Quid pro Status Quo: ALEC and State-Sanctioned Corruption in Ohio
By Beau Hodai, May, 2012
Part 1: Legislative Service with a Smile
“Quid pro quo: something given or received for something else”
– Merriam-Webster Dictionary
At about ten o’clock on the morning of March 23, 2011, Faith Williams walked into the office of Ohio House Majority Whip John Adams (R-District 78). Williams, a lobbyist with firm, Bricker & Eckler, LLP (Bricker), had an appointment to speak with Adams about an “economic development study” created by some of her clients in the life insurance industry.
Somehow during the course of this meeting– though both Adams and Williams told DBA Press and the Center for Media and Democracy (DBA/CMD) that they have no recollection of how this came to pass– two noteworthy subjects were discussed: a proposed amendment to the state’s 2011 budget, and possible support for the American Legislative Exchange Council (ALEC) Ohio “scholarship fund.”
At 4:06 p.m. the following day, March 24, Williams emailed a copy of the discussed budget amendment to Adams Senior Legislative Aide Kara Joseph. In the email, Williams expressed her gratitude to Adams for agreeing to run the amendment by House Speaker Bill Batchelder (R-District 69) for insertion into the 2011 budget.
The proposed budget amendment was a 12-page portion of a more than 80-page piece of “model legislation,” known as the “Insurer Receivership Model Act” (IRMA), adopted by the National Association of Insurance Commissioners (NAIC) in 2005. Essentially, the amendment– an extremely technical, industry-specific item– would allow “Ohio-domicilled” life insurers to engage in a practice known as “derivatives netting.” This practice essentially allows insurers to lump their assets, losses and unfulfilled obligations into one tradable commodity. This practice, according to IRMA proponents, would help troubled insurers to “manage risks.”
According to records obtained by DBA/CMD from the office of Rep. Adams though public records requests, the amendment appears to have been advanced by Williams on behalf of an Ohio insurance industry trade association, the Association of Ohio Life Insurance Companies (AOLIC). AOLIC, one of Williams’ top clients at the time of the Adams meeting, is comprised of 13 life insurance insurers operating in Ohio.
At 8:45 the following morning, March 25, Joseph responded to Williams’ email.
“It was a pleasure meeting you too!’ wrote Joseph. “Rep. Adams was wondering if you could send me the contact names for the 4 insurance companies that are in Cincinnati so that he can call them next week for ALEC. He was also interested in asking you which ones would be most receptive to participating in ALEC?”
The ALEC scholarship fund: a river of invisible, tax-deductible corporate lobby cash
“One of ALEC’s greatest strengths is the public-private partnership. ALEC provides the private sector with an unparalleled opportunity to have its voice heard, and its perspective appreciated, by the legislative members.
“[...] This partnership identifies issues and then responds with common-sense, result-oriented policies. The two groups work in unison to solve the challenges facing the nation. The results are policies that will define the American political landscape in the 21st century.”
– From 2011 ALEC “Private Sector Membership” brochure.
It is important to note here that, while Adams was one of 21 members of the House Insurance Committee in 2011, he was not the chair or vice chair of the committee– nor was Adams chair or vice chair of any other Ohio legislative committee at the time of the Williams meeting. Furthermore, Adams was not a member of the House Finance and Appropriations Committee, whose chair, Rep. Ron Amstutz (R-District 3), had introduced the House version of the state budget on March 15.
So, why would Williams elect to bring the IRMA amendment to Adams? The March 25 email from Joseph to Williams, requesting the names of potential insurance industry donors to the ALEC Ohio scholarship fund, may contain an answer to this question.
Adams is Ohio’s ALEC public sector chair. According to ALEC bylaws and records obtained by DBA/CMD, Adams has four primary responsibilities as an ALEC state chair: 1.) to increase public sector (legislative) membership, 2.) to increase public sector ALEC meeting attendance, 3.) to introduce and enact ALEC model legislation, and 4.) to increase ALEC “scholarship” fundraising.
An examination of ALEC mechanics suggests that the success of this final item– fundraising– predicates the success of the other three aims.
ALEC is a 501 (c) (3) tax-exempt not-for-profit organization that bills itself as being the nation’s largest “bipartisan” public-private legislative partnership– dedicated to advancing “Jeffersonian ideals” and “federalism.” The organization’s membership consists of more than 2,000 state lawmakers and more than 300 of the nation’s leading corporations, lobby firms and ‘think tanks.’ A review of ALEC legislative member rosters reveal that the group is only nominally bi-partisan, the vast bulk of these members being Republican.
The primary function of ALEC is to produce and disseminate “model legislation” for introduction in state legislatures. ALEC boast that approximately 1,000 such pieces of “model” legislation are introduced in real legislatures by its members annually– roughly 17 percent of which are passed into law.
This model legislation is adopted by ALEC task forces focused on the fields of: 1.) civil justice, 2.) commerce, insurance and economic development, 3.) communications and technology, 4.) education, 5.) energy, environment and agriculture, 6.) health and human services, 7.) international relations, 8.) public safety and elections, and 9.) tax and fiscal policy. (Note: in April of 2012, due to widespread criticism of model legislation affecting immigrant detention, use of firearms and voter law, ALEC announced that it would discontinue the Public Safety and Elections Task Force.) (For more on ALEC and immigrant detention, see “Brownskins and Greenbacks:” http://dbapress.com/front-page/brownskins-and-greenbacks-alec-the-for-profit-prison-industry-and-arizonas-sb-1070)
Each ALEC task force is co-chaired and comprised of both public and private sector members. Either legislative or private sector task force members may introduce pieces of legislation for adoption as ALEC models. Once a piece of model legislation is adopted by a task force, it is then added to the cannon of ALEC model bills available to all member lawmakers.
While there are strict limits on the amount of lobbying a 501 (c) (3) organization such as ALEC may engage in, email communications obtained from the offices of ALEC public sector chairs in multiple states clearly show ALEC personnel, lobbyists employed by ALEC member corporations, as well as other interested third parties (such as chambers of commerce) lobbying for lawmaker support and sponsorship of numerous pieces of ALEC “model legislation.” (see: “Publicopoly:” https://dbapress.com/archives/2040 and “ALEC Centralized Source Materials Archive:” https://dbapress.com/source-materials-archive/alec-centralized-source-materials-directory)
As such, on April 20, 2012, Washington, D.C.-based public advocacy group, Common Cause, filed a federal “whistle blower” complaint (based on materials Common Cause had independently gathered from ALEC member lawmakers though public records requests) with the IRS alleging that ALEC is essentially engaged in tax fraud in that it is, in fact, a lobby organization operating in violation of its tax-exempt status. (Learn more about Common Cause and ALEC here.)
Like any good lobbying organization (though ALEC vehemently claims it does not engage in lobbying), ALEC keeps some honey in the pot to attract lawmakers. The honey in the ALEC pot is what is known as the ALEC “scholarship fund.”
There are three primary ALEC events each year: the “Spring Task Force Summit,” the “Annual Meeting” and the “States and Nation Policy Summit.” All of these events– invariably– are held at swank resorts and feature such items as golf tournaments, trap shooting events, numerous gourmet dining opportunities and “hospitality suites”– as well as other seasonal or special items such as “holiday galas” and “cigar receptions.” At these events, ALEC member lawmakers rub elbows with the private sector benefactors who foot the bill for the whole shebang. And, through ALEC “scholarship” funds, lawmakers can be, and many are, reimbursed for expenses incurred for travel, lodging and meals during these events. (For more on these ALEC meetings, see “Inside ALEC: naked contempt for the press and public in Scottsdale”: https://dbapress.com/archives/2398)
Each state ALEC “delegation” has its own “scholarship fund.” Generally, the cash in each state’s fund is raised by the office of the state public sector chair (generally a ranking lawmaker such as the House majority whip), working in concert with the state’s private sector chair (a lobbyist representing a major ALEC member corporation or lobby/law firm). Records obtained by DBA/CMD from the offices of ALEC public sector chairs in several states show that in many instances, ALEC member lawmakers– aside from the state public sector chair– are also enlisted in the solicitation of funds from corporate donors for the state’s “scholarship fund.”
The trouble with ALEC “scholarship fund” disbursements to lawmakers is this: while member lawmakers likely know where this money comes from, many state legislatures have exempted these gifts from state gifting limitations and reporting requirements. As such, constituents of these lawmakers have no readily-available information disclosing the sources of these funds, or whether lawmakers are receiving such funds. (For more on the mechanics of the ALEC “scholarship fund,” see “Legislative Laundry”: https://dbapress.com/front-page/legislative-laundry-how-alec-funnels-millions-of-dollars-in-corporate-gifts-to-state-lawmakers-for-the-express-purpose-of-promoting-corporate-backed-legislation. See also “CMD Special Report: ALEC Scholarship Scheme Helps Corporations Fund Legislator Trips,” http://www.prwatch.org/news/2012/05/11443/cmd-special-report-alecs-scholarship-scheme-helps-corporations-fund-legislator-tr)
To illustrate where ALEC’s allegiances lay, consider this: ALEC reported $7,171,357 in total revenue in 2010 (most recent tax records available). Of this amount, $84,883 in revenue was reported to have been drawn from “membership dues.” While available tax records do not identify the source of this revenue, it is likely that this figure reflects the amount of revenue the organization gained through public sector membership dues; ALEC member lawmakers purchase a two year membership for only $100.
It is important to note here that ALEC does receive some revenue from membership dues paid by state legislatures– for example, the Ohio General Assembly currently pays $1,000 in annual membership dues to ALEC. But, these state dues are almost insignificant– amounting to less than one percent of the organization’s total revenue, according to a statement made to DBA Press by former ALEC Director of Communications Raegan Weber in 2010.
The lion’s share of ALEC’s reported revenue for 2010, $5,997,347, was derived from “contributions and grants.” Such revenue likely is derived from corporate, lobbyist, ‘think tank’ and private foundation contributions.
(The remainder of ALEC revenue, according to tax records, is derived chiefly from events held by the organization.)
According to a 2011 ALEC “Private Sector Membership” brochure, there are three levels of ALEC private sector membership: the “Washington Club,” for which the private sector member pays $7,000 annually; the “Madison Club,” for which the private sector member pays $12,000 annually; and the “Jefferson Club,” for which the private sector member pays $25,000 annually. The chief difference between these levels of private sector membership is the amount of access private members have to lawmakers. Simply put, the more a private sector member pays, the more visible they are to the organization’s legislative members.
In addition to these base membership levels, private sector members may elect to join an ALEC task force, where they are granted the opportunity to introduce and vet pieces of model legislation. For this level of access, private sector members pay additional task force dues varying, depending on the task force, from $2,500 to $10,000.
And, ALEC is a unique lobbying organization– in the view of DBA Press, CMD, Common Cause and others– in that all dues/contributions paid by members and donors (including contributions to “scholarship” funds) are tax deductible.
(Learn more about ALEC at the Center for Media and Democracy’s ALEC Exposed.)
Quid pro quo?
Records obtained from the office of Rep. Adams show that, at the time of the Williams meeting, Adams and ALEC Ohio private sector chair, Time Warner Cable Midwest Region (Time Warner Cable) Vice President of Government Relations Ed Kozelek, were already deeply immersed in fundraising for the upcoming 2011 ALEC State Task Force Summit (SFTS), to be held in Cincinnati on April 28 through 29.
According to these records, Adams and Kozelek had already received pledges from more than 50 corporations and lobby firms, totaling $107,500 to ALEC operations in Ohio, by the end of February, 2011. Of this amount, Williams’ firm, Bricker & Eckler, paid $1,000. Records show that these contributions for the Cincinnati event were held in the Ohio ALEC “scholarship fund,” along with monies to be disbursed to member lawmakers for travel and lodging associated with ALEC events.
Furthermore, records show that on March 7, Bricker contributed an additional $1,000 to the Ohio ALEC “scholarship fund.”
As such, Williams’ entrance to Adams’ office on March 23 had been paved by $2,000 in Bricker donations for use by ALEC member lawmakers (including Speaker Batchelder and Finance Chair Amstutz). And, according to records obtained from the office of Rep. Adams, at least half of this amount had been delivered directly to Adams’ office– not to ALEC, not to Kozelek.
At 10:18 a.m., March 25, Joseph followed up with Williams, informing the lobbyist that Adams had spoken to Speaker Batchelder about the insurance amendment and that Batchelder had told Adams to give the amendment to Rep. Amstutz for insertion in the budget.
As such, no more than 48 hours from her initial conversation with Adams on the subject, Williams and her insurance industry clients got their wish. On June 30, 2011, the budget was passed into law, complete with IRMA amendment.
It is important to note that, by getting IRMA enacted as an amendment to the state budget, the “model act” managed to bypass the standard scrutiny that a stand-alone bill is subject to– items such as assignment to relevant committees and public hearings.
At 5:12 p.m., March 25, Williams sent the requested list containing the names of insurance industry lobbyists and executives to Joseph for Adams’ use in raising funds for the Ohio ALEC event.
“These people may not be the decision makers on these issues, but they’re the ones that will understand what ALEC is, and be able to get a response from their companies about providing support,” wrote Williams.
In all, the list contained the names of four in-house lobbyists or executives employed, respectively, by: Western & Southern Life Insurance Company, Cincinnati Insurance Company (a subsidiary of Cincinnati Financial Corporation), Great American Financial (a division of American Financial Group, Inc.) and Ohio National Life Insurance Co. All of the insurers on the list were current members of AOLIC, the insurance trade association Williams acted on behalf of when she lobbied Adams on the IRMA amendment.
While it is not entirely certain what was done with this list, this much is known: two of the companies named on the Williams list, Western & Southern and American Financial Group, were added to the roster of potential donor corporations being solicited by ALEC member lawmakers for contributions toward the upcoming Cincinnati event.
The Western & Southern solicitation was delegated to Ohio House Insurance Committee Chair, Rep. Jay Hottinger (R-District 71) and to House Insurance Committee Vice Chair, Rep. Bob Hackett (R-District 84).
Former ALEC Ohio public sector chair, Sen. Bill Seitz (R-District 8), along with Rep. Peter Beck (R-District 67), were tasked with raising funds from American Financial.
Seitz was also tasked with raising funds from Chiquita, Kroger and General Electric. Beck was charged with raising funds additional funds from AK Steel Corporation.
Fundraising responsibilities were also delegated to other ALEC member lawmakers. Ohio Senate President Tom Niehaus (R-District 14) was tasked with soliciting funds from Procter & Gamble and Convergys Corporation; Rep. Peter Strautberg (R-District 34) was assigned Fifth Third Bank; Rep. Lou Blessing, Jr. (R-District 29) was assigned an entity only referred to as “Ashland” and Rock Gaming, LLC; Rep. Lynn Wachtmann (R-District 75) was tasked with soliciting funds from Wal-Mart and several hospitals.
A number of lobbyists, aside from Kozelek and Time Warner Cable Midwest Region Director of Government Relations Megan Lashutka, lent their services to this fundraising drive. Most notably, the ALEC fundraising crew was joined by high-powered Ohio lobbyist, Charles “Chip” Gerhardt, III. Gerhardt is the founder and president of Government Strategies Group, LLC (GSG). GSG itself, though Gerhardt, contributed $1,000 to ALEC Ohio in February of 2011.
While Gerhardt lobbied on behalf of a large number of clients in 2011, it is worth noting that he represented prospective ALEC Ohio donors Rock Gaming and Great American Insurance/American Financial Group. Gerhardt is also a longtime lobbyist for Duke Energy Business Services (Duke) and was employed by Duke during this time. According to records obtained from the office of Rep. Adams, Duke and Time Warner Cable were the two largest single contributors to ALEC operations in Ohio through the at least the first half of 2011– both corporations delivering at least $20,000 each in tax-deductible corporate cash to the Ohio ALEC “scholarship fund” by June of that year.
A string of emails obtained from the office of Rep. Adams show that Adams and Kozelek took it upon themselves to solicit funds from a third insurance company on the Williams list, the Cincinnati Insurance Company.
According to records obtained from Adams’ office, Cincinnati Insurance Company Vice President and Government Relations Officer Scott Gilliam had previously pledged $1,000 to ALEC Ohio operations on January 28.
On April 8, Kozelek wrote Gilliam. Noting that the Ohio ALEC “scholarship fund” had not yet received the pledged $1,000, Kozelek took the opportunity to ask Gilliam if he, or Cincinnati Insurance, had considered “a bigger role” in the upcoming ALEC STFS.
“[...] It has crossed my mind but I haven’t thought about it too much. I have heard rumblings that Rep. John Adams was on the hunt for large corporate dollars for the April meeting in Cincinnati but I haven’t been hunted down yet. To be honest, ALEC has never received much traction at my company since it has a broader, all-business constituency, and is not specifically targeted to insurance like some groups, i.e., NCOIL [National Council of Insurance Legislators]. That being said, the Cincinnati venue might make us more prone to do more given the large number of Ohio legislators expected to attend.”
Records indicate that Adams followed up on this solicitation where Kozelek left off, but that Gilliam was unable to deliver funding to the ALEC Ohio “scholarship fund” by the time of the Cincinnati event.
For herself, Williams told DBA/CMD that there is nothing untoward in the fact that Bricker had given $2,000 to the office of Rep. Adams for the ALEC Ohio “scholarship fund” in the month prior to her IRMA solicitation, or that Williams had given Adams a list of potential ALEC donors only hours after Adams facilitated the insertion of the IRMA amendment into the state budget. Nor, said Williams, is there anything untoward to be read into the fact that both of these items, the IRMA amendment and ALEC fundraising, were apparently discussed in tandem during her initial meeting with Adams on the morning of March 23.
“I sure don’t remember how all of these these things– if, or how– these things are connected, in terms of timing. If part of what you’re looking for, or inquiring about, is whether there is some sort of quid pro quo here, I can assure you that that is not the case,” said Williams.
“I will tell you that I certainly do recall providing Representative Adams’ office with the names– I wouldn’t remember how many– of some of the insurance companies that are part of the association that we represent [AOLIC],” added Williams. “[...] Any time a legislator would ask us for information about our clients– you, know, ‘who’s part of this organization, what are the names of these companies, or the people who represent these companies?’– we would provide that information to them. [...] I do recall him asking me about that and so I gave him the information for his followup– so that he could contact them, if he chose, in respect to ALEC.”
Speaking to the value Bricker & Eckler and their clients find in contributing thousands of dollars to the ALEC scholarship fund, Williams painted an altruistic picture.
“I think we realize that there is a value to the legislators, and therefore a value to our clients, in having a well informed legislature,” said Williams. “And the ALEC meetings, at least historically, are a forum for legislators from different states to talk with one another and share ideas and experiences that can be valuable to them. Frankly, we’ve always taken the position that our clients are best served when members of the legislature understand the issues that are in front of them and can make reasonable decisions about things.”
On April 29, Williams wrote an email to Joseph, thanking her and Adams for their help getting the IRMA amendment into the budget:
“I’ll look for an opportunity to thank both of you personally in the near future! Thanks again and have a great weekend,” wrote Williams.
While it is not entirely clear how Williams planned to thank Adams and Joseph, it is clear that those who helped Bricker get the IRMA budget amendment signed into law have been generously rewarded.
From January 1, 2011 through April 30, 2012, Bricker & Eckler’s state political action committee (Bricker PAC) paid out a total of $9,450 to the Batchelder for Representative Committee. During the same time period, Bricker PAC contributed $3,000 to Citizens for Amstutz.
It is also worth noting that Bricker PAC contributed $500 to the Committee to Elect John Adams on February 16, 2011– a little more than a month prior to the Williams-Adams meeting of March 23.
As for Adams, records indicate that the representative went on receive $1,978.90 in ALEC “scholarship fund” disbursements for his attendance at the ALEC Annual Meeting held in New Orleans, August 3 through 6, 2011.
Joseph– not a lawmaker, but Adams’ senior legislative aide (an Ohio legislative employee)– received a total of $2,506.92 in scholarship funds for her attendance at the Cincinnati STFS and the Annual Meeting. Interestingly enough, Joseph received more in ALEC “scholarship fund” disbursements for these two events than any Ohio ALEC member lawmaker.
(Note: records returned to DBA/CMD per a January 6, 2012 public records request to the office of Rep. Adams do not contain records relating to ALEC “scholarship fund” disbursements for the 2011 ALEC States and Nation Policy Summit, held in Scottsdale, Arizona, November 28 through December 2. Due to this fact, available records only reflect scholarship fund disbursements for two of the three major ALEC events held in 2011. However, available records do show that Adams, Joseph and at least 10 other Ohio lawmakers traveled to Scottsdale for the 2011 States and Nation Policy
Summit. As such, Adams and Joseph likely received significantly more in ALEC “scholarship fund” disbursements for 2011 than is calculated here.)
Intermission: The Indispensable Compensated Volunteer
During the August, 2011, ALEC Annual Meeting in New Orleans, Joseph– who, as records indicate, is reimbursed for her travel to such meetings– received the ALEC “Volunteer of the Year Award.”
Records obtained from the office of Rep. Adams leave little room to doubt that Joseph earned this award.
Not only had Joseph been instrumental in raising funds, recruiting volunteers, and acting as an all- around go-to for all things ALEC in the run up to the 2011 Cincinnati STFS, but Joseph also carefully coordinated with ALEC donor lobbyists in the creation of detailed itineraries for ALEC member lawmakers attending the 2011 New Orleans and Scottsdale events.
An example of one such itinerary reads as follows:
Schedule for Rep. Terry Boose: [...] Tuesday, August 2nd: 6:30 p.m.– Time Warner, Mr. B’s Bistro, 201 Royal Street. [...] Wednesday, August 3rd: 6:30 p.m.– Cable & Others, Commander’s Place, 1403 Washington Avenue. (Sport coat required for men). [...] Thursday, August 4th: 2:30 – 5:30 p.m.– Task Force Meeting: Tax and Fiscal Policy. [...] 6:30 p.m.– OH Petroleum & BP, Antoine’s Restaurant, 713 St. Louis Street. [...] 9 p.m. – 12 a.m.– Cigar Reception, Pat O’Brien’s, 718 St. Peter’s Street. [...] Friday, August 5th: 6 – 8 p.m.– Ohio Night, World War II Museum, 945 Magazine Street. [...] 9:30 p.m. – 12:30 a.m.– Cigar Caucus Reception, 633-B Decatur on the Historic Upper Pontalba Apartments.
According to records obtained from the office of Rep. Adams, Joseph had some help in putting these itineraries together. Determinations on where lawmakers would dine and with whom were made at the request of ALEC Ohio donors. Essentially, a lobbyist would deliver a check to the office of Rep. Adams or to Kozelek, ranging in size from $500 to $5,000 (these amounts based on records relating to the New Orleans event) for the Ohio “scholarship fund,” or for the delegation’s “Ohio Night.” Then the lobbyist would approach Joseph with his/her dinner guest request.
For example, on October 19, in the run up to the Scottsdale ALEC States and Nation Policy Summit (SNPS), lobbyist Gary Koch wrote an email to Joseph requesting the names of Ohio lawmakers who would be attending the event. Joseph dutifully provided Koch with the list. Koch responded that he wanted help putting a dinner event together for the benefit of five specific lawmakers. At the time of this request, Koch represented such corporate interests as Eli Lilly, AT&T and the Wholesale Beer and Wine Association of Ohio.
While records obtained from the office of Rep. Adams do not contain a complete accounting of private sector contributions to ALEC Ohio funds as they relate to the Scottsdale SNPS, available records do indicate that Koch had given $5,000 on July 5, 2011, for use during the ALEC “Ohio Night” event in New Orleans. These records list Koch as being a “platinum”-level sponsor and indicate that the contribution had been made on behalf of Eli Lilly.
Similarly, emails show that Time Warner Cable lobbyist Megan Lashutka coordinated the planning of these dinners with Joseph– with Time Warner Cable reserving “first dibs” on lawmakers attending the summit. As previously discussed, Time Warner Cable had contributed at least $20,000 to the Ohio ALEC “scholarship fund” through the first half of 2011 alone– coupled with an additional $1,000 contribution on July 21 for use during the “Ohio Night” event in New Orleans.
Records indicate that Koch, Lashutka and other lobbyists were accommodated in their requests; itineraries drafted by Joseph for lawmakers attending SNPS show these legislators (along with Joseph and her husband) being whisked around to bars and dining venues throughout Scottsdale for private soirees with Time Warner Cable, Koch, lobbyists with the firm of Sean Dunn & Associates, LLP (representing such ALEC Ohio donors as AT&T and the Ohio Hospital Association), and others.
Given all this, it is easy to lose sight of the fact that Joseph is a public employee, paid nearly $47,000 annually by Ohio taxpayers to serve as the senior legislative aide to Rep. Adams. Yet, Joseph seems confused at times as to who her actual employers are. Nevertheless, records obtained from the office of Rep. Adams show that Joseph does not feel it is she who is confused.
On May 2, 2011, Joseph received an email from AT&T lobbyist Paul Weirtz. The email contained a link to a post on ‘progressive’ blog, “Daily Kos” (“Breaking!! First ever demonstration against an ALEC event in Cincinnati,” posted by “OhioDem1,” April 29, 2011). The blog post discussed protests held during the Cincinnati ALEC event and mentioned plans for a second protest at the upcoming New Orleans meeting.
“You probably saw this article,” wrote Weirtz. “Note that they are planning protests in New Orleans. Like we will be able to tell the difference between them and the Bourbon Street revelers.”
Joseph immediately forwarded the email on to Kozelek and ALEC Director of State Programs Laura Elliott.
“Thanks for sending this to us! We really appreciated it,” wrote Elliott.
“No problem. They’re so confused.”
Part 2: Lessons from a Baseball Game
“Criminal (noun): 1.) one who has committed a crime, 2.) a person who has been convicted of a crime.”
– Merriam-Webster Dictionary
“Please join us for a great American pastime!”
The Hilton Netherland Plaza Hotel served as the site for the 2011 ALEC State Task Force Summit (STFS) in Cincinnati. The summit featured the standard ALEC fare for the more than 500 attending member lawmakers: gourmet dining events, nights out on the town for state delegations, a reception for ALEC board members and task force luncheons.
And, as is also common at many ALEC events, a recreational event– having nothing to do with legislative education– was held for member lawmakers, their families and the attendant throngs of lobbyists.
The special recreational event for the 2011 Cincinnati STFS took place on the evening of April 29 in the form of a shindig at the Great American Ballpark, home to the Cincinnati Reds. The invitation for the event read:
“Please join ALEC for a night at the ballpark as the Cincinnati Reds take on the Florida Marlins! [...] ALEC will have access to the ballpark party decks where select food and drinks will be provided. Space is limited at this special event– sponsored by Time Warner Cable– so be sure to reserve your free ticket now! [...] Please join us for a great American pastime! [...] Sponsored by Time Warner Cable ["Time Warner Cable" written here in large, boldface font with the Time Warner Cable company logo][italics original].”
One vital detail to note here (just in case the invitation doesn’t make this clear) is that event was sponsored by Time Warner Cable.
According to records obtained from the office of Rep. Adams, at least 40 tickets to this game were given to at least 22 lawmakers. An additional 5 tickets were given to 5 legislative aides (including Joseph), and two tickets were given to a guest of Rep. Adams (Ohio State Representative-turned lobbyist, Bob Doyle). Grand total: at least 47 Reds v. Marlins tickets to Ohio legislators, their aides and guests.
While lawmakers from other states attended this game, records obtained from the office of Rep. Adams indicate that this Ohio delegation likely comprised close to half of the total ALEC public sector presence at this event.
The trouble with all of this– should a constituent like to know who has been wining and dining their lawmakers on the “party decks” of the Great American Ballpark, or should a constituent like to know who has been paying for their lawmakers to travel and stay in plush resorts– is that there is no record of any of this available to the public– save for records potentially uncovered through a lengthy public records request process.
An examination of statements of financial disclosure filed by the more than 60 Ohio ALEC member lawmakers for 2011 yields no trace of any of these gifts– no indication that in 2011, 30 Ohio legislators and legislative aides received a combined total of $33,791.64 in “scholarship fund” disbursements for expenses related to the Cincinnati STFS and the New Orleans the Annual Meeting; no indication that the 21 members of the Ohio legislative delegation to the New Orleans ALEC Annual Meeting were the beneficiaries of $64,000 raised from 36 donor lobbyists (representing such notable corporate citizens as British Petroleum, Cash America, Pfizer, AT&T, Time Warner Cable and Novartis Pharmaceuticals Corporation) to be spent on the legislators’ night out in the Big Easy.
Similarly, records filed by these lobbyists and their employers with the Office of the Ohio Legislative Inspector General (OLIG) bear no trace of these (tax deductible) lobbying expenditures.
For example, in the case of Rep. Adams’ role in getting the Bricker/AOLIC IRMA amendment inserted into the 2011 state budget: there is no record readily available to the general public that reflects either the fact that 1.) Bricker paid $2,000 for use in the ALEC “scholarship fund” (at least half of which was delivered directly to the office of Rep. Adams) in the month prior to the IRMA solicitation, or 2.) that Adams and Joseph drew close to a combined $4,500 from this account in the months following the insertion of the amendment into the budget.
In fact, available records paint a picture quite different from the reality of the situation. Lobby reports filed by Bricker lobbyist Faith Williams state that she only expended $43.34 for the benefit of lawmakers (in “meals under $50″) while lobbying during the first quarter of 2011. Furthermore, these records indicate that AOLIC– the client for whom Williams advanced the IRMA amendment– expended not a single dime in reportable gifts or meals to lawmakers during this period.
Similarly, lobby reports filed by Time Warner Cable– which had, by the time of the Cincinnati event, contributed at least $20,000 to the ALEC Ohio “scholarship fund” for 2011– purport that the corporation had only expended $77.16 while lobbying Ohio lawmakers during the first quarter of the year.
Inoculated from public disclosure with public cash
How is this possible? How could tens, if not hundreds of thousands of dollars in gifts and lobbying expenditures for the benefit of Ohio lawmakers have completely disappeared from public sight?
The answer is a pretty straightforward one: Ohio law contains numerous disclosure exemptions for items of worth (be they cash, meals, or plane tickets) received by lawmakers in conjunction with events held by certain legislative membership organizations. According to Ohio law, a lawmaker (or, transversely, a lobbyist) does not need to disclose expenses relating to travel, lodging or meals received/incurred (or given/expended, in the case of lobbyists) at “a meeting or convention of a national or state organization to which any state agency, including, but not limited to, any legislative agency or state institution of higher education [...], pays membership dues.”
As previously discussed, the Ohio General Assembly pays $1,000 annually in membership dues to ALEC (even though not all members of the General Assembly are ALEC members). Without this one very small drop of Ohio state public funding in the more than $7 million bucket that is ALEC, Ohio lawmakers would not be able to accept these gifts free and clear of public disclosure.
These ALEC General Assembly membership dues are paid each year through the Ohio Legislative Service Commission (LSC). Interestingly enough, in January of 2012, at the time when LSC re-upped Ohio ALEC membership dues for calendar year 2012, and paid dues owed for calendar year 2011, the chairman of the commission was Speaker Batchelder. Batchelder, according to documents obtained from the office of Rep. Adams, had received $884 in “scholarship fund” disbursements for his attendance at the 2011 New Orleans meeting. And, of the 14 LSC members– including LSC vice chair Sen. Tom Niehaus– at least 10 are known ALEC members.
When loopholes fail: go deaf, go dumb, go blind
But, for all the disclosure loopholes written into Ohio law and sanctioned by members of the Ohio General Assembly, there is a problem: while Ohio law does allow expenses paid for travel, food and lodging received in conjunction with ALEC functions to go unreported, there is no similar provision exempting gifts received by lawmakers through their involvement with such organizations.
According to Ohio law, lawmakers must report all gifts received from a “legislative agent” (lobbyist) of more than $25 in value. And, according to Ohio law, lawmakers are prohibited from accepting gifts from legislative agents with a value of more than $75.
Ohio law does allow lawmakers to accept gifts with a value of more than $75, so long as they are not from legislative agents. Nonetheless, while this practice is permitted, lawmakers and lobbyists are required to disclose these gifts– if such gifts exceed $75 in value.
And, these provisions of Ohio law are not without teeth (though the teeth they have are small and not particularly sharp); under Ohio law, a lawmaker who either fails to report a permitted gift (valued over the respective $25 and $75 thresholds), or who accepts a prohibited gift, is guilty of a fourth degree misdemeanor criminal offense.
This brings us back to the baseball game of April 29, 2011.
While ALEC member lawmakers and lobbyists were enjoying their “select food and drinks” on the “party decks” of the Great American Ballpark, another group of lawmakers were whooping it up with Duke Energy lobbyists in their own special section of the stadium.
Three lawmakers who received tickets to the Reds/Marlins game from Duke reported the gifts in their 2011 statements of financial disclosure. According to these records, the tickets were valued at $75 apiece. As such, it is fair to assess that tickets to the same game given to members of the Time Warner Cable/ALEC party were valued at at least $75– though it is not known if the Duke event was held in an equally “exclusive” area of the park.
Given the fact that none of the 40 tickets known to have been distributed to ALEC member lawmakers were reported in either Time Warner Cable lobby reports or in legislative statements of financial disclosure, this Time Warner Cable-sponsored baseball party represents at least $3,000 in corporate gifts given to members of the Ohio General Assembly totally outside the realm of public disclosure.
Of the 22 Ohio ALEC member lawmakers who received tickets to the Time Warner Cable/ALEC baseball event, 15 received two or more tickets. As such, these lawmakers received gifts valued at $150 or more. Given the fact that under Ohio law it is illegal for a lawmaker to fail to report a gift (from a non-legislative agent) over the $75 threshold, these 15 ALEC member lawmakers appear to have committed a criminal offense when they failed to report these gifts.
And, it is very possible that these 15 ALEC member lawmakers committed the additional criminal offense of accepting a gift valued at more than $75 from a legislative agent.
Records obtained from the office of Rep. Adams clearly show that Kozelek– a registered legislative agent in the state of Ohio– was the person responsible for the disbursement of these tickets to lawmakers.
For example: on April 8, 2011, Rep. Andy Thompson (R-District 93) wrote Joseph, asking if it would be possible for him to obtain extra tickets to the game for his kids. Joseph immediately contacted Kozelek, asking what could be done to accommodate Thompson. To this Kozelek responded:
“We will make sure they are taken care of. Just keep track of the ticket distribution and let’s not advertise what we’re doing for him.”
As a result, Rep. Thomspon was given five tickets to the game (one for himself, one for his wife and three for their children). The total value of this gift– clearly given by a legislative agent– was $375, five times the legal $75 threshold.
Another example: on April 11, Candice Miller, administrative aide to Senate President Niehaus, wrote Joseph. Miller stated that Niehaus would not be able to attend the actual ALEC conference, but would like to attend the game. Again, Joseph contacted Kozelek for approval. Kozelek responded:
“Registration is NOT needed for the Prez [sic].”
Niehaus received two tickets (one for himself, one for his wife) for the Time Warner Cable-sponsored event. Interestingly enough, Niehaus also received two tickets to the game from Duke– which he disclosed in his 2011 statement of financial disclosure. When asked why he did not also disclose the two tickets he received for the Time Warner Cable-sponsored event, Niehaus told DBA/CMD that he believed those tickets to be an exempt gift from ALEC. Upon learning that no such exemption exists in Ohio law, the Senate President responded that the issue was immaterial, since he and his wife only used the tickets they were given by Duke. (It is worth noting here that Ohio law contains no gift disclosure exemption for gifts received but not used.)
Given the fact that Niehaus and 14 other lawmakers received baseball game ticket gifts valued at $150 or more (along with the fact that none of the 22 lawmakers who received these gifts reported them), it is important to note that all communications obtained from the office of Rep. Adams relating to the disbursement of these tickets follow a distinct pattern: an ALEC member lawmaker would approach Joseph with his/her request for tickets; Joseph would take this request to Kozelek; Kozelek would then approve the request and the lawmaker would be granted his/her tickets, available for pickup at the ALEC registration desk in the Hilton lobby.
The section of Ohio law that prohibits lawmakers from accepting gifts valued at more than $75 from a lobbyist, (Ohio Revised Code, section 102.031 (C) (3)) states: “(C) No member of the general assembly shall knowingly accept any of the following from a legislative agent [...] : (3) A gift of any amount in the form of cash or the equivalent of cash, or a gift of any other thing of value whose value exceeds seventy-five dollars.”
And therein lies the rub. It is only a violation of Ohio law if lawmakers knowingly accept gifts above the $75 threshold from a lobbyist. Had Kozelek attempted to distribute the tickets directly to lawmakers without a non-lobbyist intermediary, the recipient lawmakers would not have been able to legally accept these gifts. As such, Joseph– a public employee, not a registered lobbyist– served as cover so that at least $2,475 in otherwise illegal gifts could be laundered through the office of the House Majority Whip to these 15 lawmakers.
While it could be argued that lawmaker acceptance of these gifts may be the product of ignorance, and therefore acceptable under Ohio law, it is doubtful that this argument would bear scrutiny; it is common knowledge amongst Ohio ALEC member lawmakers that Time Warner Cable Midwest Region Vice President of Government Relations (registered “legislative agent”) Ed Kozelek is the state’s ALEC private sector chair. Furthermore, the invitation to the game clearly stated– no less than two times– that the event was “sponsored” by Time Warner Cable.
Similarly, as records clearly show distribution of these gifts was controlled by Kozelek (and as it is unlikely that recipient lawmakers were truly ignorant of Kozelek’s involvement), the seven remaining ALEC member lawmakers who only received one ticket to the event (a $75 value), arguably committed the criminal offense of failing to report a gift from a legislative agent with a value of more than $25.
Joseph did not respond to multiple requests for comment (work phone, cell phone, email).
Neither Kozelek nor Time Warner Cable Midwest Region Vice President of Communications Mary Jo Green would comment on any aspect of the baseball game event, or on other aspects of Time Warner Cable or ALEC activities in Ohio.
ALEC Director of Communications Kaitlyn Buss did not respond to multiple requests for comment (work phone, cell phone, email).
Who you gonna believe– me, or your lying eyes?
But what do the entities that are supposed to oversee matters of legislative ethics in Ohio, the Joint Legislative Ethics Committee (JLEC) and the Office of the Ohio Legislative Inspector General (OLIG), make of all this?
On April 23, 2012, DBA/CMD approached OLIG Ethics Advisory Attorney Jennifer Lockwood with documentation outlining the apparent gifting violations stemming from the April 29, 2011 Time Warner Cable-sponsored baseball event. Lockwood stated that JLEC-OLIG (OLIG is an office subordinate to JLEC) would inspect the documentation and that OLIG Executive Director Tony Bledsoe would be available for comment once the review was completed. However, noting the extensive documentation supplied by DBA/CMD, Lockwood stated that JLEC-OLIG would most likely be unable to comment by deadline.
On April 24, DBA/CMD attempted to contact several lawmakers who had received baseball game ticket gifts of $150 or more in value. Noting that the outstanding majority of these lawmakers were not returning phone calls, DBA/CMD sent an email seeking comment to each lawmaker. The question posed through these emails was fairly straightforward: why, given the multiple potential criminal infractions in play, did lawmakers fail to report these gifts on their statements of financial disclosure?
Apparently, these emails struck a nerve.
At 8:10 a.m., April 25, DBA/CMD received a statement from OLIG Executive Director Bledsoe.
“[...] given that you submitted an inquiry via email late yesterday to one or more Ohio legislators concerning an April 29, 2011 baseball game, I feel compelled to address the specific question you pose in your email to these Ohio legislators [...]
“[...] The April 29, 2011 baseball game was hosted by the American Legislative Exchange Council as part of its 2011 Spring Task Force Summit in Cincinnati, Ohio. The invitation to the baseball game was part of the meeting program. Tickets were available at the ALEC registration check in. The invitation begins with the words “Please join ALEC…”. Although Time Warner Cable (TWC) is listed as a sponsor of the game and Mr. Ed Kozelek, a legislative agent for TWC, was involved in obtaining tickets on behalf of ALEC; his participation does not alter the fact that this was an ALEC meeting event. TWC is a member of ALEC. Mr. Kozelek is the Private Sector State Chairman for ALEC in Ohio. Ohio was the site of the 2011 Spring Task Force Summit. It is important to note that the baseball game was not an event sponsored by an entity acting apart from the national organization to which Ohio pays membership dues. ALEC obtained a sponsor for this baseball game and then included the event as part of its Spring Task Force Summit [sic].”
Bledsoe went on to opine– as a “conclusion of law”– that lawmakers who accepted tickets to the event were under no legal obligation to disclose the gifts.
According to Bledsoe, the basis of this conclusion is a 1995 JLEC advisory opinion, Advisory Opinion 95-007. The trouble with Advisory Opinion 95-007 is that there is a very definite disconnect between the words that actually exist in the opinion and those that Bledsoe apparently believes exist in the opinion. In other words, Advisory Opinion 95-007 is diametric in its meaning to Bledsoe’s interpretation of it.
The reality of the situation is that Advisory Opinion 95-007 (written, interestingly enough, by former JLEC chair and current ALEC member, Rep. Batchelder) explicitly states that gifts such as tickets to the Time Warner Cable-sponsored baseball game are not exempt from Ohio gifting law.
“It is important to note that the above two expenses– travel and meals– are the only expenses to which the national meeting exemption applies. Events or activities at a national meeting which are hosted by entities other than the national or state organization to which the [General Assembly] dues are paid are not exceptions and must be reported as gifts if the value exceeds $75 (or $25 if from a legislative agent). For example, if the member is attending a conference sponsored by the National Conference of State Legislators (NCSL) and XYZ Corporation sponsors a golf outing with free greens fees for the conference attendees, the greens fees are a gift. If NCSL sponsored the event using the dues paid by its members to fund the event, that would be considered part of the conference and not reportable as a gift since in essence the event was actually paid for by the General Assembly through its dues. All recreational events, excluding travel and meals, sponsored or paid for by someone other than the conference host is a gift and is therefore reportable if the $75 (or $25) threshold is exceeded [all italics original].”
Given the fact that the Ohio General Assembly only pays $1,000 in dues to ALEC annually (one third of the estimated value of baseball game tickets distributed to lawmakers for the Time Warner Cable/ALEC event), coupled with the fact that the April 29, 2011 baseball game event was openly “sponsored” by Time Warner Cable– an organization which had contributed at least $20,000 to ALEC’s 2011 operations in Ohio by the time of the event– it is untenable to argue that ALEC paid for the baseball game event out of General Assembly dues. Strangely, however– given the fact that, according to Advisory Opinion 95-007, this rationale would be the only avenue through which such gifts could be exempted from Ohio gift disclosure law– Bledsoe did not attempt to argue this point.
When asked to reconsider his reading of Advisory Opinion 95-007, Bledsoe reiterated his original view, resting his reasoning on three completely moot points: 1.) Time Warner Cable is an ALEC member, 2.) the invitation to the game bore the words, “ALEC invites you,” and 3.) tickets were available for pickup at the ALEC registration desk. Because of these points, Bledsoe stated that the baseball game tickets were exempt from Ohio gifting law– adding that this conclusion was JLEC-OLIG’s “final decision” on the matter.
A fundamental flaw in Ohio’s system of legislative oversight
A clue as to why Bledsoe appears to be unable to understand the meaning of words clearly and plainly printed in an advisory opinion may be found in the section of Ohio law that governs JLEC-OLIG (Ohio Revised Code, section 101.34).
As provided by Ohio law, JLEC is comprised of 12 members– six from each legislative body, not more than three appointees from either body can be members of the same party. JLEC’s House members are appointed by the speaker. The committee’s Senate members are appointed by the senate president.
As provided by Ohio law, JLEC employs the executive director of the committee. This “executive director” is known as the “legislative inspector general.” The legislative inspector general (Bledsoe) and his staff are collectively referred to as the Office of the Legislative Inspector General (OLIG). As such, OLIG is an office subordinate to JLEC.
While either the appointment or removal of the legislative inspector general requires the approval of at least eight JLEC members, consider this: of the lawmakers that employ Legislative Inspector General Bledsoe and his staff, five– including JLEC Chair, Sen. Pres. Niehaus, and JLEC Vice Chair, House Speaker Batchelder– are ALEC members.
Furthermore, of these five JLEC ALEC members– Sen. Niehaus, Rep. Batchelder, Rep. Blessing, Sen. Kieth Farber (R-District 12) and Rep. Matt Huffman (R-District 4)– three (Niehaus, Huffman and Farber) received tickets to the Time Warner Cable/ALEC baseball game.
(Note: all references to “Rep. Adams” throughout this article are to Rep. John Adams. There is no reference to Ohio Rep. Richard Adams anywhere in this story.)