The "Go-To Guys": Why Is Influence Peddling So Hard to Root Out?
There's a riveting corruption trial underway in Philadelphia, in which several members of Mayor John Street's administration are accused of financial misdeeds. (The mayor himself is not charged with any crimes.) The amounts involved aren't particularly large, but thanks to evidence introduced at the trial, the case has given us some new insights into how penny-ante corruption works in city halls.
The trial revolves around a lawyer named Ronald White who died last year. White was, unfortunately, a familiar type in big-city government circles: a political insider who lived off his connections. As the Wall Street Journal explained in a recent article, White (who held no pubic office) was allowed by the former city finance director to have a say in who was given a shot at municipal bond deals and even allowed access to confidential city documents. Why? Because "Ron was a friend of the administration, and it was understood that if he was proposing someone who had the qualifications, that they should be included," the finance director testified in court. (Not surprisingly, White got to be a friend of the administration by being one of the mayor's top fund-raisers.)
As one investment banker who did business with White said after the scandal broke, in big cities "99.9 percent of the time, there is a go-to guy" like Ron White at city hall. It wasn't supposed to be this way. In the mid-1990s, the municipal securities industry tried cleaning its own house, by forbidding bond underwriters from making campaign contributions to elected officials who could influence bond work. Later, the industry extended its ban on contributions to consultants (presumably including people like Ronald White).
But it hasn't worked, and as the Journal noted, "traditions of cronyism and petty influence are alive and well" in city halls. Why? First, the influence peddlers have gotten smarter. White found lots of ways around the ban on consultants' contributions. (In one instance, a client cut his firm in on legal work involving another city, so it wouldn't look like he was being paid for his Philadelphia connections — which, of course, he was.) The larger reason: The opportunities for influence peddling are so vast. As the Journal pointed out, 80 percent of the $400 billion in municipal bonds issued each year involve negotiated deals with underwriters, as opposed to simply accepting the lowest bidder. And it's in these "negotiations" that middlemen like Ronald White thrive. Posted 4/1/2005
Postscript: We wish we could tell you that influence peddling has declined in Philadelphia and elsewhere since this was written. It hasn't.
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