operating funds.

Haley received the largest individual contribution from Boeing, totaling $7,000. The House Republican Caucus received $10,500 from the aircraft maker and the House Democratic Caucus received $5,500. Meanwhile, the Senate Democratic and Republican caucuses received $9,000 each, records show.

“Boeing is proud to be a leading corporate citizen in South Carolina and in other parts of the nation and supports the political process as part of our normal business activity through the Boeing Political Action Committee,” the company said in an email. “Contributions to political campaigns are decided on a bipartisan basis with the overriding purpose of supporting candidates and committees who share Boeing’s position on issues of importance to its business and its shareholders.”

Boeing has contributed in other ways as well.

•  It donated $25,000 in 2010 for Haley’s inaugural events, along with Duke Energy, BlueCross BlueShield of South Carolina, SCANA and Progress Energy. In all, businesses donated $750,000 for the party.
•  In 2011, when the future of Hilton Head’s Heritage golf tournament was threatened, Boeing helped Haley save it with a $1 million, five-year sponsorship deal.
•  Haley appointed Boeing executive Marco Cavazzoni as chairman of the S.C. Research Authority, essentially making him the overseer of a state agency.

‘Undue influence’

Corporations have almost unlimited avenues to get cash to S.C. politicians through PACs, parties, caucuses and committees, said John Crangle, head of S.C. Common Cause, a good-government advocacy group.

“The big corporations and the PACs dominate,” Crangle said. “They have an undue influence on who can afford to run. They have an undue influence on who gets elected. And they have an undue influence on legislation.

“It’s all implicit,” he added. “Nobody is violating the Hobbs Act (a federal law outlawing extortion). It’s a political system that pays off the big corporations with huge incentive and tax breaks and free land. At the same time, their policies fail low-income children, women and teachers because they don’t have the money to buy the public policy.”

Former state Sen. Phil Leventis, D-Sumter, now a member of Common Cause, is highly critical of the state’s ethics laws. South Carolina needs to require disclosure of lawmakers’ personal income and tighten the laws governing how parties, caucuses, committees and leadership PACS raise money.

But, Leventis added, the mega-corporations that create the most jobs and get the biggest state incentives – the BMWs, Boeings, Bridgestones and Michelins of the world – are probably the least likely companies to misuse the system. Their dealings with government are simply too big and too visible for them to take chances.

More likely, Leventis said, it is the smaller industries, flying under the public’s radar, whose donations can have the most influence – fighting regulation, for example.

“It’s the low-profile things,” he said. “They don’t get the scrutiny that the Bridgestones and the Continentals get. It takes more effort to ferret it out. You look for prints.

“(Former Democratic state Sen.) Tommy Moore was the guru for the title-loan industry. Then, he got job with them. (Then-state Rep.) Haley went to work for Lexington Medical Center and Wilbur Smith.

“The list goes on and on.”

More information

$886,000 in contributions, $808 million in incentives

Four of the corporations that have created the most S.C. jobs since 2008 -- and received the most in state incentives and tax breaks -- also have given almost $900,000 in campaign contributions to S.C. politicians, political action committees, caucuses and parties. A look at the jobs the companies have created or promised, the incentives they have received or stand to get, and the political contributions they have made. (The numbers for incentives in the chart below are estimates. The state Commerce Department says incentives are performance-based and it has not fully calculated them.)

Company Jobs announced Incentives Contributions
BMW (1) 700 $103 million $378,587
Michelin North America (2) 500 $78 million $182,750
Bridgestone Americas 850 $57 million $236,550
Boeing 5,800 $570 million $88,500

(1) Jobs are for 2002 and 2012 expansions; incentive for 2002 expansion only, 2012 incentive not calculated

(2) Jobs are for Lexington and Anderson expansions; incentives for Anderson plant only

SOURCES: S.C. Policy Council, media reports, S.C. Ethics Commission

Giving almost $1.5 million to caucus operating funds

The amount any one donor -- an individual or company – can give an S.C. political candidate is limited by law to $1,000 per race for legislators and $3,500 per race for candidates for statewide office. But individuals and companies can give unlimited amounts of money to the operating funds of the S.C. House and state Senate political caucuses, operated by Democrats and Republicans. Those four caucuses then can spend the money – without disclosing what they spend it on – to support political campaigns. Often, critics say, the caucuses spend the contributions to directly support candidates, paying for things the candidate otherwise would have to pay for out of campaign contributions. Some of the biggest contributors to the House and Senate caucuses’ operating funds since 2008:

Duke Energy: $322,250

AT&T: $304,100

BlueCross BlueShield of S.C.: $276,250

Palmetto Leadership Council: $238,000 (1)

BMW: $137,000 (2)

S.C. Hospital Association: $68,250

Time Warner: $68,000

Bridgestone: $64,500 (2)

Progress Energy: $46,500 (3)

SCANA Corp.: $33,000

Boeing: $23,000 (2)

Michelin: $3,500 (2)

(1) The Palmetto Leadership Council is a political action committee often linked to S.C. House Speaker Bobby Harrell, R-Charleston. All of its contributions went to the operating fund of the House Republican Caucus.

(2) Sums given to the caucus operating funds by BMW, Bridgestone, Boeing and Michelin also are included in their contribution totals in the separate box.

(3) Now part of Duke Energy

SOURCE: S.C. Ethics Commission

No thank you to incentives

When Time Warner Cable announced a $24 million, 644-job expansion in Lexington County in January, it didn’t ask the state for any tax incentives in connection with the deal.

“This announcement was related to an investment/expansion in our Columbia call center that included expanding and refurbishing an existing Time Warner Cable facility,” the company said through a spokesman. “Time Warner Cable did not ask for or receive an incentive, and it is not common practice for us to do so in South Carolina.”

While Time Warner demurs when it comes to incentives, it is an active player when it comes to political contributions.

Since 2008, the company has contributed more than $277,152 to 163 different politicians and 11 political action committees, caucuses and parties, according to the S.C. Ethics Commission. It also has given an additional $68,000 to the operating funds of Democratic and Republican caucuses in the S.C. House and state Senate.

The biggest individual recipients were:

•  State Sen. Vincent Sheheen, a Camden Democrat who is running for governor in 2014 against Republican Gov. Nikki Haley for a second time, at $8,750

•  Secretary of State Mark Hammond, R-Spartanburg, $8,000

•  Haley, $7,000

•  Attorney General Alan Wilson, R-Lexington, $6,500

The state’s largest cable television provider also gave $32,500 and $30,000 to the state Senate Democratic and Republican caucuses, respectively; $21,000 and $17,000 to the S.C. House Republican and Democratic caucuses, respectively; and $14,000 to the Palmetto Leadership Council, often tied to House Speaker Bobby Harrell, R-Charleston.

“The company’s participation in the political process is based on its business objectives and policy priorities, including regulation of the distribution of video content; the Internet and telephone and high-speed data services; local and state cable franchising; and other laws and regulations that affect the company’s general business operation,” Time Warner said. “All Time Warner Cable contributions are made in accordance to guidelines and rules set up by the South Carolina Ethics Commission.”

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