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May 1998 – Extortion, Bribery, or Business As Usual?

May 26, 1998

Extortion, Bribery, or Business as Usual?

According to new research by Democracy South, the state and federal Republican Party received at least $35,000 from agribusiness-related donors within days of a meeting in which witnesses say House Speaker Harold Brubaker discussed legislative relief for the hog industry in exchange for its financial support.

The meeting occurred in late August 1996 at the Raleigh offices of the N.C. Republican House Committee and involved at least a dozen representatives of the state’s largest hog and poultry companies and their allies.

Checks of $1,000 to $2,500 delivered that day or soon thereafter came from executives of Murphy Family Farms, Hog Slat Inc., and the House of Raeford, and from the owners of several businesses that sell tractors, diesel trucks, feedmills, lagoon site preparation, and construction services to Murphy Farms and other hog integrators.

Accounts of the August meeting confirm the basic description of Nick Weaver, chairman of Farmers of Fairness, who gave this sworn testimony at a Board of Elections hearing last month: “And toward the close of the meeting, the Speaker was specifically asked by one of the attendees, ‘Do I,’ something to the effect of ‘Do I understand you correctly, sir, to say that if we help you through contributions maintain a majority in the House of Representatives that we won’t have any more regulations in the hog industry?’ And the Speaker’s response was, ‘That is exactly correct. You need to help me out. I am the only game in town.'”

It is against state and federal law for an elected official to seek, or for a donor to give, campaign contributions in exchange for specific legislative action. The federal Hobbs Act makes it a felony to accept donations that are made to gain special favors, even if the favor isn’t given.

Speaker Brubaker has said Weaver’s “statements are false and will not be substantiated.” But some attendees Democracy South contacted agreed with Weaver’s overall account of the August meeting; others say any link between contributions and promised relief is being exaggerated, possibly to advance the political agenda of Farmers for Fairness, which has been waging an aggressive ad campaign against selected House Republican candidates.

What really happened – and what links exist to funds received by Brubaker-connected committees – will be the focus of testimony at the Board of Election hearing that begins tomorrow. The hearing will focus on possible illegal fundraising practices by House Republicans, following charges last month by
Farmers for Fairness that hog regulations passed in 1997 came in retaliation for the industry’s failure to satisfy fundraising goals set by Republicans.

Questions for consideration at the hearings include:

Who initiated discussions of legislative relief in exchange for political donations, and did they constitute an illegal quid-pro-quo deal?

Brubaker’s political advisor, Paul Shumaker, has already testified that he sought $200,000 in contributions from poultry and hog interests in a November 1995 meeting with Wendell Murphy, chairman of Murphy Family Farms, and E. Marvin Johnson, head of the House of Raeford, a major turkey processor. Johnson also says he offered to raise a substantial sum for House Republicans, but both sides now say no firm amount was agreed upon at the meeting, nor was a clear connection made between the money and a commitment for legislative action.

Weaver, the Farmers for Fairness chair, testified that in a November 1997 meeting, he and his colleagues pressed Shumaker with the question, “Well, what will it take to ensure ourselves no additional regulation, no more regulation?” (This meeting occurred soon after a moratorium and other new regulations had passed the General Assembly.) Shumaker’s response, Weaver said, was “We need some funds for support.” Pressed again, the figures given by Shumaker ranged from $1 million to $3 million, which Weaver interpreted to mean “we can’t afford it.”

But Shumaker, who had previously worked for Farmers for Fairness, knew that the group was then spending well over $1 million a year on lobbying and political ads. During his testimony, Shumaker confirmed that he was pressed at the November 1997 meeting to make “a commitment . . . that the House would kill” any further regulation. He said he asked Weaver and his associates “what would be the incentive” to take such action, since it would “create a $2 million political problem for ourselves at least.” Again, both sides say no agreement was reached.

Weaver still believes that Republican leaders passed the moratorium as retaliation for the hog industry not furnishing enough money during the 1996 campaign. In turn, Weaver said he recommended his own retaliation when the fundraising requests from Brubaker and his agents continued. “I advised the members of Farmers of Fairness that I came in contact with not to contribute a dime,” he told the state Board of Elections last month.

A few weeks after the November 1997 meeting, Farmers for Fairness also began airing its ads attacking key Republican House members, beginning with Rep. Cindy Watson.

What was the role of “soft money” in the fundraising strategy of House Republican leaders?

Democracy South estimates that Speaker Brubaker and his associates raised more than $1 million during the 1996 campaign, through at least five different political committees — the N.C. Republican House Committee, the N.C. Republican Party, the Republican National Committee, the Randolph County Republican Party, and Brubaker’s re-election committee.

Much of that money followed a circuitous route, often traveling through two committees, before being sent to a specific candidate or being spent for polling and other services designed to help the Republicans maintain their slim majority in the House. For example, 48% of the $614,000 taken in by the Brubaker-controlled Randolph County Republican Party came from the Republican National Committee or from the Brubaker reelection committee.

Democracy South also tracked over $500,000 in 1995-96 donations by poultry and hog interests, which didn’t always go where Brubaker wanted. For example, on February 1, 1996, the Jim Hunt reelection committee logged in about $40,000 from Wendell Murphy’s relatives and business associates.

In fact, relatively little agribusiness money benefiting House Republicans went directly to Brubaker’s own reelection committee or to the two committees he clearly controlled. Most of it went to the state or federal Republican Party, where it was harder to track who it was intended to benefit, and from there to the Randolph County Republican Party, where it could be disbursed in unlimited amounts to specific candidates.

Indeed, these are the very features that make “soft money” so appealing to political fundraisers:

(1) the lack of contribution or spending limits,
(2) the difficulty in tracking what campaign the money benefits, or even what candidate raised what funds from what source, and
(3) with federal party committees, the added attraction that they can accept unlimited money from corporation accounts, not just from individuals or other committees.

In August 1996, two companies from Randolph County sent $100,000 to the Republican National Committee at Harold Brubaker’s request. The two related companies, Klaussner Furniture and Techimark Inc. are controlled by a foreign owner, Hans Klaussner, a German citizen. Several days later, the Republican National Committee also received between $7,500 and $22,500 in donations related to the August 1996 meeting described above between Brubaker and agribusiness leaders. In the next three week, the federal party sent $118,667 to the Randolph County Republican Party.

In June 1997, Democracy South asked the Board of Elections to investigate this possible “laundering” of federal soft money. Because of North Carolina’s ban against indirect or direct corporate donations to campaigns, it has been illegal for federal committees to return funds made available because of money they receive from companies. Last month’s decision by federal District Court Judge Terrence Boyle makes enforcement of this law difficult at best.

What happened to the missing money — donations sent to committees at Brubaker’s request but not recorded as being received?

Nick Weaver testified last month that J. Louis Maxwell Jr. and H. Gordon Maxwell (his relatives and associates at Goldsboro Milling) each delivered $2,500 checks to Brubaker at his legislative office in early May 1996. Weaver says he attended the meeting along with lobbyist Zeb Alley, who later became a Farmers for Fairness lobbyist. According to Weaver, the checks were made payable to the Republican National Committee at Brubaker’s or his staff’s request.

Months passed and the checks were never cashed, Weaver testified. So at the August 1996 meeting, he and Louis Maxwell asked Brubaker what happened to them and he said he’d look into the matter. About 10 days later, the checks cleared. Weaver told Democracy South that they were deposited in a Virginia bank account, endorsed by the RNC — but, with the help of the Federal Election Commission staff, we have still found no record of the RNC or its affiliates receiving the funds.

E. Marvin Johnson of the House of Raeford says he also made a donation in May 1996 to the Republican National Committee — for $10,000. The check later cleared, he told Democracy South, but we also unable to locate it on any federal disclosure reports.

What happened to these three checks totaling $15,000? Was money moved from one account to another, or deposited in an account not chosen by the donor? These questions are all the more appropriate since Democracy South earlier identified a donor who said she made a $4,000 donation to Brubaker’s reelection committee, but the check was logged in as a contribution to the N.C. Republican House Committee. The donor, Yvonne Tilley, assistant to William Armfield IV of Greensboro, told a reporter that “it’s not possible” that she made her donation to the House Committee.

What other quid-pro-quos or quasi-deals have been made, or quotas set, affecting political fundraising and legislation in North Carolina?

When Brubaker became Speaker of the House in February 1995, he announced that the House would become “the voice of business.” A series of pro-business legislation passed in rapid succession, and Brubaker’s fundraising prowess rapidly grew. In fact, soon after the Republican victory, in the month of January 1995 alone, Brubaker’s new NC Republican House Committee received $106,000.

A large share of that January money came from Charlotte-area donors with real estate, construction and other development interests. And despite the Republican anti-tax ideology, Brubaker soon became a fan of a multi-million-dollar bond for speeding up highway construction promoted by these same donors. Brubaker appointed the son of his leading Charlotte fundraiser, Charles Shelton, to the Board of Transportation and put another Shelton relative on the Environmental Management Commission.

Earlier reports by Democracy South have shown how Brubaker received bundles of donations from such special interests as the soft-drink bottlers and physicians, whose legislative agenda he has helped in the General Assembly. Special interests continue to shower his political committees with donations, and rumors of quotas or fundraising goals abound inside the legislative halls.

A review of the Brubaker reelection committee for 1998 shows home builders and construction interests giving about $20,000 on one day in January, plus another $6,000 in February; owners of long-term care facilities kicked in $11,350 on one day in March; physicians also donated more than $8,000 in March.

One looks in vain for significant contributions from ordinary North Carolinians without a vested interest in particular legislation — people who might insist that the General Assembly be guided by the principle of “one person, one vote” rather than the slogan, “He who pays the piper calls the tune.”