Dealing with Wheeling

"Wheeling" is a term I just discovered. The context is that NJ governor Chris Christie made a campaign promise to deal with "wheeling," and then failed to, according to a South Jersey Times editorial yesterday. Here's how the editorial describes the practice (many NJ local governments prohibit or limit contributions from their contractors):

It goes like this: Smith County has a fat consulting contract with Joe Blow Associates. Instead of giving $10,000 to the Smith County Republicrats, Joe Blow sends a $10,000 check to the Jones County Republicrats. Suddenly, a $10,000 “clean” donation from “Jones County Republicrats” appears in the Smith County incumbents’ campaign fund.

A 2009 Hoboken Record article describes a real-life situation:

Hoboken ... has one of the toughest "pay-to-play" bans in the state. Contractors can't get government work there if they give more than a combined $800 to local campaigns. ... A constellation of North Jersey donors dumped $19,000 this year into to the New Frontier Committee, a little-known political action committee, [which] then donated the money to [a Hoboken mayoral candidate] in his time of need. ... But the New Frontier route also served another purpose — it allowed donors to finance the race without risking their ability to win future city contracts. It was legally clean.

Among New Frontier donors was CMX Inc., a South Jersey engineering firm that was recently awarded a $100,000 city contract. Ken Long, a CMX official, denied giving money to New Frontier to skirt Hoboken's ban. Long could not say exactly why the company donated to New Frontier, but said that officials contribute to those who are "supporting" the kind of "broad-based good government that we support."

Wheeling can also involve PACs and candidate committees, as well as party committees at every level, including legislative leadership committees. It is political money laundering that serves the same purpose as giving money to individuals, who then fraudulently make contributions under their names. Often, both types of money laundering are done by the same individuals and entities who seek special benefits from the officials who are ultimately receiving the contributions.

What makes wheeling worse than many other kinds of ethical misconduct is that it is a form of institutional corruption. That is, it involves more people than the contractor or developer and the official. Whether it is a form of influence or pay to play, it involves various individuals and groups of individuals, all of whom have to engage in ethical misconduct, and keep it secret, for the plan to work. It creates or maintains poor ethics environments and, thus, leads to more ethical misconduct by more people.

According to a 2012 Times of Trenton editorial, "in 2002, close to $3 million was wheeled from three sources (George Norcross [a political power broker], [just retired state senator] John Lynch and [U.S. senator] Jon Corzine) into the final month of the Bergen County executive race, altering the outcome. The Legislature decided to prohibit wheeling [among county party committees], but only before June 30, ensuring that party bosses would not suffer from outside influences in their tightly controlled primaries while allowing them to affect general elections in November."

According to a 2010 press release from Gov. Christie, he proposed to end wheeling by "eliminating many of the exemptions on contribution limits for county or municipal political committees ... [by curtailing] the unlimited transfer of campaign money between committees and from committees to candidates in different parts of the state, which can unfairly impact local races."

A city or county can only pass laws that affect its own candidates, but this can be enough to prevent wheeling. For example, after what happened in Hoboken (described above), the city passed a very simple anti-wheeling law:

No candidate or candidate committee for any Hoboken elective municipal office shall accept any monetary or in-kind contribution, in excess of $500 per election, directly or indirectly, from any committee.

The limit before this bill was passed was $8,200. The problem with this law is that, although enforcement includes quadruple damages, it is enforced by the city clerk, a political office. Although Hoboken citizens and groups are allowed to sue, they can sue for compliance only, not for damages. In addition, a penalty can be assessed only if it can be proven that accepting an illegal contribution was willful and intentional. Candidates can usually say it was a mistake, and simply return the money. It is better to have an independent individual or body provide oversight and handle enforcement.

Robert Wechsler
Director of Research-Retired, City Ethics

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