An extensive investigation of campaign contributions in Delaware finds documentation of donations is lax, ethics enforcement is insufficient and limits on contributions are below the national average.
Independent Counsel and former Chief Justice of Delaware Supreme Court Norman Veasey released a Dec. 28 report detailing illegal donations given to high-profile state officials, including Gov. Jack Markell and Attorney General Beau Biden.
The report also proposes reforms aimed at preventing future violations of campaign finance law, including raising the minimum amount an individual or business can contribute.
Veasey and other attorneys at his law firm – Weil, Gotshal and Manges of Wilmington – teamed with Delaware State Police in a two-year investigation of whether evidence shows any candidate had knowledge of illegal campaign contributions.
“Although some witnesses made vague references or speculated to the effect that candidates or their agents knew about or suggested reimbursements, investigators did not find credible evidence to support a charge,” Veasey reported.
He also said candidates and their staffers vehemently denied knowledge of illegal donations.
In a Dec. 31 press release from the Attorney General’s Office, Veasey said critics of the report have argued it fails to hold public officials accountable for behavior the report condemns. “The failure of some elected officials or donors to follow the law carefully does not mean they should be indicted when there is no credible evidence of all the elements of a crime that we could bring to a judge and jury in a court of law and prove beyond a reasonable doubt, and at a considerable expense of taxpayer money,” he said.
In a statement, Markell said he and his campaign workers were unaware of unlawful contributions. “The campaign had no interest in receiving tainted contributions, and we have reimbursed contributions alleged to have been illegal,” he said.
The investigation began after NKS Distributors Chief Executive Officer Christopher Tigani entered a guilty plea to violations of campaign finance and tax laws in 2011. Biden appointed Veasey to investigate all aspects of possible violations of Delaware law. Biden recused himself, citing the potential appearance of a conflict of interest.
Veasey said Tigani would instruct employees to contribute to candidates – up to $1,200 for statewide offices – and later reimburse the employee for the donation in order to evade maximum contribution limits.
Tigani would collect multiple checks from straw donors and deliver them to the campaign, “ensuring that the campaign recognized Tigani’s role in procuring the contributions – in order to curry favor with the candidates,” Veasey wrote.
NKS contributed more than $200,000 to political campaigns for at least 19 candidates from 2002 to 2008, the report found.
Each reimbursement constituted a separate felony on the part of the donor, the person making the reimbursement and the candidate who knowingly accepted the illegal contribution, Veasey said.
Tigani pleaded guilty to three felony counts; he was sentenced to jail time and ordered to pay more than $100,000 in fines. NKS was also charged, but settled out of court, agreeing to pay the state $500,000. The straw donors were not prosecuted, Veasey wrote.
After Tigani was sentenced, Veasey said, he discovered two more reimbursement schemes.
Developer Michael Zimmerman reimbursed at least five straw donors to Markell’s 2008 gubernatorial campaign, totaling $6,000 in illegal donations, he said.
According to the report, Zimmerman pleaded guilty Sept. 10 and was ordered to pay the state more than $20,000 and serve probation time and community service.
Likewise, Kemal Erkan, owner of United Medical LLC, directed seven employees to contribute $250 each to Markell’s 2008 campaign and later reimbursed the straw donors in the form of a payroll bonus, the report stated.
Erkan entered a no prosecution agreement with the state in exchange for $15,000 and 100 hours of community service, Veasey wrote.
Delaware law permits corporations and other business entities to contribute to state political campaigns, Veasey said. When making the contribution, the company must notify in writing any owners with a share of 50 percent or more, or indicate that no such person exists.
In some cases, individuals who owned more than half of an entity made campaign contributions without attributing the majority owner, but investigators found no evidence that the campaign was aware of the ownership structure, Veasey wrote.
The investigation also revealed instances where an individual who owns a controlling interest in a business – up to 49 percent – can skirt the maximum donation amount of $1,200 allowed by entities. “If the 49 percent owner causes each of the 10 businesses to make a maximum contribution of $1,200 to a candidate for statewide office, that individual can effectively cause contributions of $12,000 to the campaign without violating the Delaware campaign finance statute,” he wrote.
Veasey suggested prohibiting campaign contributions from entities.
“All of these factors counsel against continuing to permit direct campaign contributions by entities. Although legal if the statute is complied with, the current situation makes no policy sense, in our opinion,” Veasey wrote.
Delaware’s pay-to-play culture must change, Veasey said.
The law requires public officers to disclose receipt of any gift valued at more than $250 or face misdemeanor charges. Veasey said office holders failed to report expensive gifts from NKS to the Public Integrity Commission, which oversees financial disclosure laws.
“For example, after offering ‘perks’ to legislators, including gifts of alcohol and tickets to concerts and sporting events, Tigani successfully sought legislative action authorizing Sunday liquor sales, which would benefit NKS, and legislative inaction with respect to proposed increased excise taxes on alcohol sales which would harm NKS,” he wrote.
Veasey said a number of legislators from Kent and New Castle counties admitted to receiving gifts from Tigani. The legislators were not charged because there was no evidence to suggest they knew the value of gifts they received exceeded $250, Veasey wrote.
Fewer gifts would go unreported if the state gave its ethics commission the power and resources to enforce ethics laws, Veasey said.
“Delaware’s PIC is responsible for enforcing rules for about 48,000 government employees, but it currently is staffed by just two people,” Veasey wrote.
For example, Veasey said, if the PIC were allowed to audit state government operations, it could uncover wrongdoing and incentivize officials to comply with campaign finance laws in their bookkeeping.
The PIC could also be authorized to bring civil actions or prosecute criminal violations when the Attorney General’s Office does not choose to prosecute them, Veasey said. “All of these changes would strengthen the PIC’s ability effectively to enforce Delaware’s public integrity laws,” he wrote.
One answer to preventing violations of campaign finance laws is to simply allow donors to contribute more, Veasey suggested.
“The contribution limits in Delaware are below the national average and the national median,” he wrote.
Veasey also suggested forcing contributors to disclose their occupation and employer, banning entity contributions and forbidding political committees from depositing a contribution until all reportable information, such as the contributor’s ownership of entities, is disclosed.
To combat reimbursement schemes, Veasey said, allow employees of businesses and political campaigns to report the violations anonymously. Otherwise, they will be afraid of losing their jobs if they come forward, he wrote.
In his conclusion, Veasey said the reforms should be considered promptly, when the General Assembly reconvenes. “The reforms recommended in this report should not gather dust on a shelf,” he said.
In June, the General Assembly established an Election Law Task Force to examine and recommend changes to Delaware’s election laws. In a statement, Markell said he plans to discuss Veasey’s reform proposals with the General Assembly, which is scheduled to reconvene Tuesday, Jan. 14.
“As indicated in the report, there is an Election Law Task Force currently working, and that appears to be a good place to begin that process,” he said.
To view the entire report, go to attorneygeneral.delaware.gov.