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New Jersey’s Pay-to-Play Leviathan

Abridged Version

Americans cannot trust each other to do the right thing, and for a good reason. If factory owners maintained safe working conditions with competitive pay, then explain the purpose of labor unions. As political philosopher Thomas Hobbes writes in Leviathan, “And because the condition of man… is a condition of [war] of every one against every one, in which case every one is governed by his own reason, and there is nothing he can make use of that may not help unto him in preserving his life against his enemies” (Hobbes 1651,106). Indeed, American Capitalism thrives on a dog-eat-dog philosophy, merely coming short of blatantly encouraging immorality. It is every person for themselves in America, under the guise of a united nation. This mentality extends into the political arena, where money decides Harold Laswell’s “who gets what, when, and how.” Especially in New Jersey, this question boils down to who you know and that you can pay the price of admission.

Strangely, the state is home to some of the most rigid anti-corruption laws in the nation. However, as journalists Bob Ingle and Sandy McClure note, “Little is done [in New Jersey] because it is the right thing to do. Sometimes it can be the right thing, but in that case, it’s a coincidence” (2008, 9). Or, in the case of campaign finance regulation, it’s an inconvenience generally ignored. A laudable effort, the pay-to-ply laws merely speak to the ingenuity of those hoping to circumvent them, spawning outlandish scandals and a culture of corruption. While reform is necessary to the current system, New Jersey also needs to enforce the regulation with draconian authority to dissuade potential infractions. In doing so, the state can promote a fairer democracy.

I. History of Campaign Finance Regulation

To begin with, many citizens do not have faith in the government. For this reason, campaign finance laws aim to help increase public confidence in leadership by thwarting corruption. Specifically, the regulations hope to limit quid pro quo or the idea that wealthy contributors can use their fortune to influence legislators’ policies and votes. This idea of wealthy contributors extends to securing government jobs and public contracts. In turn, Professor Daniel Bromberg of the University of New Hampshire and his colleagues note that nineteen states have pay-to-play laws in place that limit campaign donations from government contractors. Most of these regulations include disclosure requirements or spending limits for companies eager to secure a contract. (Bromberg, Hartley, and Mohammed-Spigner 2017). This practice helps to level the playing field, making it easier for a small business to throw their hat into the game. It also helps to ensure the best vendor with the best price gets the job.

Moreover, from their conception, pay-to-play laws did not merely aim to eradicate corruption; they also focused on eliminating the appearance of corruption. After all, perception is reality, and governments do not want to lose public trust. Consequently, most pay-to-play regulations target premeditation. They hope to prevent individuals from beginning the walk down a corruptive path (Bromberg, Hartley, and Mohammed-Spigner 2017). The policy of disclosure has proved most effective. It allows citizens to research who has given money to political campaigns and how much they donated, increasing citizens’ knowledge and involvement in the political process (Bromberg, Hartley, and Mohammed-Spigner 2017). To date, disclosure is one of the few original regulations still upheld by the Federal Government.

On the whole, these policies that promote a level playing field by criminalizing bribery and earning public trust seem aligned with the principles of democracy. Nevertheless, many individuals have historically shunned them. Associate Professor Matthew J. Burbank of the University of Utah and his colleagues note that even the earliest regulations set after the Civil War proved challenging to enforce, resulting in candidates mainly ignoring the new rules (2008, 97). However, the growing necessity of regulation led to the creation of The Federal Election Campaign Act of 1971. Otherwise known as the FECA, this bill limited the amount candidates could spend on advertising and how much of a candidate’s personal finances they could use on a campaign (Burbank, Hrebenar & Benedict 2008, 97). It also called for public disclosure of the names and contact information of persons donating more than $100 (Burbank, Hrebenar & Benedict 2008, 97). However, the 1971 law, like the original legislation enacted after the Civil War, did not provide any way to enforce the new regulations.

Likewise, exploitations of the system quickly emerged. For instance, in 1972, W. Clement Stone gave $2 million to Richard Nixon’s campaign, and executives from twenty-one corporations made illegal $100,000 contributions. Coupled with the Watergate scandal, these abuses led to revisions to the FECA in 1974 (Burbank, Hrebenar & Benedict 2008, 98). One of the more predominant changes was creating the Federal Election Committee, otherwise known as the FEC. This agency sought to enforce campaign finance laws, something gravely lacking in all previous attempts to reduce corruption (Burbank, Hrebenar & Benedict 2008, 98). However, stricter laws and further regulations sparked hot political debate.

Indeed, many questioned the legality of such severe restrictions, sending multiple cases to the United States Supreme Court. By and large, the FECA failed to achieve consistent support, ushering in a decades-long quest to find legal loopholes in the system. One of the original ploys arose from the use of soft money for political campaigns. In the 1980s, “political parties could solicit donations of any size provided that the money was used for ‘party building’ activities, such as voter registration drives, at the state and local level” (Burbank, Hrebenar & Benedict 2008, 99). This money, known as soft money, came under little scrutiny because it covered nonfederal expenditures. Ideally, these contributions should not have influenced federal elections; they should have targeted voter turnout and participation.

Nevertheless, by 1996, campaigns had found a way to make soft-money work harder for them. They began using the contributions to finance “issue advocacy” ads, which impacted elections (Burbank, Hrebenar & Benedict 2008, 99). In turn, the legislator passed the Bipartisan Campaign Reform Act of 2002, also known as BCRA. However, it has also not proved resilient or successful.

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IV. Private Industry

The government’s own corruption reveals only part of the story. The private industry is also guilty of defiling the spirit of campaign finance. For instance, one of the greatest pay-to-play scandals in New Jersey began at the end of a romance. In 2013, Philip Angarone Jr., the marketing director of Birdsall Services Group, an engineering firm otherwise known as Birdsall, was going through a bitter divorce (Baxter 2013). According to reports on NJ.com, during a meeting with his soon-to-be ex-wife, Mr. Angarone revealed that he had received bonuses as illegal reimbursements for political donations made on Birdsall’s behalf. One should never make confessions like these to a scorned lover. Perhaps as an act of revenge, the former Mrs. Angarone recorded the conversation and reported her estranged husband’s activities to authorities three months later (2013). Mr. Argarone had already lost his wife, and now he would lose his career.

Indeed, the information provided by the former Mrs. Argarone led to an investigation. An affidavit obtained by The Star-Ledger describes how Birdsall managed to use their employees as illegal conduits, bridging money to political actors, which helped secure the company millions in public contracts (Baxter 2013). As journalist Christopher Baxter writes, “They held regular meetings, hand-picked the contributors, told them what to do and kept records of their reimbursements” (2013). According to New Jersey law, corporations cannot donate more than $300 to political campaigns. By encouraging private donations from their employees, Birdsall thwarted the system. However, employees heavily involved with the business also fall under the same jurisdiction. In these cases, ideally, the company would report doling out employee bonuses received as a form of reimbursement to the state’s Election Law Enforcement Commission. They circumvented this system as well. According to Angarone’s official statement, executives or other employees involved wrote their checks for $299 (Baxter 2013). This move allowed the company to skirt reporting to the Election Law Enforcement Commission and indicated to recipients that the donation came on Birdsall’s behalf (Baxter 2013). Essentially, it was a clandestine wink-to-play that secured the company an increased advantage when vying for public contracts.

Indeed, according to the original affidavit, Birdsall concealed more than $686,000 in illegal contributions through their employees from 2006 through 2012 (Baxter 2013). This amount accounted for seventy-five percent of the total funding Birdsall would donate to political campaigns (2013). Further investigation found that Birdsall made over one thousand illegal donations worth $1.05 million to both Democrats and Republicans across the state (Baxter 2019). It was an indiscriminate plan to manipulate the free market’s power.

While kept secret for many years, The Star-Ledger uncovered some of these beneficiaries and where Birdsall made their killing. According to Baxter’s report, “The company earned approximately $2.45 million from Barnegat… $1.45 million from Ocean County, $4.9 million from Brick, $4.2 million from Monmouth County, and $1.2 million from Lakewood” (2019). This violation of campaign finance laws gave Birdsall a clear advantage as it thwarted aspirations for less savvy competitors.

In turn, according to the state’s Election Law Enforcement Commission, Birdsall received upwards of $28 million in public contracts in 2011 and $86.7 million in 2008 (Baxter 2013). Considering half of Birdsall’s annual projects derive from government contracting, it seems the trouble of duping the system paid off for a time. In court papers, Eileen Kuhfahl, a former marketing manager for Birdsall, admitted these illegal contributions frequently awarded them contracts (2013). The company only needed to provide a reasonable price with an equally reasonable timeline (2013). In this case, the competition amounted to a test of perception. If Birdsall blended in with their less-cunning rivals, then they won the contract.

Undoubtedly, this corporation’s fraud bastardized the free-market economy. Not every business has a large staff willing to write ‘ghost checks’ in their own name on the company’s behalf. Most small businesses rely on their reputation, pricing, and expertise, all of which means nothing against a major corporation’s fiscal power. In American mythology, financial clout should not usurp talent, but it does, as seen in New Jersey, time and time again. The contractor who paid got to play, leaving any little dogs in the dust. Moreover, Birdsall’s scam did not ensure taxpayer dollars bought the most qualified contractor that offered the best price. It merely looked as though they had, at least adhering to the original pay-to-play commitment to limit the “appearance of corruption.”

Nevertheless, once investigators uncovered actual corruption, Birdsall’s reign in New Jersey spiraled into defeat and infamy. The Attorney General’s Office seized $41.6 million in assets from the company (Baxter 2013). They could no longer pay their employees and filed for Chapter 11 bankruptcy. Without a workforce, the company had to disband, impacting the progress of hundreds of public projects state-wide (2013). That amounts to millions of taxpayer dollars left in limbo or even wasted. Although political actors involved vehemently deny knowledge of the scheme, beneficiaries of Birdsall’s donations scrambled after the investigation to rid themselves of the funding- if they had any left. Former Assemblyman Robert Clifton, a Republican from Monmouth County, where Birdsall donated $7200 in illegal contributions, planned to donate the money to charity (Baxter 2019). Without concrete evidence that confirms politicians knew about Birdsall’s scheme, gestures of this nature will have to suffice.

V. Solutions

The Birdsall scandal provides an excellent opportunity to examine some significant loopholes in New Jersey’s pay-to-play regulations. The Garden State prohibits companies in pursuit of large public contracts from contributing more than $300 to those involved in awarding the work. However, because this is New Jersey, each municipality has its own fiefdom, with its own laws governing campaign finance. In areas where restrictions did not apply, Birdsall contributed to political campaigns legally and reported the donations to the Election Law Enforcement Commission, as required by law (Baxter 2019). This act suggests the law itself propagated the crime. Indeed, Birdsall cheated the system in areas with the most rigid pay-to-play regulations in their attempt to cover the board with clandestine funding. As Baxter notes, “Secret donations flowed every year like free wine from Birdsall” (2019). They made no distinction between parties, benefitting Democrats and Republicans alike. However, where Birdsall could stay in line with the law, the company did. Those pesky jurisdictions with restrictive legislation inspired manipulation of the system, setting the stage for controversy.

At this time, one discovers the most significant fault in New Jersey’s system: lack of continuity. While political actors enjoy sovereignty over their individual municipalities, this power rendered any attempt at faithful adherence to the spirit of campaign finance legislation impossible, as it created an opportunity for corruption. If New Jerseyans desire a level playing field for companies vying for public contracts, the state needs universal campaign finance regulations. The laws need to be the same in Hoboken as they are in Gloucester Township. It needs to apply to political action committees, interest groups, and parties as it applies to individuals and businesses.

In truth, local municipalities should not have the authority to dictate laws governing businesses that can operate state-wide. Municipal law should only focus on local, nuanced issues that impact their community and only their community. Extending municipal jurisdiction to cover an entity with the legal means to operate outside the township overextends their power, leaving gaps in state legislation. The idea invites corruption, facilitates it, killing any attempt at a fairer New Jersey. However, one hundred and seventy-six municipalities in New Jersey have their own campaign finance restrictions (Mugure 2014). By creating a universal system for all state and local governments to follow, New Jersey would close one of its most significant loopholes in pay-to-play by instilling continuity into the system.

Similarly, PACS and other organizations provide clear openings for campaign finance law circumvention. They exist as entities meant to swallow funds individuals cannot funnel directly to candidates. The idea legislatures did not foresee this loophole suggests an ugly truth about New Jersey politics, one that lends credibility to the “mob mentality” of the Garden State. If the state wants to portray an image of fairness, its laws need to apply equally. Labor unions, PACS, and other political interest groups need the same level of regulation as individuals. Otherwise, they will continue to launder money for those hoping to secure the favor of a politician. Once the state finds itself on the same page across the board, it can tackle other flaws in campaign finance legislation.

For instance, as highlighted by the Birdsall case, the corporate donation limit makes it too easy to thwart regulation. Since New Jersey law caps donations for businesses vying for a public contract at a measly $300, superiors only need to procure the perfect flock of nobodies for the scam. Of course, there is beauty in that. One need not master the art of manipulation to secure a donation. Few would hesitate to write a check for $300, and no campaign truly benefits in any tangible way from that small amount either. While a fair amount of money that levels the playing field for everyone, this stingy limit could not persuade a politician. $300 is a drop in the bucket, not even enough to mail a significant number of flyers out to constituents. However, multiple installments of $300 from numerous parties over time will build a mind-altering war chest of funding.

For this reason, legislators might consider raising this limit. A donation cap of $1000, for example, would not so readily come from an employee’s pockets. Even with a restorative bonus in mind, not everyone could part with that amount of money, at least not as a favor to their supervisor for something they do not personally support. While still a fair amount, $1000 also does not warrant any particular political favors, making it a sweet spot for a donation limit. However, this solution leaves the door open for a high-net-worth Birdsall copycat to swoop in and run the show.

VI. Radical Reform

In truth, legislation begets further legislation and another round of corrective legislation. Even if someone manages to close every loophole in New Jersey’s pay-to-play laws, purportedly the strictest in the nation, someone will slash open a brand-new hole. In turn, many critics of campaign finance think these restrictions should disappear. Melanie D. Reed notes in the William Mitchell Law Review that campaign finance restrictions violate an individual’s constitutional right to free speech, especially when it precludes donations to a political party (2018, 645). By limiting how much an individual could contribute of their personal finances to a campaign, the laws dictate how citizens spend their money. For this reason, the Supreme Court ruled that limits on campaign donations infringed on an individual’s right to political expression and association freedoms.

Without federal backing, these local laws that breed corruption do not stand on solid ground. As Reed notes, “…the Supreme Court has subjected contribution limits to a lower standard of scrutiny than expenditure limits, which are thought to directly affect an individual’s ability to engage in communication” (2018, 645). For instance, in Randall v. Sorrell, the Court ruled against a Vermont statute that limited the dollar amounts of campaign donations. They believed the existing rule impeded funding available to challengers in hotly contested areas, did not account for inflation, and they saw no evidence for its justification, among other grievances (Reed 2008, 646). As seen here, the Supreme Court supports an individual’s right to express their political views via campaign contributions. With this in mind, states like New Jersey should consider eliminating donation caps altogether, a move that would weaken interest groups, party bosses, and PACS, as well as promote transparency.

Indeed, for as long as limits on campaign donations exist, ulterior roads to channel funding will also exist. The state could set the limit at $10,000, and someone hoping to donate $11,000 will send that extra money to an organization that will funnel it to the preferred party. Handshakes and winks at fundraisers will still be exchanged, and those party bosses who secretly run the state will continue to flex their financial muscle. It is simply common sense. More legislation will only cause further confusion, leading to more convoluted scams in the future. Therefore, a single state-wide law that does not limit campaign donations for any individual, business, or entity and only requires full public disclosure may prove the most effective and easiest to enforce.

As stated earlier, to date, disclosure is one of the few original regulations still upheld by the Federal Government. Moreover, one must remember that Birdsall complied with regulations when they did not interfere with their agenda. With these details in mind, eliminating donation caps for individuals, businesses, or entities vying for government contracts and only requiring full transparency may work. As an expansion of the current “fair-and-open” policy, it would provide the best means to minimize corruption in the state. According to this current law, a “fair and open process” occurs when the government awards a contract after giving the public information regarding a project’s qualifications and criteria, along with the selection process, current bidders, and who will preside over the decision (Mugure 2014). They must publish the proposal in the newspaper or on a website ten days before awarding the contract and discuss the award of the said project at a public meeting (2014). In doing so, the public is fully aware of the mechanics of the decision. Under the current legislation, the “fair and open” policy will not disqualify a business based on political contributions, as the entire process takes place in the public arena.

Using this same logic, individuals, businesses, and organizations hoping to secure a contract can donate an unlimited amount of money to campaigns as long as the donation has full written public disclosure. Currently, lobbyists must disclose what they are spending on their efforts to election committees. They need to file annual reports, along with quarterly activity reports. These records are publicly available online, so voters can see what bills, contracts, and companies are involved (Burbank, Hrebenar & Benedict 2008, 221). Penalties exist for infractions. However, it falls on the lobbying community to regulate itself.

Similarly, this proposed law that eliminates donation caps would mean websites, newspapers, and the Division of Elections need to publish the names and business affiliations of all donors and recipients, along with details surrounding current contracts. This move allows citizens to see where the money is coming from, where it is going, and who benefits most. While this proposed law may allow a larger corporation to snuff out a smaller organization, the battle will ensue in the public domain, where no one wants to appear like a bully. Politicians would not want to associate with a bully contractor, and neither would political organizations. For their part, these entities would not hold the same clout as they did in the past, given donation caps are extinct and their primary function as money launderers rendered obsolete. In turn, campaign finance law will become a self-regulated system predicated on keeping up appearances.

Of course, those who merely aim to achieve a moral appearance will still exist. However, the law is less convoluted in this case, and therefore, easier to enforce. An individual or business vying for a government contract either discloses a donation made to a campaign, political party, or organization, or they do not. The key to success relies on enforcement. As Thomas Hobbes notes, “Covenants, without the sword, are but words and of no strength to secure a man at all” (Hobbes 1651, 136). Failure to report a contribution should meet with severe punishment, such as permanently revoking a business license for a contractor found in violation coupled with a fine that would effectually disenfranchise the company. An inability to apply for a business license should apply to the contractor for life. It should also extend to investors, all senior staff members, their immediate families, and anyone else proven cognizant of the scam, eliminating the possibility of reopening the business under another person’s name for, at minimum, fifteen to twenty years.

Considering an individual or business can donate however much they please to whoever they want, the punishment for skirting this proposed law works to deter criminal activity. Monitored by the public and a bipartisan or unaffiliated group of individuals whose job is to sniff out anomalies in their reports, this system may prove effective if not draconian in nature. However, legislators need to simplify campaign finance laws and then employ harsh punishment to dissuade infractions in a no-nonsense way. The “mob mentality” that plagues New Jersey responds to no other approach.

IV. Conclusion

Campaign finance laws that regulate contractors aim to level a cutthroat playing field, launching opportunities for small businesses to land large government contracts. The system ideally ensures citizens that their tax dollars get spent on the best vendors with the most competitive prices. In a utopian world, where everyone does the right thing, these laws would not even be necessary. They would merely serve to help the little guy get ahead in business and remind politicians to keep an honest course. However, as Thomas Hobbes writes, “I put for a general inclination of all mankind, a perpetual and restless desire of Power after power, that ceaseth only in Death” (Hobbes 1651, 80). Indeed, the ingrained dog-eat-dog American mentality will corrupt even the most honorable.

New Jersey may have some of the strictest anti-corruption laws on the books, but New Jerseyans have crafted some of the most elaborate loopholes. Nevertheless, the state should not respond with further legislation that will only complicate an already convoluted system. Instead, New Jersey needs to relax the legislation by eliminating donation caps and enforcing stricter penalties for infractions. By only requiring full disclosure of donations, this move would allow the world of campaign finance to regulate itself. It also provides fewer opportunities for corruption, disenfranchises dark money, and could ultimately lead to a fairer Garden State.

Works Cited

Baxter, Christopher. “Ex-Wife Who Triggered Collapse of Birdsall Engineering Firm Breaks Her Silence.” Nj.com, August 18, 2013. https://www.nj.com/politics/2013/08/ex-wife_who_triggered_collapse_of_birdsall_services_group_breaks_her_silence.html.

Baxter, Christopher. “Secret Files Reveal How Pay-to-Play Works in N.J.” NJ.com, March 30, 2019. https://www.nj.com/politics/2013/06/secret_files_reveal_how_pay-to-play_works_in_nj.html.

Bromberg, Daniel, Rodger E Hartley, and Deborah Mohammed-Spigner. “Pay-to-Play: An Examination of State Laws.” Public Integrity 19, no. 4 (2017). http://ezproxy.tcnj.edu:2180/ehost/detail/detail?vid=0&sid=329391b4-d23c-4d9b-8f73-92df1fb95c91%40pdc-v-sessmgr02&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=aph&AN=123952514.

Burbank, Matthew J, Ronald J Hrebenar, and Robert C Benedict. “Campaign Finance.” Chapter. In Parties, Interest Groups, and Political Campaigns 1, 2nd ed., 1:94–127. New York, NY: Oxford University Press, 2008.

Corasaniti, Nick. “In New Jersey Governor’s Race, Money Can Take a Circuitous Route.” The New York Times, August 27, 2017. https://www.nytimes.com/2017/08/27/nyregion/new-jersey-governors-race-campaign-finance-phil-murphy.html?rref=collection/timestopic/New%20Jersey&action=click&contentCollection=nyregion®ion=stream&module=stream_unit&version=latest&contentPlacement=1&pgtype=collection&_r=0.

Hetrick , Christian. “Independent Groups Poured $45 Million Into NJ Races Last Year.” The Observer, January 18, 2018. https://observer.com/2018/01/independent-groups-poured-45-million-nj-races-last-year/.

Hetrick, Christian. “Murphy to Fundraise with Norcross at DGA Event.” The Observer, August 15, 2017. https://observer.com/2017/08/murphy-to-fundraise-with-norcross-at-dga-event/.

Hobbes, Thomas, and Chrisopher Brooke. Leviathan. London, UK: Penguin Books, 2017.

Ingle, Bob, and Sandy McClure. The Soprano State: New Jersey’s Culture of Corruption. New York, NY: St. Martin’s Griffin, 2008.

Mugure, Monica Njeri. “Plugging Loopholes In State Pay-to-Play Statutes: Creating an Effective Anti-Corruption Law.” Public Contract Law Journal 44, no. 1 (2014). http://ezproxy.tcnj.edu:2277/ehost/detail/detail?vid=0&sid=094786dc-c41c-4985-9635-c57ae503dd89%40sessionmgr4008&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#anchor=bib39up&AN=102725894&db=ofm.

Reed, Melanie D. “Regulating Political Contributions by State Contractors: The First Amendment and Pay-to-Play Regulations.” William Mitchell Law Review 34, no. 2 (2018): 636–51.