The prompting for this essay relates to a tainted money scandal involving both political parties that has been reported nationally. The article from Reuters, filed February 14th, referred to money allegedly bilked from investors by R. Allen Stanford ending up in political campaign coffers of Democrats (mostly) and Republicans. Iowa has not been immune from tainted money scandals.
The Reuters article makes clear that Stanford denies any wrongdoing and has not been convicted of anything. Whatever his innocence, the issue for this essay is the appropriate response from Republicans and why. We will also reflect on the Iowa DeCoster “tainted money” issue and also the Stevens – Aviva theft where the embezzled money possibly found its way into the campaign accounts of various Iowa politicians particularly Democrats but also Republican Maggie Tinsman.
From Reuters regarding the Stanford allegations:
“National fundraising committees for the Democratic and Republican parties, President Barack Obama, and other major politicians have declined to return campaign donations totaling $1.8 million from Houston financier R. Allen Stanford, now on trial for allegedly masterminding a $7 billion Ponzi scheme.”
”The court-appointed receiver charged with returning money to Stanford investors obtained a federal court order last June against five Democratic and Republican campaigns. But they haven’t returned the money. The Democratic Senatorial Campaign Committee received $950,500; the National Republican Congressional Committee (NRCC), $238,500; the Democratic Congressional Campaign Committee, $200,000; the Republican National Committee $128,500, and the National Republican Senatorial Committee (NRSC) $83,345 . . .”
Reuters also reports that: “The national campaign committees . . . have appealed a federal judge’s order to return the money to a higher court, which has not yet decided whether to consider the matter.
”There is scant legal precedent when it comes to clawing back such campaign contributions. That’s because it is often difficult to prove in court that a campaign committee took money that was clearly illicit and therefore must return it to the victims of an alleged fraud, according to Meredith McGehee, the policy director for the non-profit Campaign Legal Center.”
“If there is a clear trail, they can be forced to give the money back,” she said, noting that in cases like Stanford — where yachts, homes and other assets have been successfully claimed by the receiver – donations could be fair game as well. That contrasts with a case like the 2002 telecom accounting scandal at WorldCom, where there was fraud but also legitimate business that can cloud the source of campaign donations.”
“Aside from the courts, McGehee said, another check on the system is that candidates have to face “the court of public opinion if they are given and then keep stolen money.”
At the time the Stanford article was written only $154,000 had been recovered directly by the receiver from candidate campaigns. A lot of money is at stake and the political parties that are being sued, and many other individual politician’s campaigns that have been asked, are fighting the law suits in order to keep the money or are otherwise declining to submit Stanford related funds to the receiver.
If McGehee’s comment regarding the legal difficulties of forcing a return of the donations animates the attitude of the Democrat Party and Republican Party and their respective senatorial or congressional campaign committees on this matter, it smacks of the “no controlling legal authority” defense of one Al Gore some 12 years ago . . . and we find that a disgustingly unethical dodge. We also find it a particularly bad tactical response for Republicans.
The issue for this commentary is not “bribery,” that is criminal for the candidate to accede to. It is about receiving and keeping tainted money however innocently in the beginning. It is about appearances and public opinion, and even more importantly, fairness to those who have lost money, apart from any legality of being required to return or bond over funds or in-kind donations received.
The issue addressed here is also limited to the receipt of a substantial donation relative to the campaign from someone under indictment, the timing of the alleged crime predating or overlapping the time of the donation. A substantial donation relative to the campaign is one that would to outside observers indicate a key or substantial supporter or is at a level that would typically engender a special thank-you or other follow-up a.k.a. “donor research.” Substantial (relative to the campaign) out of the blue donations rate circumspection, period. In a state legislative or local race, as little as a hundred dollars might rate being circumspect about if there is no other relationship or in-house knowledge about the donor.
What we believe are pertinent legal and ethical analogies on such matters follow. The Web page information provided by Illinois Legal Aid, was instructive. We also interviewed experienced law enforcement and procedural veterans. The information gleaned combined to inform the analogies we set fort.
It appears from our investigation to be generally settled law that if someone stole a traceable item and sold it at a yard sale or gave it away to someone who had no idea it was stolen, the victim of the theft has a right to reclaim the merchandise and the person who received it has no enforceable claim to it, whether or not they paid money. If it were traceable stolen cash during a bank robbery that was then used to buy something at Home Depot, the cash could be seized by authorities from Home Depot and Home Depot is S.O.L. as they say, regardless if the merchandise they sold is recoverable.
Essentially a thief has no title to his or her ill-gotten gains and therefore cannot transfer title or give away something that does not belong to them, the recipient does not possess good title however innocent they may be. Something of value that was stolen can be recovered if it can be identified.
The idea of transfer of good title is so engrained in the law that pawn shops must record descriptions of all merchandise taken in whether “pawned” or purchased outright and submit same to the local police and then sit on the merchandise for a period of time in order to give the police time to check the description against theft reports before the pawn shop may resell the items. That pertains to everything they take in. Definitively stolen items would be seized by the police, suspected items might have a hold placed on them. It is not free to be sold or used unless and until any cloud is removed.
Regarding stolen cash, that is why cash laundering schemes including repetitive transfers arise in an effort to flummox traceability. Nevertheless anytime a traceable bill is found no matter how many times it has exchanged hands, the item belongs to the person who was the victim of the theft, and it can be seized.
So what are the political entities hanging their hats on to keep from giving tainted money back? A combination of things no doubt, none of them on a high plain of political respectability or political invulnerability. Below we are referring especially to donors under indictment for financial crime or theft. Elements of “the dodge” might also apply to “tarnished money,” referred to later, which in our parlance refers to politically embarrassing associations which, in the public’s eye at least, might have some of the same ethical questions, although perhaps separated a bit more from a possibly criminal or otherwise controversial donor.
One “dodge” is that in some cases there may be the political “good old boy” understanding, as a result of both camps of rival campaigns knowing that the other has received tainted funds, and has the same resultant vulnerability. So . . . the understanding becomes . . . “I won’t criticize you if you don’t criticize me and we can both ignore the rump section of blue nose critics.” Allies of one are not likely to make an issue of the other’s taint if they know their favorite son or sons are just as vulnerable to similar criticism. It is the “we all do it” and “they all do it” corruption.
Another dodge is that some political entities may express great umbrage that Joe Smith is innocent until proven guilty (understood better as “I intend to spend the money before anyone else can get their hands on it before this comes to trial, I can always say sorry after the election”). There might be a claim that the indictment is politically motivated . . . which it could be . . . but missing money is missing money and the victim’s losses are seen with more sympathy than the “innocence” of a politician. The superior response in such circumstances is to at least bond over the money, or pledge reimbursal, depending on any trial’s outcome.
There is also the technical argument that although the donation of the funds is traceable back to the suspect donor, the donor has commingled the funds with putatively legitimate income. The alleged thief has what might be termed good money and possibly bad money commingled in the same checking account. They may have other streams of income large or small into the same account that are legitimate. Perhaps the account is a joint account possibly complicating the traceability. Of course the politicians want to pretend that their donation came from the good side of the account or is at least partly or mostly “good,” the result being they do not want to give ANY of it up under bond or otherwise. Objective voters are not likely to buy such an explanation.
Most resistance comes when the money is at a level that is important to the political entity and they know that there are too many technical hurdles for the law to overcome in order to seize the money in their particular circumstances. They feel there are enough technical hurdles that no law suit will ultimately be successful, so they simply ignore or outright refuse any informal claw back. In such cases there is no prosecution, that is, except by the court of public opinion.
This editor believes for example, that in the Stanford case, not providing the related funds at least under bond directly to the receiver (giving to charity is not a substitute) is not only wrong politically but is wrong ethically given what is already known about the case . . . which boils down to very large amounts of money that Stanford was managing, being unaccounted for while he was donating large amounts to politicians. While it appears that Republicans have been somewhat more responsive to the court appointed receiver, all of them need to be.
Giving Money To Charity Does Not Make Victims Whole
The full Stanford article contains additional analysis of that case and the names of politicians who have given up funds to a court appointed receiver who prevailed on their good judgment for return of the money, short of filing a law suit. Other politicians in response to the receivers informal requests instead donated like amounts to what they received from Stanford to charity. It is unclear to us how much the charity giveaways amounted to but according to the Reuters article the parties, other political entities and most candidates are resisting giving up any related money to charity or otherwise.
If one has received a stolen copy machine, whether paying money for it or as a gift (donation) and the victim has been identified, the ethical thing to do is to return the copier to the victim, not give it to charity. The same is true for cash donations. The ethical thing to do is to proceed so as to make the victims whole to the extent of the donation, and whether or not the money has been spent. Ill gotten gains were never properly the candidates. Having spent it is not an excuse as the political entity should not and likely would not have received it as an honest donation.
The Obama campaign is supposedly one of three entities who gave money to a charity in like amount to the donation received from Stanford. That hardly helps the victims of any crime that was committed. The first response from the candidate in receipt of tainted money from a political and ethical perspective should be to turn the money over to the authorities if there has been a judicial ruling to do so, (and not to get into countersuits in order to keep the funds). Perhaps a bonding arrangement can be made reflecting the outcome of any trial. That would be an approach to take whether the case is criminal or civil. The politician should do this publicly by announcing that their first interest is to proceed so as to make victims whole.
Republicans Have More to Gain . . . and More to Lose
Most crooks are Democrats and give to Democrats. (Ed. note: If I have to defend that statement to Republicans then this article is a fools errand). That is why doing the right thing vis a vi tainted money helps Republicans the most. Some cynics might wonder . . . what! . . . and miss out on all that campaign cash!
It is our view that when a truly non-partisan independent voter reflects on big city politics, union corruption, crony capitalism and the like, they actually associate corruption more so with Democrats. Accordingly Republicans should avoid giving cover to Democrats or rival them for their dishonor.
The practical aspect extends from two directions. Even when Democrat opponents cannot be shamed into doing the right thing by reducing their coffers of tainted money, the Republican opponent identifies himself as a candidate of integrity, inuring to his own political benefit and to the Party by maintaining the brand. And it provides an honest effective campaign issue.
Specifically regarding the Stanford case, look at the numbers. It appears that Democrats raked in two or three times the amount Republicans did. Republicans have (had) the opportunity to magnanimously return, pledge, or bond over the possibly tainted money, perhaps pending trial outcome, and shame the Democrats into doing the same.
If the Democrats are forced to follow suit, the result is a substantial net relative advantage for Republicans and the Party brand of integrity is reinforced. Even if the Democrats do not follow suit (they will ) the Stanford money becomes a campaign issue worth two million dollars and a fund raising incentive.
The problem of retrieving embezzled cash can be an identification problem for authorities but in this writer’s judgement such a factor should make no difference to the political or the ethical resolution, especially if it strains the straight face test that the level of donations from the accused would be likely independent of the alleged ill-gotten proceeds. If a candidate received money from an indicted individual, they should contact authorities for the best way to turn over or bond over the money, but they should get it off of the table in order to preserve theirs and the Party’s political integrity.
Why publicly — to protect the Party brand from ignorant supposition and because it is better personal politics than keeping it or not assuring people you are not keeping it . Democrats’ instincts seem purely Machiavellian on the matter, taking it and returning it only when they feel the heat. Republicans should firstly refuse if the donation is from a questionable source. Or, do not cash a check until the campaign does the due diligence it should normally be doing anyway regarding a substantial donation from an unknown source. Letting the issue fester is politically devastating for the candidate, and if Republican, for the Republican brand.
Two “Tainted Money” Scandals in Iowa
In the run up to the 2010 general election it was reported that Iowa Attorney General Tom Miller, running for reelection, had returned campaign donations from the DeCoster family. It was done in response to the well constructed challenge from our own AG candidate Brenna Findley regarding the “tainted eggs” being processed by DeCoster connected entities.
The burden for Miller was that he should avoid being perceived as the recipient of perceived tainted funds from a source that MIGHT come under prosecution from his office. The “tainting” is political as far as we know as there was never any representation that DeCosters stole the money they lavished on candidates.
So was Brenna Findley right in calling for him to return the money? We believe she was politically and ethically correct to do so. AG Miller was correct to quickly recognize the political liability and return the donations. Of course Miller should have been circumspect about taking the money in the first place as he had prosecuted DeCoster entities in the past, but that only proves our first point in the previous section.
Findley did the right thing, she received positive earned media, Miller received bad publicity although he was able to minimize it, and Findley denied him resources he would otherwise have used against her. Findley lost the election but it sure as hell was not because she successfully called Miller to task. The seriousness of which he took the criticism is confirmed by the fact he returned the “tainted” money from DeCoster even though the amount ($10,000) was given four years previously. There was no excuse of . . . “well I already spent it” or the irresponsible “I will give a like amount to charity.”
So as related above, Democrats sometimes have felt shame or vulnerability for themselves or their Party regarding hanging on to tainted or tarnished money (or frustration at getting caught). But Republicans should always be circumspect and go out of there way to be transparent and public in giving up tainted money.
Astoundingly, a scandal of more political effect (Democrats capitulated on DeCoster) was largely ignored. From 2006 – 2009 Iowa Democrats (and Democrats out of state) received a lot of money from actual criminals, the lezbezzler team of Phyllis Stevens and Marla Stevens. They are the two “married” females who were indicted in September of 2009 for embezzling almost six million dollars from the Des Moines insurance company Aviva. They admitted to the crime in September of 2010. The amounts they donated directly to the Democrat Party and Democrat candidates that election cycle and one notable Republican in 2006 were substantial to each campaign.
The Stevens criminality at the time of the donations was not known. However their indictments were known for over a year prior to the 2010 general election and their guilty plea for well over a month before the 2010 general election. More follow up is needed but we are unaware even at this writing of Democrats in Iowa giving up any of the money they received from the Stevens. No press reports have turned up in our search confirming that any money has actually been given up by Democrats. If they have not, now is the time for the Republican Party to publicly remind them, each and every one.
Keep in mind that the political donations in this case, now known to be from proven criminals, were in amounts at the time that were unusual for them as donors and for the recipient campaigns as receivers.
Comparing Iowa Republican Responses to the Scandals
There has been at best a stupefyingly lackadaisical treatment of the Stevens and the Stanford tainted money scandals by Iowa Republican leadership as compared to the DeCoster matter. In 2010 Republicans Findley and Branstad were all over the DeCoster situation. It was effective! To illustrate the disparity, the DeCoster matter related to a donation almost five years previous and the scandal involved matters implicating civil regulatory enforcements, not criminal allegations.
Compare that to the Stevens matter which involved proven criminality, first suggested by indictments in 2009, it also involved a lot more money, but neither then or in the lead up to 2010 was there any drum beat to shame the Democrats into returning the money. The editor of the blog site, The Iowa Republican tried (Web site is one of our established links) by doing a timely article raising the issue In September of 2010 as it involved then current legislators and candidates including Chet Culver (all Democrats). But that article mentions only Democrats. It should have mentioned that a prominent Republican had also received substantial money from the Stevens pair. Keep in mind that by September 22, 2010, about six weeks before the election, the Stevens pair were established as guilty!
The Stanford situation involves even more “favorable” net denial of funds to Democrats, yet Republicans remain lock jawed. Iowa Republican leadership should find their tongue on the issue regardless of the foot dragging by the Republican National Committee. A rising ethical tide floats Republicans and sinks Democrats.
So why have many Iowa Republican leaders not pressed this issue? In most cases they are probably possessed of the same somnolence on the matter. For others we suspect reasons even more pathetic . . . hand-wringing, misplaced loyalties, conflict of interest (the desire not to embarrass some of our own), poor ethical reasoning, or an absence of leadership ability. And so we let Democrats off the hook and public disdain for politicians is aggravated.
Special Case — the Tinsman Connection to the Stevens Pair
Although former Iowa Senator Maggie Tinsman’s campaign account had been closed prior to the indictments, and there is no reason to believe she was aware of any criminality, based on our political opinion of how substantial amounts from unusual sources should be handled, we find that former Senator Tinsman’s has failed to be forthcoming publicly regarding the political implications and timing of her acceptance of the money in the first place. We believe failing to do so is not helpful to the Republican brand.
It is also our opinion that continuing acceptance by other Republicans of campaign donations from Ms Tinsman after the indictments were handed down is regrettable unless the recipient has been assured that Ms Tinsman has stepped up to make Aviva whole for the money she accepted for her campaign from the thieves who stole nearly $6 million from the company. We are talking about current candidates, Maggie Tinsman can do what she wants.
Again we are not maintaining that Ms Tinsman has any legal requirement to reimburse Aviva for anything although we believe it is the right thing to do if the alternative practiced is giving to Republicans instead. We note that she has been maintaining a political profile and donating to Republican candidates since the Stevens were indicted and convicted. If Ms Tinsman won’t do it, it seems to us that Republicans in receipt of Ms Tinsman’s donations might want the good people victimized by the Aviva’s loss to be “donated” to first, given the political use of the stolen funds and the political nature of their receipts from someone who had benefited politically. They could suggest the same to Ms Tinsman or submit the money as appropriate to Aviva.
Regarding another theme of this essay, Tinsman’s acceptance of the Stevens donations, as with Miller and DeCoster, was due circumspection just because of controversial political implications or associations of the donor, regardless of any actual or alleged criminality of the donor.
The Stevens couple had an easily verifiable record of gay marriage political activity. They were notorious certainly in Des Moines and in their old stomping grounds of Indiana. That fact and its possible implications would have been of interest to Republican voters in 2006. However the fact of the donation was effectively hidden politically by its timing. Ms Tinsman, had received the donations prior to her failed primary election, but they were (conveniently?) only reportable on the campaign finance report that was due after the heated primary election.
This is relevant because of the legislative record of Ms Tinsman and how she was trying to portray that record to primary voters at the time. Senator Maggie Tinsman bolted not only from the Republican Party Platform and the overwhelming majority of Republicans, but also the great majority of her Republican legislative colleagues to cast a deciding vote in opposition to merely putting the proposed Marriage Amendment to the Iowa Constitution on the ballot for the people to decide. At the time Senator Tinsman was saying to potential voters that she was really “pro-marriage” but that a (heterosexual) Marriage Amendment was not necessary (if words were ever proven to be more wrong . . .). Traditional heterosexual marriage was and is the Republican brand and needs to be protected.
What voters did not know was what exactly Senator Tinsman meant by “pro-marriage” or to what level of sincerity she held it. Their perception might have changed had Senator Tinsman volunteered how pleased she was to receive the support of Mrs and Mrs Stevens prior to the election. But with that information voters might have had the time to stumble upon that Phyllis Stevens, one half of the “married” couple, was on record saying that she (or they) only give to people who support “freedom’ or “equality ” the recognized code words for gay marriage, et al. It might have caused some eyebrows to raise that the couple were not only notorious “gay rights” activists but that Senator Tinsman was the largest single state legislative campaign recipient of the two women’s largess and the only Republican.
The Stevens’ generosity to Tinsman ($2100 each for a total of $4200) was in the very top tier individually and even as compared to PACs. their total alone represented over 10% of the money Tinsman took in that calendar year (2006).
With reference to another donation that hurts the brand (Republicans not necessarily Tinsman) it is relevant to point out that the same report, available only after the primary, showed that Planned Parenthood, Iowa’s largest abortion syndicate, PAC, Freedom Fund PAC, gave to “I am not for abortion” Maggie Tinsman $1000, a top tier donation relative to both and very meaningful politically. It is another item that might have helped clarify matters for voters had the information been available for appraisal prior to the election.
Maggie Tinsman continues to be active politically and legislatively. Her cumulative political donations relevant to the time period after the indictment of the Stevens’ tainted money scandal have been substantial. In the time period just since the Stevens pair were arrested (9/28/2009) as of 12/31/2012 Maggie Tinsman has donated $4500 to Iowa state candidates or PACs. While arguably not relevant, her husband R. Hovey gave another $4000 also to Iowa state candidates or PACs in the same time period. Again, this was not money from her campaign as all of that including the Stevens money had been expended 19 months or more prior to the revelations about the Stevens pair’s embezzlement of $6 million from Aviva Insurance Company. We have no doubt that they have also been generous to unrelated charity.
Unfortunately there has been no public record of Maggie Tinsman sending money to Aviva that we have been able to find. We believe any such event should be made public in the interests of maintaining the Republican brand to the greatest extent possible. If it has been done we would be pleased to make the facts public. In the mean time the key point of this section is the proper response Republican recipients of Tinsman’s largess should show towards those donations IF Aviva has not received a like amount from Tinsman. Some may think this an arcane ethical issue. We think not. Recipients of Tinsmans largess should give it back or send it to Aviva Insurance Company. The priority should be to make Aviva whole in that small way, and be totally free to insist that Democrats do the same, in a big way.
The purpose of this essay is to express our opinion regarding the ethical response of Republicans toward tainted and even controversial donations. We do so in the interest of protecting the Republican brand for the highest in integrity. Another important theme is the need for public response in order to fervently differentiate Republicans from Democrats on the matter of any tainted or “tarnished” donations. It is not that Democrats are in a position to make an issue of the matter. The point is that Republicans are!
Republicans should not forgo long term gain for short term inconclusive benefit nor should Republicans forgo being in a position to critique Democrats in order to protect a Republican from similar critiques. We think doing the right thing, even if it seems extreme to the jaded, is useful tactically and in the interest of instilling public confidence in the political process.
While Party rules or legislative inducements should not be necessary for Republicans to do the right thing, if they would help facilitate the process then we heartily support those measures.