Recently, we noted a pay-to-play scandal in Pennsylvania that resulted in multiple arrests. This week, New Jersey’s Attorney General charged seven executives or shareholders of Birdsall Services Group, an engineering firm. The alleged Birdsall scheme illustrates the ease with which pay-to-play violations and campaign finance violations can mix.
Pay-to-play laws typically restrict or prohibit public contractors (or would-be contractors) from making political contributions to those with some authority over contracting decisions. As described in the indictment, the Birdsall scheme allegedly involved a multi-year attempt by the company’s executives and major shareholders to evade pay-to-play restrictions by making contributions under the state’s $300 threshold for detailed reporting of political contributions. By making contributions below the disclosure threshold, the contributors would have avoided having their names or employer listed on state campaign filings. To prevent the awarding of contracts to companies that have made prohibited contributions, companies such as Birdsall are often required to submit certifications that no prohibited political contributions have been made. If a company were to fail to disclose prohibited contributions in order to appear eligible to bid on contracts—as Birdsall is alleged to have done—the lack of name and employer information on campaign finance reports would make it more difficult for regulators to detect the pay-to-play violation.
The indictment alleges that the Birdsall executives also sought to have the company reimburse employees’ contributions. When a contributor is reimbursed for his or contribution, the result is that the true donor—the source of the funds—is someone other than the person making the contribution. This is often referred to as making a contribution “in the name of another” and is prohibited at the federal and state levels. In New Jersey, for example, there is a specific prohibition against corporations reimbursing employees for contributions.
This is one of the more serious pay-to-play cases to have come down the pike, and we will be following developments closely.