WASHINGTON -- Supreme Court Justice Anthony Kennedy argued that legalizing unlimited election giving to groups such as super PACs would have no corrupting effect on democracy because PACs are independent from the candidates. Luckily for Kennedy, he was not among those present at a 2013 meeting involving Harry Reid and private equity CEO David Bonderman.
As Senate majority leader, Reid directly solicited a contribution from Bonderman, sources present at the May 1, 2013, meeting at the Milken Institute said. The private equity giant then gave more than $1 million to a super PAC connected to Reid, and Reid later moved to insert two pieces of language into the 2015 end-of-year omnibus budget bill that would be a boon to Bonderman.
One provision would have gutted a Depression-era financial law to help Bonderman’s TPG Capital muscle out public pensions and other bondholders in a battle over the potential bankruptcy of the Las Vegas casino company Caesars. That measure wound up getting pulled at the last minute, but Reid was able to insert the other provision beneficial to Caesars. The fight over legislation related to Caesars is deadly serious to TPG, whose fate is closely tied to the entertainment company. TPG, along with fellow private equity firm Apollo, put up $6 billion in cash to buy Caesars in 2008, adding on another $23 billion in debt to complete the deal.
Reid, with or without contributions, has fought for the casino industry, a leading job creator in Nevada, his entire career. According to a source who was present at the Reid-Bonderman meeting, Bonderman gave Reid a rundown of the difficulties Caesars was having that led to a controversial restructuring and bankruptcy. Caesars opponents have challenged the bankruptcy, suggesting the company improperly moved assets. TPG has been hoping a legislative fix would bail them out, though Bonderman did not specifically ask for any legislation during the meeting.
After Bonderman's presentation, Reid said Democrats were in desperate straits and might lose the chamber in 2014, and then asked Bonderman for a contribution. Often, after a lawmaker or candidate asks for the legal limit, a fundraiser connected with the super PAC will follow up. Bonderman got the message and he and his wife, Laurie Michaels, came through over the course of 2014. The couple made seven contributions to Reid’s Senate Majority PAC in 2014 for a total of $1,025,000, and threw in another $150,000 through a firm called Bonderman Ops, LLC. The first two contributions, totaling $340,000, came from Michaels, before Bonderman began giving that cycle under his own name.
The couple, whose wealth is estimated at $2.6 billion, also donated $455,000 to Senate Majority PAC in the 2012 elections and has given hundreds of thousands to super PACs run by EMILY’s List and the League of Conservation Voters. This was, however, their single biggest investment to one group in an election cycle to support Democrats.
Robert Glennon, TPG's outside lobbyist, was in the meeting, and said in a statement that it was untrue that Bonderman discussed Caesars in the same meeting as the ask for money. "The meeting described by the anonymous sources did not occur and I have no knowledge or recollection of any follow up meetings," he said in a statement. "David Bonderman donating to a political campaign or PAC is not new. He is a significant contributor to political causes and has been for well over 20 years."
"The story reported by the Huffington Post is a total fabrication and patently false," a TPG spokesman said after the initial publication of this story. "The meeting described never occurred. The legislation described was developed by other companies and TPG had absolutely no role. It's clear the Huffington Post was deceived by their sources and failed to accurately report this story."
A source close to Bonderman claimed that the private equity mogul did not push for the provision that Reid failed to get in. "David Bonderman and TPG had no knowledge of the legislation you are referring to in your reporting," the source said.
"This is such an extreme stretch between two unrelated events that the story risks pulling a muscle," a spokesman for Reid said.
The TPG-related proposal ran into opposition from Democrats concerned about preserving an important law safeguarding less powerful investors. Republicans were willing to adopt the proposal, but only in exchange for an equally poisonous provision reversing the Labor Department’s recent fiduciary rule.
But Reid’s solicitation of money from the billionaire Bonderman presents another example of the how the unlimited contributions unleashed by the Supreme Court’s 2010 Citizens United have become intimately tied to the legislative process. The court’s decision allowed corporations and unions to spend unlimited sums on elections as long as they remained independent from the candidates and parties they support.
The court’s rationale for allowing unlimited contributions to independent groups was that spending independent of a candidate could not corrupt that elected official. Kennedy famously wrote that independent spending funded by unlimited contributions, even from corporations, “do not give rise to corruption or the appearance of corruption.” The ensuing flood of unlimited independent spending, however, has been anything but independent.
Reid soliciting money from Bonderman is an example, among numerous others, that shows how closely connected the major unlimited money groups are to party leadership or individual candidates. In turn, those groups are often run by or connected to corporate lobbyists working to advance client interests in Washington.
The Federal Election Commission has set limits on how close elected officials can get to the unlimited money groups connected to them. Reid aides say the Nevada senator was briefed early and repeatedly by attorney Marc Elias, who advises never to ask for more than $5,000 so that there is no confusion around the legal limit. A second source, who was also present at the meeting, said he "can absolutely guarantee" that "Harry Reid did not ask for anything other than $5,000."
Reid’s ability to raise money for these groups was established after Elias asked the FEC for an opinion on behalf of both Senate Majority PAC and House Majority PAC, a super PAC connected to House Democratic leadership. The request pressed the FEC on whether officials or candidates could directly solicit unlimited contributions. The FEC balked at this idea, but allowed that officials could appear at fundraising events and ask for up to $5,400 -- the highest amount a candidate can receive from one donor for their campaign.
In November, the FEC clarified its rules on whether a group could consider a meeting on behalf of a super PAC between a single official or candidate and a single donor a fundraising event. By a 4-2 vote, the commission decided that a super PAC fundraising event could involve only two people -- the official and the donor.
Bonderman isn’t the only interest connected to Caesars that has put money behind Democratic super PACs.
Caesars made corporate contributions of $150,000 to Senate Majority PAC in 2012 and another $50,000 contribution to House Majority PAC in 2014. Its parent company, Harrah’s, donated $75,000 to Patriot Majority PAC in 2010 when the super PAC supported Reid’s final reelection campaign.
Reid ultimately backed away from the effort to overhaul the Trust Indenture Act, trading the measure away late in the negotiations over the omnibus bill. But Caesars didn't come away from the process empty-handed. Under its restructuring plans, part of the Caesars empire is set to be converted into a Real Estate Investment Trust -- a special legal entity that received favorable tax treatment compared to other corporate structures. The omnibus bill was set to wipe out those tax benefits, but Reid secured a measure that would allow Caesars to continue to receive them.
Clarification: This article has been updated to better describe how far along in the process Reid's proposed additions to the omnibus made it. The article has been further updated to include statements from Reid's spokesman and a TPG spokesman.