Ending 'pay-to-play' a top issue for GOP

HARRISBURG -- Gov. Ed Rendell's connection to a central figure in a New Mexico "pay-to-play" investigation has prompted some Pennsylvania lawmakers to renew a push for legislation prohibiting campaign contributors from receiving state contracts.

"I believe it'll be one of the top priorities for our caucus," said Senate Majority Whip Jane Orie, R-McCandless. "I think it's imperative we end pay-to-play."

A ban took effect Jan. 1 in Illinois -- the eighth state to enact such a law -- where impeached Gov. Rod Blagojevich is accused of trying to sell the Senate seat vacated by President-elect Barack Obama to the highest bidder. A federal court last month upheld Connecticut's law, approved following a 2004 guilty plea by Gov. John Rowland, who took gratuities from state contractors.

New Mexico Gov. Bill Richardson last week withdrew as Obama's nominee for Commerce secretary amid a federal grand jury's investigation of donations to Richardson's campaign committees by CDR Financial Products, a Beverly Hills firm that won contracts worth $1.5 million to provide advice on state-issued bonds.

THE RENDELL QUESTION

The investigation by the U.S. Attorney's Office in New Mexico is part of a broad look at the municipal bond industry. It has included raids on the offices of bond dealers and brokers in Pennsylvania and California.

David Rubin, CDR's chief executive officer, donated $100,000 to Richardson's campaign committees. He gave $40,000 to Rendell, most of it when Rendell first ran for governor in 2001 and 2002.

The company in 2003 was approved as an adviser to the Pennsylvania Housing Finance Agency, a no-bid contract that eventually would pay CDR nearly $600,000.

The Rendell administration has awarded more than $1 billion in no-bid contracts since 2003, according to state records.

Brian Hudson, the housing agency's executive director, who approved the CDR contract, and Chuck Ardo, the governor's spokesman, said the governor never spoke with Hudson about the decision to hire CDR.

In 2002, Hudson and his then-wife contributed $250 each to Rendell's campaign. The 34-year bureaucrat was promoted to executive director of the agency after Rendell took office in 2003.

Rendell is not accused of wrongdoing, and Rubin has strongly denied engaging in any pay-to-play activities.

'PART OF OUR TEAM'

Rendell knew Rubin "tangentially," Ardo said.

In 2003, when he was appointed to Rendell's transition committee for the Department of Revenue, Rubin issued a news release that included this quote from the governor-elect: "My intention is to recruit the best and brightest professionals to help develop recommendations for my new administration," Rendell said. "We are very pleased to have David Rubin as part of our team."

"The real issue in pay-to-play is the quid pro quo and to identify the specific connection" between money and a contract award, said former U.S. Attorney Patrick Meehan, who successfully prosecuted bribery-related cases in Philadelphia.

Former Philadelphia City Treasurer Corey Kemp was found guilty of fraud and sentenced to 10 years in federal prison for steering bond work to bankers in return for gifts, some of them from Rubin's firm.

CDR provided Kemp co-defendant Ronald A. White with three tickets to the 2003 Super Bowl in San Diego. White, who has since died, brought Kemp to the game.

CDR's contract in Pennsylvania likely "will be scrutinized in the New Mexico investigation," said Meehan, a Republican who is considering a run for governor in 2010.

APPEARANCE OF CORRUPTION

Craig Holman, government affairs lobbyist for Public Citizen, broadly defines "pay-to-play" as an "act of official corruption or the appearance of public corruption."

Even where there is no agreement between contractor and government official, large donations from people who win contracts raise an appearance problem with the public, he said.

Rep. Douglas Reichley, R-Allentown, has sharply criticized Rendell's contract awards.

"In the last six years, the pay-to-play mind-set that prevailed in Philadelphia under Mayor Rendell has migrated to Harrisburg to become the prevailing motto for the award of no-bid contracts worth millions of taxpayer dollars to friends and supporters of Gov. Rendell," he said. Rendell served as mayor of Philadelphia from 1992-1999.

"The governor has strained the legal interpretation of state contract law," Reichley said.

He cited Rendell's decision to reward his former law firm with a $1 million "emergency" contract to draft state Act 44, Pennsylvania's transportation funding law. Reichley said that Rendell "has extended contracts with existing vendors to avoid public bidding procedures, and enriched campaign contributors with lucrative no-bid contingent fee agreements."

Reichley said he will continue to push for legislation that prohibits anyone from receiving a government contract within one year of contributing to the campaign of an officeholder at the state, county or municipal level. Such a bill was introduced last year by Rep. Robert Godshall, R-Montgomery County.

"I think such a step is an important one to restoring public trust in government, but the first step has to be full disclosure right now from the governor, not a spokesman, about his relationship with David Rubin and CDR ... to indicate his level of contact, either formal or informal, not only with Mr. Rubin but also any other state agency on behalf of Mr. Rubin or his lobbyist, Alan Kessler," Reichley said. Kessler, a prominent Philadelphia lawyer, has been a key Rendell fundraiser.

AIDE FIRES BACK

That brought an angry response from Ardo.

"I would challenge Rep. Reichley to offer proof to substantiate his pay-to-play allegations against the governor, or to withdraw them. If the representative knows of wrongdoing, he should inform the proper legal authorities and seek an investigation. Absent that, this appears to be another baseless attack intended solely to impugn the integrity of honorable public servants," Ardo said.

Ardo described news media reports about Rendell's relationship with Rubin in the context of the New Mexico investigation as "guilt by insinuation."

Rendell has raised more than $70 million for his campaign accounts since 2001.

DIFFERENT APPROACHES

Some state laws to curb contributors' influence establish a ceiling on campaign contributions for donors seeking contracts. In New Jersey, it's $300 within 18 months of a contract award. Anything above that amount would disqualify a contractor on contracts worth more than $17,500.

"Banning contributions never works," said Matthew Brouillette, president of the Harrisburg-based Commonwealth Foundation. He said "money will always find its way into politics."

Meehan noted that although the Securities and Exchange Commission prohibits contributions from banks and securities firms to officials with control over municipal bonds, Rubin was not covered because of his status as an "adviser."

Orie, the Senate majority whip, proposes banning all no-bid contracts, a measure that passed the Senate last year. Every contract above $5,000 would be competitively bid. It died in the House, which Democrats control.

Rep. Josh Shapiro, D-Montgomery County, will reintroduce a campaign finance reform bill with an added provision with limits for contractors. It's based on a Philadelphia ordinance.

The best approach, Shapiro said, would be to combine a ban on no-bid contracts with restrictions on what contractors can give.

Ingrid Reed, an analyst with the Eagleton Institute of Politics at Rutgers University, said New Jersey approved its law in 2004 in response to news reports about contractors getting county work after making large campaign donations.

New Jersey state Sen. Loretta Weinberg, D-Bergen County, sponsor of the law, said it was a good first step and the best she could get at the time. It's been firmed up with a series of executive orders by the governor that need to be enacted into law, she said.

"I tell people, banks have safes and people still rob banks," Weinberg said. "There are always loopholes."