News Column

Firms gave heavily to DeWine, GOP

January 26, 2014

By Laura A. Bischoff and Jackie Borchardt, Dayton Daily News, Ohio

Jan. 26 -- COLUMBUS -- In the three years since winning a close race for attorney general, Mike DeWine and his political team have been raising hundreds of thousands of dollars -- often from lawyers who want state business -- and then using that campaign cash to pay off a $2 million personal loan that DeWine made to his committee in 2010 and to build up a war chest for his 2014 re-election bid. Firms that represent and are seeking to represent the state in securities fraud cases and other complex legal matters have given more than $1.3 million since 2010 to the campaign coffers of DeWine, the Ohio Republican Party and DeWine's son, Hamilton County Appellate Court Judge Pat DeWine , according to campaign finance records and outside counsel assignments. Of the $316,880 raised by Pat DeWine's campaign, at least $91,250 came from lawyers and firms that do special counsel work for his father's office, including $11,450 from Pat DeWine's old firm, Keating, Muething & Klekamp, a Dayton Daily News analysis of campaign finance and AG records shows. The contributions are perfectly legal as long as the donations aren't contingent on the firms getting state work. But those who closely watch the nexus between campaign contributions and state contracts -- often referred to as pay-to-play -- say the pattern of contributions to DeWine's office are troubling. "We were hopeful that DeWine would improve this," said James Copland , who studied pay-to-play in Ohio under Democratic Attorneys General Richard Cordray and Marc Dann for the conservative-leaning Manhattan Institute for Policy Research . "Unfortunately, it's only marginally better than Dann." Like previous attorneys general, DeWine picks law firms to serve on a panel to advise him on which securities fraud cases to pursue. The litigation can be expensive, drag on for years and can involve financial titans such as JP Morgan Chase , Freddie Mac and BNY Mellon . There are 27 firms on the current advisory panel, including 12 from Ohio . Panelists are also eligible for the special counsel work, which can be lucrative. In 2012, Bank of America settled a class action lawsuit led by two of Ohio's public pension funds and agreed to pay $2.4 billion to plaintiffs -- the fourth largest securities fraud settlement in U.S. history. Law firms assigned to the case were awarded $152 million in fees, plus $8 million in expenses. The Daily News examination found huge campaign contributions from some of the members of the panel, including some that came as DeWine was deliberating on which firms to put on the panel. "It appears based on the timing on where some of this money has come in, there's a rather overt effort to correlate contributions to DeWine's campaign fund with the selection of these firms to get on the (advisory) panel," Copland said. Asked about political contributions from firms seeking work from his administration, DeWine said, "We always follow the law and we make full disclosure." Big money at stake The attorney general hires outside firms to handle legal issues beyond the expertise of the office's in-house lawyers, such as difficult debt collection or securities fraud cases. Debt collectors are paid a percentage of what they collect, general legal work is paid an hourly rate and firms working on securities fraud cases are paid on contingency -- nothing if the state loses; a percentage of the settlement or award if the state wins. DeWine gets final say on who does the work. The Daily News examination found that the law firms on the panels tend to be the ones who get the work. Of the 27 law firms assigned to the cases that pay on contingency, 19 serve on DeWine's panel. Most of them also contributed via PACs or employees to the Ohio GOP, Mike DeWine and/or Pat DeWine -- more than $1.3 million from 2010 to 2013. About half of the donations came from firms whose main office is outside Ohio . In comparison, the 16 firms that did not land spots on the panel were not big campaign contributors. Twelve of the 16 made no contributions, and the other four contributed a total of $95,675 . Berman DeValerio , a Boston -based firm that has served on the panel the past three years, donated $2,000 to Pat DeWine's campaign on Aug. 16, 2012 -- just a week after Mike DeWine told co-founder Glen DeValerio his firm had once again made the panel. "I don't know why they gave. You have to ask them," Mike DeWine said. "Ask them. For me to surmise why they gave, it would be trying to read their minds." DeValerio did not return messages seeking comment. University of Michigan law professor Adam Pritchard , considered an expert on pay-to-play in securities fraud cases, said it is common to see national law firms spreading money to allies of a key officeholder. "You see these patterns all the time," he said. "It's not limited to just the candidate who is making decisions over who is going to get selected as counsel." Pritchard said other states have panels similar to one set up by DeWine. "The question is do these panels serve any useful purpose and the answer is probably no," Pritchard said. "The reason to have the panel is to get these people in the door so they can make the campaign contributions. It gives them a tangible spot that they can see what they're getting for their campaign contributions." DeWine, who is being challenged for re-election by David Pepper , a Democrat and former Hamilton County commissioner, noted that only 32 percent of individual donors to his campaign identified themselves as lawyers and thus eligible for special counsel work. Unusual situation DeWine is a political powerhouse who has served as Greene County prosecutor, lieutenant governor, U.S. Senator and now attorney general, where he is highly visible as the state's top cop. But most of what the attorney general does is manage Ohio's largest public law firm with 1,400 employees, including hundreds of attorneys who do mostly civil litigation. The securities fraud cases are a small fraction of the office's legal load. DeWine said that of the 11 pending cases that will be paid on contingency, he inherited eight from his predecessors. Campaign funding experts say it is not unusual for firms that get work under a previous administration to shift their campaign giving to the current officeholder. The attorney general can change outside counsel assignments as he sees fit, though it would be rare to switch firms midway through a complex case. Also, class action attorney picks are subject to court approval. All officeholders raise money for their campaigns, but DeWine is in an unusual situation because he loaned his campaign an unprecedented $2 million in his 2010 bid to oust Cordray from the AG's office. Often candidates -- including Pepper -- have forgiven personal loans to their campaigns. DeWine did not. So far, DeWine's campaign committee repaid $1.65 million to the Cedarville Republican but it still owes $350,000 . Campaign finance reports due Thursday Jan. 30 will show who contributed to the DeWine political machine in 2013 and how much debt remains. DeWine brushes off the idea that starting out $2 million in the hole has added fundraising pressure on him. "There is just always pressure to raise money for a campaign," he said. "You got to raise money. So, there isn't any more pressure just because there is a small debt remaining." The Ohio Republican Party , which received the bulk of the campaign contributions from firms seeking outside work with DeWine's office, has funneled $977,537 to DeWine's campaign fund since he took over as AG in January 2011 . Ohio law prohibits the use of political parties to sidestep contribution limits to candidates, and DeWine said that hasn't happened under his watch. "That would be illegal. You can't do that," DeWine said. "There can't be any earmarking of money that goes to the ORP. No one can do that. That's illegal and everybody knows that." 'I was surprised' Under Ohio law, individuals and Political Action Committees may contribute up to $11,543 to candidates for statewide office and $34,631 to state parties. But the contribution limit is $1,000 for donors who receive an unbid contract from the officeholder. The more stringent limit, though, doesn't apply to political parties, which allows law firms and PACs to give more to the officeholder's state party. The Daily News uncovered a violation to Ohio law that DeWine's office said it would move quickly to address. On the same day the New York law firm Labaton Sucharow submitted its proposal to serve on DeWine's panel, four of the firm's partners contributed $16,000 to DeWine's campaign. That would appear to violate Ohio's law, which caps at $1,000 donations from those seeking unbid state contracts to the officeholders who award the work. After the Daily News brought the matter to DeWine's attention, First Assistant AG Mary Mertz said the contributions would be returned and the firm would be ineligible for unbid work until 2015. Labaton officials had certified in their proposal documents that they had not exceeded the $1,000 limit. "I was surprised," Mertz said. "I don't know what they were thinking." Attorneys from Cincinnati -based Keating Muething & Klekamp contributed $7,000 to DeWine's campaign on July 6, 2012 -- one week after they submitted their panel application. Pat DeWine was an associate at Keating Muething & Klekamp before joining the bench in 2009 and the firm hired Mike DeWine for a stint between his U.S. Senate loss to Democrat Sherrod Brown and his run for attorney general. Both Keating Muething & Klekamp and Labaton Sucharow were selected for the panel. Another firm, Dayton -based Dyer, Garofalo, Mann & Schultz served on the panel under Cordray. The firm did not contribute to DeWine in 2011 and was rejected for the panel in May 2011 . The firm gave $25,000 to the Ohio GOP in June 2011 and was selected for the 2012 panel. Pritchard said the state party serves as another step to obfuscate the perception that there may be a quid pro quo. "The suspicious mind would say they're just putting another link in the chain and it doesn't change the substance, which is that these law firms get selected because they have made the campaign contributions or it is understood that they will make the campaign contributions," he said. "I'm sure when you call Mike DeWine's office they will say we pick based on the merits and the campaign contributions are irrelevant to our choices....The readership of your paper can decide which story is more persuasive." Active role E-mails and schedules obtained by the Daily News show DeWine plays an active role in deciding special counsel assignments and he meets with politically connected lobbyists to talk about the assignments. In July 2011 , Republican political strategist Mark Weaver e-mailed DeWine to inquire how the attorney general would handle a public records lawsuit involving ESPN and Ohio State University : in-house attorneys or special counsel? Just two hours later, DeWine responded directly to Weaver via an e-mail sent from his iPad: "In house for now. If we use anyone, we would want it to be u." In June 2011 , DeWine's director of outside counsel, Michael Hall , sent an e-mail to the attorney general about Bob Howarth doing special counsel work. In an e-mail response DeWine gave an indirect endorsement of Howarth: "Ok thanks. If we ever need a seasoned guy. Politically savvy...former chief of staff to Rhodes." Republican Jim Rhodes was Ohio's governor from 1963 to 1971 and 1975 to 1983. DeWine's office calendar shows he met with his former campaign fundraiser David Myhal at least twice to discuss special counsel assignments. Myhal is now a lobbyist who has represented law firms that do business with the attorney general's office. Likewise, the calendar shows he met with Alex Arshinkoff , a well-connected lobbyist and the longtime chairman of Summit County Republican Party who represents four companies doing business with DeWine's office. The Summit County GOP is a big supporter of DeWine, contributing $271,500 to his campaign account since 2010. Some states, such as New Jersey , have more stringent laws on campaign giving by state contractors than Ohio . New Jersey prohibits contributions from companies with $17,500 or more in contracted state work, with an exception for highway work. Robert Stein , former president of the Center for Governmental Studies and author of some of California's campaign finance laws, said states should go a step further: prohibiting contributions from any business seeking work from the state. "If you're bidding on a contract or receiving a contract you shouldn't be allowed to make a contribution to the person," Stern said. "Contracts are lucrative and people who get contracts like to say thank you -- or say thank you in advance." -- ___ (c)2014 the Dayton Daily News (Dayton, Ohio) Visit the Dayton Daily News (Dayton, Ohio) at www.daytondailynews.com Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Dayton Daily News (OH)


Story Tools