Government Corruption Arrests in NJ: Abuse of Nonprofits, Conduit Contributions, and A Network of Crooked Officials
A few local government ethics issues come together in the story
behind the arrest today of 44 people in a political corruption and
international money laundering ring based in New Jersey. The story is
best told, so far, in the<a href="http://www.usdoj.gov/usao/nj/press/press/files/pdffiles/bidrig0723%20re…; target="”_blank”">
press release</a> of the U.S. Attorney for the District of New Jersey.<br>
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Among <a href="http://www.usdoj.gov/usao/nj/press/press/files/pdffiles/Addendum%20with…; target="”_blank”">those
arrested </a>are three mayors and a deputy mayor, two state assembly members, four rabbis, and numerous housing
inspectors, investigators, aides, political consultants, and
unsuccessful political candidates. <a href="http://www.cityethics.org/node/333" target="”_blank”">I wrote</a> about the last
series of arrests in this ongoing investigation a couple of years ago.<br>
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For local government ethics purposes, there are three important
issues: nonprofits, conduit campaign contributions, and the
existence of a network of crooked local government officials.<br>
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<b>The Abuse of Nonprofits</b><br>
Nonprofits pop up in this blog far too often for my taste. In this
instance, the proceeds of all sorts of criminal endeavors, including
bank fraud and counterfeit goods, were laundered through synagogue and
related nonprofits. This points, once again, at why government ethics
practitioners have to pay close attention to relationships of officials
with nonprofits, as unappetizing as it is to be and to seem critical of
organizations we would prefer to admire.<br>
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<b>Conduit Campaign Contributions</b><br>
Conduit, or conversion, contributions are political contributions from
straw men and women, that is, people who are handed money to give to
candidates. It's the opposite of the more commonly discussed bundling.
One could call it unbundling. The difference is that, whereas bundling
gives too much influence to a small number of people, who could not
otherwise buy such influence where there are individual contribution
limits, unbundling, although it serves the same purpose, is a crime. And because it's a crime, there are no
disclosure requirements. It's the perfect end run around campaign
finance laws, at least if you don't get involved with someone who's
turned state's evidence.<br>
<br>
I should point that the only instances of conduit contributions that
became public today were instances where one cooperating witness was
involved. The fact that many officials were doing this implies that
this is a common practice, perhaps even a "best practice" among a
certain kind of official.<br>
<br>
One advantage public campaign financing has over disclosure
requirements and contribution limits is that it prevents this sort of
gambit. If no one can give anything but a tiny contribution, who will
bother with conduits, bundling, and other apparently legal approaches.
Bags of cash will still be handed over inside Cadillacs, but there are
many officials whose ethics won't accept this, but will accept
semi-legal campaign contributions.<br>
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<b>Network of Crooked Officials</b><br>
The most frightening part of what the authorities found was a network
of "trusted" local and state government officials, former officials,
candidates, and advisers, who were known, at least to the principal
fixer in this case, to accept bribes in return for help in approving a
developer's project. The fixer, a state government administrator and
former local government zoning commissioner, set up introductions with
these officials, in return for $30,000.<br>
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The existence of such a network implies that a developer or contractor
could go to just about anyone in the network to obtain referrals to the
people who could smooth his way in return for cash bribes or conduit
contributions. In fact, in this case, the first introduction came from an alleged money launderer, himself a developer. His introduction was to a building inspector, who then introduced the cooperating witness to the person who turned out to act as a fixer.<br>
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This image of at least countywide networks of crooked
local officials and, possibly, a statewide network, leads one to
believe that there is a local government official underworld, where the
trusted officials are the ones on the take.<br>
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Yes, this is New Jersey, home of the Sopranos. But New Jersey hardly
has a monopoly on government corruption. Its officials are likely
following "best practices" invented elsewhere or, if they were indeed
invented in New Jersey, they've probably shared them with their
colleagues in other states.<br>
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What the FBI has unearthed will undermine people's trust in government
even in New Jersey (if there was much left), but also elsewhere. It is
important to create ethical environments in local governments wherever
possible, because officials such as these do not thrive in such
environments, and they certainly don't learn the ways of the underworld
there. They are the outsiders, and therefore have little or nothing to
sell.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
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