Despite Pledge to Curtail Corporate Earmarks, Politicians Pursue Them

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Huffington Post Investigative Fund

Despite Pledge to Curtail Corporate Earmarks, Politicians Pursue Them

Some Members of Congress Funnel Tax Dollars for Businesses Through Universities and Nonprofits

by
David Heath, Huffington Post Investigative Fund

This March, House Appropriations Committee chairman David Obey pledged to stop colleagues from steering millions of dollars in no-bid contracts to businesses, a controversial practice used by politicians to please constituents and boost pet projects, and which sometimes benefits campaign donors.

Restricting so-called corporate earmarks, declared House Speaker Nancy Pelosi, would help end the “culture of corruption” in Washington by limiting the influence of lobbyists while ensuring that companies “no longer reap the rewards” from special favors.

In a joint statement that grabbed headlines – even though it applied only to one-tenth of all earmark requests – Obey and Norm Dicks, D-Wash., chairman of the defense appropriations subcommittee, declared that they “will not approve requests for earmarks that are directed to for-profit entities.”

But that apparently hasn’t stopped some members of Congress from trying – including eight of the 60 members on the appropriations committee. Instead of naming companies as direct recipients of earmarks, as they have in recent years, some members appear to be attempting to funnel money to those same businesses through nonprofit organizations.

Among the politicians are Dicks, Rep. James Moran, D-Va., and Rep. Marcy Kaptur, D-Ohio – all of whom made the requests just after being cleared last February in a House ethics investigation into whether they had traded favors for campaign donations.

In all, the Huffington Post Investigative Fund found 18 instances in which the eight members are seeking to keep alive previous grants to businesses by listing a university, research center or other nonprofit as the recipient this time around.

While some of the earmark requests appear to involve a sharing of federal dollars between the non-profits and the businesses, in at least two instances intended recipients acknowledged they intended primarily to allow money to pass through to corporations. In two instances, some of the same people work for the nonprofit and the corporate beneficiary.

Similar findings were reported today by The New York Times, which said it had identified “dozens” of such earmark requests totaling $150 million that would indirectly benefit profit-making companies. Obey’s spokesman, Ellis Brachman, said the committee can and will block any requests that violate the restrictions announced by Obey and Dicks in March. But the task is daunting if not impossible, given the sheer volume of requests for earmarks – tens of thousands of them amounting to some $16 billion in federal spending last year.

 “No matter what they tell you, there is just no way they can police all that,” earmark critic Jeff Flake, an Arizona Republican congressman, told The Times. “They just don’t have the time or resources.”

No comprehensive list of earmark requests exists, so it’s difficult to tell how many members of the committees or in Congress overall are still pursuing earmarks benefiting companies.

Even on its face, the Obey-Dicks restrictions on earmarks were viewed as minimal at the time they were announced; only 1,000 of all earmark requests involve businesses. Some 90 percent of all earmarks are designated for organizations such as charities, nonprofits and educational institutions - spurring predictions that members of Congress, lobbyists and corporations would use these allowed earmarks to keep the money flowing to businesses.

House Republicans vowed for a year to restrict all earmark requests – not just those going to companies.

The Investigative Fund identified businesses that could benefit from earmarks naming nonprofits by reviewing military spending-related requests from members of the House Appropriations Committee. Specifically, the Investigative Fund simply compared for-profit earmarks secured last year with the language of earmarks requested by some of the same lawmakers this year.

While the named recipients varied, the description of the project being funded was similar if not identical in language, which is usually tucked into larger pieces of legislation.

Many universities collaborate with businesses on endeavors that are legitimate and produce meaningful results. But Flake scoffs at the notion that research collaborations with universities are acceptable when it comes to targeting money specifically as favors requested by individual members of Congress. Such collaborations are “coalitions of convenience for the facilitation of earmarks,” he told the Investigative Fund.

Appropriations Committee spokesman Brachman declined to discuss specific requests. But he said but each earmark would be reviewed separately. Obey, he said, “is very serious about the ban on for-profit entities.” The committee “will not fund earmarks going to for-profits,” he added.

Congressional aides, asked about the continuing requests despite the restrictions, told the Investigative Fund that rules have never been spelled out. The only guidance is a press release – the one released by Obey and Dicks. 

Back in March, Steve Ellis, vice president of the Taxpayers for Common Sense, a nonpartisan watchdog organization on government spending, questioned in news media interviews whether Congress could restore public confidence by restricting only one-tenth of all earmarks. He wanted an all-out ban.

Steering money through nonprofits to for-profit companies won’t improve perceptions, he says now. “Trying to finesse your way around it with lawyerly excuses really feeds voter cynicism."

Officials at some of the nonprofits acknowledged in interviews that they expect to receive only a share of the money for collaborating with the companies in research. In a few cases, the nonprofit expects to keep little or nothing.  And some of the nonprofits appear to have close ties to the company.

For example, Rep. James Moran, D-Va., last year secured an earmark to a health clinic and small company, HealtheState, that is trying to commercialize free medical-records software developed within the Defense Department. This year, Moran has asked for $2.5 million again, which would go to the clinic and a nonprofit called Prometheus Foundation.

The foundation lists as its contact, Jill Phillips, an officer at HealtheState. Last year, Phillips donated $4,000 to Moran’s campaign. The foundation’s Web site, which describes its primary mission as helping the “technology transfer” of the medical-records software, lists HealtheState as its partner.

Phillips could not be reached for comment. Moran’s spokeswoman he was “comfortable the funding request meets the appropriate guidelines” and that if the earmark is approved, “it will go to a most worthy non-profit in our district.”

Rep. Tim Ryan, D-Ohio, has requested $1.5 million for research on behalf of an arm of the Forging Industry Association, which is involved in metals manufacturing. However, the executive vice president of that trade group, Roy Hardy, says he doesn’t have any researchers on staff and so won’t be directly involved in the work.

An Akron, Ohio company, IQ Technologies, lobbied for the earmark with the help of helicopter manufacturers. Joe Powell, the company’s president, said he will use the money to test the company’s exclusive technology for making stronger helicopter parts.

Ryan’s spokesman said he believed partnerships between for-profits and non-profits would still be allowed. Ryan did not identify the company in his request, only the trade association

An Exempt Chairman?

The likely next chairman of the appropriations committee is Dicks. As the defense spending subcommittee’s chairman, he already is in the position to enforce the restrictions he endorsed last March in his press release with Obey, entitled, “Appropriations Committee Bans For-Profit Earmarks.”

But Dicks has himself continued to pursue money for research undertaken by a company in his district.

Since 2004, Dicks has sponsored more than $20 million in earmarks for the tiny startup, Intellicheck Mobilisa. In last year’s earmark request, he named the company, whose executives have donated $26,000 to his campaigns.

This year, the earmark names a subcontractor and collaborator as the intended recipient on the project – the University of Washington.

The research involves technology identified in the earmark request as a “Littoral Sensor Grid” – the same description for Dicks’ earmark directly benefitting the company last year.

The company, which sells a system that scans driver's licenses for retail stores and military bases, secured its first earmark to provide free wireless Internet to passengers on ferries. That morphed into a system for sending security and environmental data collected from waterborne buoys in the Seattle area, for which the company received a $4.5 million no-bid contract last September.

The University of Washington has received $1 million in each of the last two years to provide assistance in the research, according to the contract obtained by the Investigative Fund.

The latest earmark request is for $6.2 million. University spokesman Bob Roseth said it’s unclear how money would be split. He said the company wouldn’t necessarily be involved in the project next year, though he wouldn’t rule it out.

When asked how the company could not be involved in deploying its own technology – the “Littoral Sensor Grid” – Roseth responded, “that’s a fair question.”

A spokesman for Dicks said he wasn’t sure if the ban would allow the company to be involved in the project anymore.

Just weeks before requesting the earmark, Dicks had been among seven lawmakers cleared in a congressional ethics investigation involving suspicions they had traded earmarks for campaign donations. The House ethics committee uncovered evidence that company executives gave campaign donations in expectation of receiving earmarks. But the panel concluded in February that lawmakers were not involved themselves or had no idea of the expectations of lobbyists and companies.

The final report included evidence that one company, 21st Century Systems, had given Dicks a $1,000 campaign donation through its political action committee and was planning to give more, in hopes of getting an earmark. An internal company spreadsheet on campaign contributions to members of Congress proposed giving Dicks another $2,000 and in the next column listed an earmark it was seeking from Dicks.

Dicks told investigators that he does not review Federal Election Commission filings to see who’s giving donations to his campaign and that he awards earmarks only after careful review of their merits.

Earmark University

Also cleared in the investigation was Rep. Marcy Kaptur, D-Ohio, who told the ethics committee that she separates her fund-raising activities from her legislative duties. This year, Kaptur is sponsoring five earmarks for the University of Toledo that last year she directed to private companies.

A research executive at the university, Frank Calzonetti, said Kaptur's office asked earlier this year if the school would be willing to start collaborating with four of the companies seeking earmarks. University researchers were already collaborating with a fifth company, so Kaptur’s earmark this time lists the school as the intended recipient rather than the company.

The name of that company is Teledyne Turbine Engines, which once had a plant in Toledo that at its peak employed 1,100 workers. To save the plant from shutting down, Kaptur helped set up a collaboration with the university in 2003, directing millions in federal dollars to a new research effort.

Included in the ethics office report was a form used by Teledyne to justify contributions from its political action committee. It asks if the candidate is important to any of the company’s program, and in Kaptur’s case, the answer given is that she represents the district where Teledyne Turbine Engines is located and sits on the subcommittee that directs defense spending. The form then asks if the candidate being supported could influence the awarding of government funds. The answer given in Kaptur’s case was “absolutely.”

Teledyne’s legislative affairs director acknowledged in an interview with the ethics office that donations gave him access to lawmakers to discuss legislation and were awarded based on past support the member of Congress provided. In his interview with the ethics office, the company officer “says that it does go through your mind whether you are buying influence.”

In exonerating Kaptur, the ethics office said there’s no evidence that Kaptur was aware of Teledyne’s internal documents or the views of its legislative affairs director.

Now, again, Kaptur is sponsoring a $4.5 million earmark to research Teledyne’s turbine engines. Only this time, she’s lists only the University of Toledo as the intended recipient. Teledyne’s PAC and employees have donated $22,900 to Kaptur’s campaign in the past six years.

One company, American Systems Corp., spent roughly $140,000 on lobbying in the past year, including pursuit for what its public disclosure identifies as an “Enhanced Detection Adjunct Processor.” Kaptur is sponsoring an earmark using the company’s description but lists the recipient as the University of Toledo.

Kaptur declined requests to speak with the Investigative Fund. But she told The Times, in its story on earmark requests, that she’d been pleased alliances formed by defense contractors in Ohio enabled her to resubmit requests that had once been made directly to them. “I am a member who does fight for my region and my state,” the Times quoted her as saying, and adding, “I don’t fight mindlessly.”

Another member of the appropriations committee, Rep. Steve Rothman, is sponsoring a $9.8 million earmark for a start-up company with six employees. Last year, Rothman named Lightening Energy as the recipient. This year, the Congressman lists the unincorporated New Jersey Innovative Technology Consortium as the recipient.

Mark Merclean, the consortium’s sole unpaid staffer, said it is still up to Lightening Energy to do all the work to get the contract and to deal with Congress. “Now if a company gets an earmark, that’s great. It can still go through the consortium,” although the money would end up with the company, Merclean said.

Rothman also requested a $2 million earmark for the New Jersey National Guard. In the Senate, where there is no ban, Frank Lautenberg, D-NJ, is sponsoring what appears to be the same earmark but says the money will go to Telos Corp.

In another instance, Rothman is seeking $3 million for the National Center for Manufacturing Sciences, the same earmark that Lautenberg wants for a Hackensack-based company, ID Systems. Last year, Rothman himself named both Telos and ID Systems as the recipients of these earmarks.

Rothman’s office did not respond to questions about the earmark requests.

One company identified in the Investigative Fund’s reporting admits it set up a nonprofit entity to secure government contracts. Charles Lambert, an Air Force veteran, said that in December he created the nonprofit, Persistent Elevated Solutions, because his for-profit company, Colorado Springs-based Skysentry LLC, was not allowed to bid on an Environmental Protection Agency contract. Skysentry has received earmarks for years for testing lighter materials and more efficient batteries for blimps.

But this time he knew he had to seek a contract as a nonprofit. “There are various government agencies, like the EPA, that restrict bidding to nonprofits,” said Lambert. The company filed with the Ohio Secretary of State and paid a $125 fee to set up the nonprofit.

While Lambert acknowledged that the Army hasn’t shown much interest in funding the research, he estimated it could save the military billions of dollars. “Decision-makers in the Army are supportive but not anxious to kind of stick their necks out and support a new technology,” he said. Rather than restricting earmarks to nonprofit companies, he thinks Congress should vet them better.

 “If I feel like I can stand on the steps of one of the presidential monuments and explain to the American public why I think it’s a good thing and anticipate that they are not going to react adversely, I’m not ashamed to go after some of these thing.

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