By Dan Christensen, FloridaBulldog.org
In a ruling that undermines an 81-year-old anti-corruption law prohibiting pay-to-play political contributions by federal contractors, an impotent Federal Election Commission last week disclosed that it allowed Boca Raton private prison contractor The GEO Group to get away with making hundreds of thousands of dollars of otherwise illegal contributions to Super PACs.
The Federal Election Campaign Act, passed in 1940, bars any person or firm negotiating or performing a federal contract from contributing “directly or indirectly” to any political party, committee, federal candidate or any person for any political purpose or use. The idea: to prevent undue influence in the awarding of taxpayer-funded contracts.
Super PACs, technically known as independent expenditure-only committees, are allowed to raise unlimited sums of money from corporations, unions, associations and individuals. They can spend that money to overtly advocate for or against political candidates. They are not allowed to donate money directly to political candidates, and their spending cannot be coordinated with the candidates they benefit.
In 2016, Washington, D.C.’s Campaign Legal Center filed a complaint with the FEC against Rebuilding America Now, the primary pro-Trump Super PAC founded that year by then-Trump campaign manager Paul Manafort and real estate mogul Tom Barrack. The main accusation: that The GEO Group’s wholly-owned subsidiary GEO Corrections Holdings Inc. (GCH) contributed $100,000 to Rebuilding America Now on Aug. 19, 2016 – one day after the Obama administration announced that it would be ending the Federal Bureau of Prisons’ use of private prisons.
“That same day, GEO Group Inc.’s stock dropped 40 percent,” the complaint says. Donald Trump had made public statements supporting privately run prisons.
THE GEO GROUP ‘FAMILY’
GCH is both a subsidiary of The GEO Group and parent to numerous other entities all in the GEO family of companies. “A number of these entities, including The GEO Group, hold federal contracts,” according to a report by the FEC’s nonpartisan Office of General Counsel, which after a five-year investigation recommended in July that the commission find probable cause to believe that GCH had broken the law.
From 2015 to 2017, GCH made a total of $945,000 in contributions to various federal political committees, according to the General Counsel’s legal brief. And according to GEO Group’s 2016 annual report, 48 percent of the company’s $2.5 billion in revenue came from federal contracts.
But GCH sought to claim it is a separate company from The GEO Group. To do so, it relied in large part on a previous FEC determination that parent companies of a subsidiary that’s a government contractor may contribute if the parent is a “separate and distinct legal entity” with sufficient revenue from other sources to make a contribution.
But the “fiction” of a separate legal entity goes out the window when there is “a domination of finances, policy and practices by the parent that the subsidiary has no separate existence of its own and is merely a business conduit for its principal,” according to a previous FEC analysis cited from another case.
The General Counsel’s office determined that the GEO Group and GCH are located in the same Boca Raton building, have the same corporate policies relating to finances, ethics and human resources and have an “employee sharing agreement,” in which “all of the senior managers throughout the domestic entities in the GEO family work.”
“Though they are employees of GCH alone, each of these executives holds the same title with, and performs work for most, if not all, domestic entities in the GEO family. For instance, George Zoley is the Chairman and CEO of all 9 domestic GEO entities,” says the General Counsel’s brief.
RECOMMENDATION NOT FOLLOWED
That uniformity boils down to this finding: that GCH is “part of a family of companies with management, operations, policies and finances so thoroughly integrated that GCH should not be considered a separate and distinct legal entity.”
But after that determination was recommended, the FEC’s six commissioners – three Republicans, two Democrats and one Independent who often votes with Democrats – the commission voted 3-3 last month on whether to find probable cause as well as whether to find no probable cause.
Republicans Allen Dickerson, Sean Cooksey and James “Trey” Trainor III did not explain their votes not to punish GCH for making prohibited contributions. Democrats Shana Broussard and Ellen Weintraub published a three-page “statement of reasons” explaining in detail why they voted to find probable cause.
The partisan stalemate, the latest in a long string of partisan splits that have sapped the FEC’s ability to enforce the law, prompted the FEC to close its file on the matter without taking action.
According to Open Secrets, the nonprofit and nonpartisan Washington, D.C. watchdog group that tracks money in politics, Rebuilding America Now spent nearly $21.2 million in the 2015-16 election cycle, including $17 million advocating against Democratic presidential candidate Hillary Clinton and $4.1million in favor of Republican Donald Trump.
The FEC’s failure to follow its General Counsel’s recommendation and enforce the federal election law follows last month’s announcement that another South Florida-based federal contractor had paid a $125,000 civil penalty to settle similar charges that it made an illegal $500,000 contribution to a different pro-Trump Super PAC, America First Action. Randal “Randy” Perkins, the chairman and founder of the Deerfield Beach disaster clean up contractor AshBritt, paid the fine. Earlier, America First Action refunded the contribution to AshBritt.
According to Open Secrets, 2,276 groups organized as Super PACs have reported total receipts of more than $3.4 billion and total independent expenditures of more than $2.1 billion in the 2019-2020 election cycle.