News Column

Super PAC Backing Romney Accepting Federal Contractors' Funds

Page 2 of 1

The super PAC supporting Mitt Romney's presidential bid has accepted more than $1.2 million from federal government contractors, in apparent defiance of campaign-finance regulators.

The contributions, reported by the Restore Our Future political action committee over a nine-month stretch ending in February, came from firms in fields such as energy, engineering, and health care. They represent businesses with federal contracts totaling more than $244 million, according to government records.

The ban on political giving by such contractors has existed since the 1940s. Even so, several of the donors stand by their contributions.

Bolstered by recent court victories that expanded the role companies can play in financing independent political groups, they argue the curb on contractors is outdated and will no longer stand up in court.

"This is an area where the [Federal Election Commission] has yet to conform its regulations to reflect Supreme Court precedent," said Lynn Seay, a spokeswoman for Canonsburg, Pa.-based Consol Energy, which gave $150,000 to Restore Our Future in July. "Consol believes it has a First Amendment right to make contributions to independently support candidates."

The Supreme Court's 2010 decision in the Citizens United case left a question mark over the ban on contractor giving, campaign-law experts agree. That ruling opened the floodgates to unlimited independent political spending from businesses, unions, and individuals -- provided they did not donate directly to, or coordinate with, the campaigns of individual candidates.

The ruling made no specific mention of the seven-decades-old contractor restriction.

Congress first banned federal contractors from donating as part of the 1939 Hatch Act. The ban was meant to address dual concerns: that companies might seek to buy their way into government work by donating to campaigns, and that officeholders might extort contributions from firms seeking extensions of existing contracts.

But the 1939 law was largely overshadowed by broader, older prohibitions on companies making political contributions.

"In general, corporations -- whether they were contractors or not -- could not spend money to affect the outcome of a federal race," said Anthony J. Corrado Jr., a government professor at Colby College in Maine.

But in the new post-Citizens United environment, Corrado said, contractors may have a what-about-me argument: If other companies' financing of campaigns and political groups is now viewed as a lawful exercise of free speech, why not donations by federal contractors?

The FEC has meanwhile made its position clear: "Government contractors remain prohibited from making, either directly or indirectly, any contributions or expenditures in connection with any federal election," FEC Chairwoman Cynthia Bauerly testified last year in a congressional hearing.

Citing those conflicting analyses, representatives from one firm that gave to Restore Our Future said they were unaware their contribution might run afoul of the law -- and have since asked for the money to be returned.

"We still don't believe we broke any laws," said a spokesman for M.C. Dean, an electrical engineering contractor in Virginia, commenting on condition that he not be identified by name. "But we asked for our money back in an abundance of caution."

The Dean firm has received more than $206 million in federal contracts since 2011 for projects such as construction of office buildings for the Federal Emergency Management Agency and maintenance on U.S. Navy security systems.

The company donated $5,000 to Restore Our Future in October. Company officials said they were encouraged to do so in a letter distributed last year by the PAC's treasurer, Charles Spies, who previously was counsel and chief financial officer to Romney's 2008 presidential campaign.

Spies' memo, a copy of which was obtained by The Inquirer, makes no mention of the FEC's federal contractor ban but guarantees potential corporate donors that no money will be spent supporting state or local candidates.

"Contributors can rest assured their contributions will not . . . prevent them from obtaining state or local government contracts," the letter reads.

A spokeswoman for Restore Our Future declined to comment on the letter or on any individual contractor's contributions. So did representatives for several other super PACs, such as the one backing President Obama, Priorities USA Action, and the Karl Rove-managed American Crossroads.

Neither of those PACs has accepted a contractor donation to date, according to financial filings through February. And both sound a cautionary note on their websites -- by asking potential donors to certify that their contributions do not come from companies that do business with the government.

No such request appears on the website for Restore Our Future.

Contributors to Restore Our Future include companies such as Oxbow Carbon, a Florida-based petroleum coke distributor headed by billionaire William I. Koch, brother to conservative and libertarian donors David and Charles Koch.

A subsidiary company, Oxbow Carbon & Minerals, received $1.5 million from the government last year to provide fuel to various federal agencies. The parent firm donated $750,000 to Restore Our Future between September and December. (William I. Koch also personally gave $250,000 to the super PAC in the same period.)

Company spokesman Brad Goldstein defended the donations in an interview, saying that Oxbow Carbon and Oxbow Carbon & Minerals were separately incorporated businesses. The two firms share a board of directors and are registered at the same Key West, Fla., address, according to corporate filings.

Asked in March if the contributions conflicted with the ban on giving by federal contractors, Goldstein told the Los Angeles Times, "Oxbow believes it has a First Amendment right . . . to make political contributions to independently support candidates who will best address the deep economic issues facing this country."

Consol Energy, one of Pennsylvania's largest energy firms and one of the companies drilling for natural gas in the Marcellus Shale, echoed that sentiment -- verbatim. Asked recently about Consol's $150,000 donation to the Restore Our Future PAC, Seay, the company spokeswoman, sent an e-mail that mirrored Oxbow Carbon's earlier argument word-for-word.

Consol has had federal contracts for fuel and equipment with the Tennessee Valley Authority and the Department of Energy. The firm also has had a high political profile in recent years, having raised eyebrows in Harrisburg for taking a handful of state legislators and their aides to the 2011 Super Bowl.

On the day before the state's April 24 primary, Romney delivered a speech outlining his domestic energy policy at a Consol Energy facility in South Park, Pa.

According to federal records, other firms that donated to Restore Our Future include:

Boston-based Suffolk Construction, which gave the PAC $75,000 between October and January. The company has active U.S. Navy contracts worth more than $23 million for construction at sites in North Carolina and Connecticut.

The Larry H. Miller Group of Companies, whose subsidiaries include the Utah Jazz basketball team. Other firms under its umbrella hold federal contracts worth $50,000; the firm gave $200,000 to Restore Our Future over the last year.

B/E Aerospace, a private jet outfitter in Wellington, Fla., that has won $8.1 million in Defense Department contracts since last year and donated $50,000 to Restore Our Future in June.

So far, Restore Our Future has spent $45.5 million supporting Romney's candidacy, most of it directed toward television ads in hotly contested primary states such as Florida and Michigan.

And while the $1.2 million from donors with federal contractors is a small portion of that total, the donations are raising eyebrows in the political fund-raising arena.

Should the FEC fail to step in, such giving could become a rich new vein of potential cash for PACs of all stripes.

As much attention as the Citizens United ruling has received for allowing unlimited corporate donations, most big donations still come from individual donors. That's in part because nearly every major U.S. business contracts in some way with the government, said Kenneth A. Gross, a former FEC general counsel who now advises Fortune 500 companies on political giving.

"If contractors can now legally give, the old rules and prohibitions when it comes to contributions are out the window," Gross said in an interview. "The atmosphere is ripe for new FEC regulations."

Advocates and detractors of the 1939 contractor ban are already taking steps to steer the conversation. Last year, Obama floated plans to require all firms seeking government work to disclose their political donations as part of the bidding process. On the other side, three plaintiffs in a suit filed last fall asked a judge to strike down the contractor ban.

In April, U.S. District Judge James E. Boasberg, an Obama appointee, denied their request for a preliminary injunction, saying they were unlikely to prevail in arguments scheduled for later this year.

Until the legal questions are settled, Paul S. Ryan, attorney with the nonpartisan Washington-based Campaign Legal Center, said he would advise federal contractors to stay out of political giving.

For now, Ryan said, contributions from such contractors "would be a poorly conceived strategy."