The Loophole Allowing Corporations to Finance Gubernatorial Elections

Tyler Rauh – In most states, corporations are prohibited from or limited in direct donations to gubernatorial candidates. These rules, however, have created loopholes where an interested third-party acts as a strawman to channel contributions to a desired candidate. In recent years, various corporations have funneled money through the Democratic Governors Association (DGA) or the Republican Governors Association (RGA) in efforts to support the gubernatorial candidates they believe will help their cause.

Contributions from corporations to the DGA or RGA must be disclosed, but the trail runs cold after the money is under an association’s control. When a candidate receives a donation from the DGA or RGA, it is labeled as coming from the association, not any corporation. The lack of disclosure within the DGA and RGA creates a cloud of uncertainty and provides a ready excuse: both associations can claim every donation is independent of any original donor influence. But when the available data is analyzed, troubling patterns emerge.

In 2014, Florida Power and Light Co. (FPL) was interested in building a pipeline and increasing electricity rates; both would have to be approved by governor-appointed regulators. That year, FPL donated a total of $1.6 million in two installments to the RGA, which supported Rick Scott in his reelection bid for governor.[1] The RGA then donated $1.5 million to a political group in support of Rick Scott a mere five days after the second installment. After Scott secured his re-election, government officials approved the pipeline and rate increases. Both the RGA and representatives of the Scott Administration denied the donations had any influence on the approvals.

During the same election cycle, Las Vegas legend and casino industrialist Steve Wynn decided that Boston Harbor would be a prime location for a gleaming, new gambling mecca. An anti-gambling referendum, however, posed a significant hurdle and Wynn Resorts Ltd. spent millions in an attempt to defeat it. On October 1, 2014, with the Massachusetts gubernatorial race[2] in full swing, Wynn Resorts Ltd. donated $2 million to the RGA. On that day, the RGA donated $1.1 million to Republican candidate, and eventual governor, Charlie Baker. It then gifted an additional $1.1 million a week later to Charlie Baker. Representatives for Wynn note that there is no evidence to support any direct contribution from Wynn Resorts Ltd. to Mr. Baker. Wynn himself claimed he was ignorant as to who was running for governor on the Massachusetts’ Republican ballot. Regardless, the anti-gambling referendum and other challenges were eventually dropped after Governor Baker publicly supported the 29-story multibillion dollar casino resort, which is slated to open in 2019. Jim Conroy, a senior advisor for Baker, states “the governor has always and will continue to religiously adhere to all applicable campaign finance rules.”

Conroy’s statement may be true, but the campaign finance rules he refers to are counterproductive. Justice Kennedy remarks that “disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Citizens United v. FEC, 558 U.S. 310, 371 (2010). If the limitations imposed upon corporations allow loopholes that result in no disclosure and muddled transparency, then the purpose of the rules is undermined by corporations donating to future state governors through the RGA or DGA. The rules must be removed so as to promote full disclosure[3] or strengthened to enforce a de facto limit on corporations’ contributions to gubernatorial elections. Otherwise, the citizens and shareholders are left guessing if the integrity of their elections is compromised.

[1] Florida is one of twenty-five states to have strict limitations on gubernatorial contributions from corporations. Its limit is $3,000.

[2] Massachusetts is one of nineteen states to entirely prohibit corporations from donating to governor candidates.

[3] Six states–Alabama, Missouri, Nebraska, Oregon, Utah, and Virginia–have no limitations.

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