Reform laws spurred by scandals full of loopholes
PACs, weak enforcement render kickback statutes almost meaningless, auditor says
FBI agents raided the state treasurer’s home. Then the calls for reform began.
It was 2005, and federal investigators accused then-Treasurer Robert Vigil of demanding kickbacks from private financial advisers hired by the state government to manage New Mexico’s investments.
Vigil maintained that some of the payments were merely campaign donations. His predecessor, Michael Montoya, pleaded guilty to a similar extortion scheme, saying campaign debt drove him to solicit kickbacks from contractors.
FBI agents quoted Montoya as saying kickbacks were merely “the way we do business in New Mexico.” Some legislators sought to change that. They approved reform measures in 2006 and 2007 that bar contractors from plying politicians with campaign donations or other gifts while vying for government business. And the changes required contractors to report donations they have made to public officials.
But a decade later, those laws are full of loopholes.
A recent review by the State Auditor’s Office found 2 in 5 government contracts did not include the paperwork contractors are required to submit reporting their donations to public officials. For about a decade, the standard forms even included inaccurate language. And The New Mexican has obtained documents showing how corporations, along with political action committees, can skirt the rules altogether.
“This is the weakest part of all our campaign finance rules, which is ironic because it is the first part we tried to fix after the treasurers’ scandal,” State Auditor Tim Keller said.
He described enforcement and compliance of the laws as so poor, the statutes themselves are almost meaningless.
The 2006 and 2007 laws had two main components. From the moment a business gets the chance to bid on a government contract to the moment the contract is awarded, the
company, its representatives as well as relatives of board members are banned from giving money or other gifts to public officials who might be in a position to influence contracts. The measures also are designed to bring more transparency by requiring companies bidding for business with a state or local agency to file a form with that agency detailing any donations it has made to public officials during the previous two years.
But in June 2015, the Interstate Stream Commission asked engineering firms to submit proposals for designing part of a big and controversial project that could ultimately divert the Gila River. Several companies submitted bids.
As the commission weighed which contractor to hire, a political action committee linked to one of the companies sent a $1,000 donation to Susana PAC, a political action committee tied to Gov. Susana Martinez.
The company, AECOM, received the contract in May 2016. The Center for Biological Diversity, which has been tracking the project, cried foul, saying the donation was illegal under the part of the decade-old laws designed to prevent pay-for-play deal-making.
The donation was a pittance for Susana PAC, which raised nearly $330,000 during that six-month period. And both Susana PAC and AECOM’s political action committee reported the donation in routine regulatory filings.
Even so, the donation pointed to loopholes in the law.
The New Mexican has obtained letters showing that the State Auditor’s Office raised concerns about the contribution earlier this year. The Interstate Stream Commission replied that the donation did not come from AECOM but from its political action committee. And the money did not go to a public official but to a political action committee, though it was one linked to the governor.
Because the money did not go straight from a contractor to an official, the state’s purchasing law did not apply, the commission said, echoing arguments AECOM’s own lawyers made in a letter to the commission.
A spokesman for the company said it defers to the Interstate Stream Commission and declined to comment further.
“It’s disturbing,” said Dede Feldman, a former Democratic state senator from Albuquerque, who sponsored the reform laws.
Political action committees, now major players in American politics, were not as significant when the law passed, Feldman said.
And the idea that political action
committees could fall outside the law altogether could make it obsolete.
“That certainly was not the intent of the law, and it’s a huge loophole,” Keller said.
Senate Majority Leader Peter Wirth, D-Santa Fe, argues that lawmakers have to keep up with changing practices.
“Having worked on campaign finance reform for many years, one of the things I’ve learned is that groups on both sides are always pushing for ways to get around the law,” he said, adding that the Legislature should revisit the 2007 statute.
But even if legislators tighten the law, government agencies will still have to enforce it.
The State Auditor’s Office published a report on the state’s purchasing practices last month and found many agencies are not requiring contractors to submit required documents. Even if agencies collect all the required paperwork, they are not verifying whether it is true, the report said.
The other part of the 2006 and 2007 laws requires, for example, that contractors report political contributions when submitting a bid for government business.
The State Auditor’s Office reviewed 54 procurement files from 2014 and found that 23 did not include campaign contribution disclosure forms. Part of the problem may be that the state agency that created the forms included inaccurate wording for about a decade.
A version of the form drafted by the Department of Finance and Administration in 2007 and available on its website as recently as June 2017 said only contractors bidding on contracts for particular services needed to file the disclosure.
But the law is broader, requiring disclosures for each contract.
Since the audit, the state’s purchasing office has determined that the campaign contribution forms must be collected with every contract.
The Department of Finance and Administration updated its form this month to reflect what the law actually says.
Even when agencies collect the forms, they do not necessarily verify whether the information is correct, according to the state auditor’s review.
The office raised concerns, for example, that the Interstate Stream Commission did not flag AECOM’s donation.
But the Interstate Stream Commission replied that it is not required by law to double-check, which advocates argue is another shortcoming of the statute that leaves it, in Keller’s words, “marginally effective.”