'Pay-play' ban offers Democrats loophole
Party lawyer outlines a new route for cash
Thursday, March 24, 2005
BY JOSH MARGOLIN AND JEFF WHELAN, Star-Ledger Staff

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Acting Gov. Richard Codey signed what he calls the strongest "pay-to-play" ban in the nation this week, but the Democratic State Committee is circulating a blueprint for getting around it.

Angelo Genova, who is the party's top lawyer and who helped write the law, also drafted a memo explaining how state contractors can still make hefty campaign contributions even though the new statute is supposed to curb the practice.

The Feb. 1 document was distributed among top Democratic fund-raisers before the party's annual fund-raising gala, which was held Tuesday just hours after Codey signed the pay-to-play law.

The new law bars anyone who contributes more than $300 to gubernatorial candidates or to state or county political parties from winning state contracts worth more than $17,500. It is intended to prevent what critics call a form of legalized bribery: the exchange of campaign cash for state contracts.

But Genova's tip sheet advises state contractors they can still contribute up to $10,000 per year to the Democratic State Committee's federal campaign fund.

Genova yesterday pointed to language in the law that defines campaign contributions as donations "reportable by the recipient under 'The New Jersey Campaign Contributions and Expenditures Reporting Act,'" which is enforced by the state Election Law Enforcement Commission.

The party's federal account, however, falls under the jurisdiction of the Federal Election Commission. The party typically uses that fund for presidential and congressional campaigns, but there is nothing to prevent it from spending the money on this year's races for governor and Assembly.

Contributions for this week's gala, which some state contractors attended, went to both accounts even though there are no federal elections this year.

The tip sheet is addressed to state contractors, with headings such as "If you are covered by EO 134" and "If you are a partner within a firm that is covered by EO 134" -- referring to the executive order that Codey has now enacted into law.

Democratic State Chairwoman Bonnie Watson Coleman said there was nothing wrong with the memo, which she said is merely designed to provide advice to individuals or companies that want to support the party.

"Proactively, we've talked to people that have supported us in the past and have expressed an interest in supporting us in the future," said Coleman, an assemblywoman from Mercer County. "The federal account, as far as I know, is outside the jurisdiction of the EO."

Officials at the Treasury Department, which will enforce the ban, see things differently. Tom Vincz, an agency spokesman, said "we don't recognize a distinction" between the state party's federal and state accounts and that "any change to that would require a legal review."

Codey, however, appeared to side with the state party, which he controls.

"How do you penalize somebody where federal law governs federal elections? We govern state elections. We can't prohibit anybody from donating to federal accounts," Codey said. "I wouldn't call it a loophole off the top of my head. I'd have to speak to Angelo about it."

GOP State Chairman Tom Wilson said his party is not seeking state contractor cash and believes the law prevents Democrats from doing so as well.

"You cannot make a contribution to the state party, period, no matter what account it is. That is our interpretation," he said. "Federal money can be used on state activities. So this wouldn't be a loophole, it would be a glaring, giant, gaping, intentional violation of the spirit of the law."

Wilson noted that the memo was written weeks before Codey signed the measure, giving Democrats plenty of time to close any loophole. During that time, Codey conditionally vetoed the measure to make other changes.

Harry Pozycki, chairman of Common Cause New Jersey, which fought for the law, said state contractors should be leery of risking their business "on some sort of hair-splitting interpretation."

The memo also offers reminders of other exceptions to the pay-to-play law. For example, it advises contractors, "You may continue to make and/or solicit non-reportable contributions," meaning those of $300 or less. And it reminds firms that the law does not apply to partners who own or control less than 10 percent of the firm.

The law that Codey signed made permanent an executive order signed by his predecessor, Gov. James E. McGreevey, last September. At the time, McGreevey was in his waning days in office after resigning in scandal, and instead of using his staff to draft the law, he turned to Genova, the Democratic Party's top campaign finance lawyer.

Last summer, Genova's firm, Genova, Burns & Vernoia, began marketing a corporate political activity law practice designed to help corporations and individuals hew to both state and federal regulations on campaign donations. The new memo states it is the "work product" of that unit, the "Corporate Political Activity Group."

Genova said yesterday there is "nothing untoward" about his giving such advice. "It's no different than people that have served in the Legislature and help draft laws that advise clients of the application of those laws," he said.

Codey said of Genova's role in writing the law and then writing the memo: "I guess he's the most qualified, that's for sure. He got it on the front end and the back end."