By Mattathias Schwartz, The Intercept, Aug. 6 2016
More than 100 Americans are rich enough to buy the presidential election outright
Two billion dollars, the estimated cost of this year’s presidential election, is big money, but it is not huge money. Two billion is one-tenth of NASA’s annual budget, one-twentieth of the Harvard endowment, one-thirtieth of the personal wealth of Warren Buffett. Buffett is number two on the 2015 Forbes list of 106 Americans who hold personal fortunes of $5 billion or more, the Club of 106. These billionaires are rich enough to pay for the campaigns of both Hillary Clinton and Donald Trump and still have $3 billion left over.
A lot of the money in Club 106 is family money. The Club includes two Kochs, four Waltons, three Marses, two Newhouses, and three Ziffs. Donald Trump was also born into big money. With a supposed net worth of $4.5 billion, he is brushing up against the velvet rope outside of Club 106. The Clintons, both born to families with ordinary incomes, are now worth around $110 million, which puts them way off from Club 106 and pretty far from you and me as well. In the political off-season, the Clintons have borrowed private jets from friends and relied on book advances and speaking fees to maintain two residences, to summer in East Hampton, and reportedly to help their daughter and son-in-law purchase a $10 million Manhattan apartment. The Obamas will soon be devising their own approach to making their way in a billionaire’s world with a mere $20 million.
At least four of the members of Club 106 (Buffett, the Kochs, Bloomberg) have openly voiced their thoughts on who should be president. Five members (Soros, Simons, Cohen, Ellison, Bloomberg) are among the top 25 donors to the outside groups that have poured tens of millions of dollars into the campaign. Seven members (Bezos, Zuckerberg, Page, Brin, Murdoch, the Newhouses, Bloomberg) own large media and internet companies — Amazon, the Washington Post, Facebook, Google, Fox News, the New York Post, the Wall Street Journal, Condé Nast, Bloomberg — with the power to shape public opinion. (By way of disclosure, an eighth member, Pierre Omidyar, founded The Intercept’s parent company, First Look Media.)
For the Club of 106, elections are a game they can easily afford to play. One vehicle of choice is the Super PAC. In the 2012 election cycle, the top 100 Super PAC donors accounted for 3.7 per cent of the donor population but gave 80 percent per cent of the money, a structure that roughly mirrors the makeup of U.S. society as a whole, where one per cent of the population holds half of the total wealth. The ratio will likely tilt even further toward the Club of 106 during the 2016 cycle, thanks to two recent court decisions — McCutcheon and Citizens United — that loosened limits on individual donors and opened the door for Super PACs to raise and spend unlimited amounts of money.
Trump, borrowing from the rhetoric of Clinton’s former rival, Sen. Bernie Sanders, likes to say that the electoral system is “rigged” by big money, and that he, a billionaire, is the only candidate wealthy enough to transcend it. “I’m self-funding,” he said at one point, which isn’t exactly true. “No one owns me.”
It is easy to lose this Trump brag among his many other provocative statements. Trump has, for example, called climate change “bullshit” and “a hoax invented by the Chinese”. He has described his anti-ISIS strategy as “knock the hell out of the oil,” although, as he told the editorial board of the Washington Post, “I would rather not do it with our troops.”
Here is Trump in a primary debate, explaining the basics of campaign finance:
When they [politicians] call, I give. … When I need something, two years later, three years later, I call them. And they are there for me. That’s a broken system. … With Hillary Clinton, I said ‘be at my wedding’ and she came to my wedding. Do you know why? She had no choice. Because I gave.
Here is Trump anointing himself the lion of campaign finance reform at the Republican convention in Cleveland:
Big business, elite media and major donors are lining up behind the campaign of my opponent because they know she will keep our rigged system in place. … She is their puppet, and they pull the strings … my message is that things have to change.
Trump is laying it on thick, but he is essentially right: The system is rigged. The Democrats are corrupt. So are the Republicans. Jane Mayer’s exposé of the Koch Brothers, Dark Money, describes exactly how pools of private money shape policy on the Republican side. A New Republic story on the fundraising prowess of Tim Kaine, Clinton’s vice presidential pick, shows how deep donor influence runs in the Democratic Party’s current leadership. Judging by their track records and public statements, neither Clinton nor Trump is up to the task of breaking the hold of money over U.S. politics, which means that anyone looking to make a White House run in 2020 or 2024 had better make nice with the Club of 106.
The members of Club 106 are not like you and me, but neither are they a monolith. Some ski at Aspen, others at Davos. Some are pro-choice, others are pro-life. Some are concerned about a potential 12-degree increase in the surface temperature of the planet by the year 2100. Some are not. There are, of course, two monoliths of wealth and power: Democrat and Republican. There have been years — 1968, arguably 2004 — when the ideological distinctions between the two have been as fuzzy as the difference between Pepsi and Coke. Were Jeb Bush or John Kasich the Republican nominee, 2016 might have been one of those years.
But Donald Trump won. He burned the traditional mores of his party to the ground, and filled the Republican platform with his field-tested blend of anti-Muslim and anti-immigrant xenophobia, “law and order” fear-mongering at home, racism, and a confusing posture of swagger and isolationism overseas. This year’s Republican platform, now under Trump’s sway, is wildly divergent from the Democratic one.
But Trump does have one thing going for him — his big talk about sticking it to the special interests and the billionaires of Club 106. Would he? It’s hard to say. Trump’s day-to-day opinions seem to bubble up from some internal Magic 8 Ball. “I love the idea of campaign finance reform,” he said last year. There is no plan for reform on his campaign website, just two 50-second rants about “special interests” and “the establishment.”
When a small number of donors wield such disproportionate influence over the outcomes of elections, any politician who cannot finance his or her own campaign is obligated to put to the interests of the wealthy few above the majority of the U.S. electorate. The electorate is waking up to this, and they are angry. Trump is, in part, the embodiment of that anger. Trump’s pitch, “I will be your voice,” is disingenuous but savvy. It tunes in the frustrations of millions for whom eight years of enlightened Democratic rule have done little. Real hourly wages have remained flat, as they have for decades. Despite gains in output, productivity, and CEO pay, wage growth has been especially slow for lower-level workers, failing to keep pace with the rising costs of education, health care, and housing. These are the conditions that enabled Trump’s rise. The next demagogue to take advantage of them will likely be a more convincing and competent one. Unless we find a way to curb the power of the Club of 106, we may soon wind up with the Club of One.
Of course, Hillary Clinton has a sensible and detailed plan for campaign finance reform. It includes overturning the Citizens United decision that set loose the Super PACs, matching public funds for small donors, and an end to “secret unaccountable money in politics.”
But as heartening as Clinton’s proposals sound, they are belied by her actions, particularly the current lack of transparency around donors to the Clintons’ family foundation.
The basic business model of a political convention seems to be rooms full of rich people, organized into various tiers, snacking and drinking and talking about what is to be done for the common good. After Bill Clinton left office, he replicated this model in the private sector with what is now the Bill, Hillary and Chelsea Clinton Foundation, a non-profit based in Harlem. Founded in 2001, the organization did not disclose the identities of its donors until 2009, under pressure from the incoming Obama administration, ahead of Hillary Clinton’s confirmation as secretary of state. It turned out that a lot of the $2 billion received by the foundation since 2001 came from foreign governments.
As of this summer, the Clinton Foundation has received more than $10 million dollars each from the governments of Australia, Norway, and Saudi Arabia. More than $5 million each came from Kuwait and the Netherlands. More than $1 million each came from Morocco and the Sultan of Oman. Most of the money went to good causes — cataract operations in Peru, carbon-offsetting trees in Malawi, a failed-but-well-intentioned [sic] effort to rebuild Haiti after the devastating 2010 earthquake. The foundation has helped rural farmers bring their crops to market, distributed HIV/AIDS medicine, and given rural villagers access to clean water. Each year, the foundation holds a conference to celebrate these and other accomplishments, which reportedly costs $20,000 and up to attend. Charity Navigator, a watchdog organization that evaluates nonprofits, offered “neither a condemnation nor an endorsement” of the Clinton Foundation due to its “atypical business model.”
Few can claim to understand the interplay of money, influence, ego, and genuine good works within the Clinton Foundation. The New Republic’s 2013 profile of Doug Band, who got his start as Bill Clinton’s White House valet, and used his work with the foundation to launch Teneo, his own consulting company, is one place to start. The writer George Saunders was impressed by the foundation’s good works in 2007. Todd Purdum, who covered the Clinton White House for The New York Times, was less impressed. A memo responding to Purdum’s Vanity Fair article, circulated by one of Bill Clinton’s aides, criticized the magazine’s “loose relationship with the facts” and claimed that Clinton “has helped save the lives of more than 1,300,000 people in his post-presidency.”
As far as this election is concerned, the urgent question is not what the Clinton Foundation does but where its money comes from. If one takes Hillary Clinton at her word about seeking an end to “secret, unaccountable money in politics,” knowing who has given how much to the Clinton Foundation would be a step in the right direction. The foundation deserves some credit for voluntarily disclosing its foreign donors, despite having done so later than one might have hoped.
Last year, as Hillary Clinton prepared for her presidential run, the Clinton Foundation announced a new policy. Going forward, it would only accept donations from six governments: Australia, Canada, Germany, the Netherlands, Norway, and the United Kingdom. Again, this new constraint represents incremental progress. This is presumably part of the foundation’s “commitment to honesty, transparency, and accountability,” which is how one of the foundation’s vice presidents described the policy shift.
Then there are the donors who are still anonymous. Frank Giustra, a Canadian billionaire with interests in mining and filmmaking, gave $100 million to establish the Clinton Giustra Enterprise Partnership. CGEP is technically a registered Canadian charity. It gives money to a sister organization with the same name that is part the broader Clinton foundation. The purpose of having two organizations with the same name, according to CGEP’s website, is so “Giustra and other Canadian residents could receive a charitable tax credit” for their donations.
Giustra and Clinton are close enough for Giustra to have “co-produced” the former president’s 60th birthday. “All my chips, almost, are on Bill Clinton,” Giustra told the New Yorker in 2006. “He can do things and ask for things that no one else can.” In a 2008 letter to the Wall Street Journal, Giustra called himself as “a private Canadian citizen with no interest in U.S. politics.” All the same, he seems to have traded on Bill Clinton’s star power to obtain a 2005 government concession to mine uranium in Kazakhstan. The New York Times scolded Bill Clinton for “hand[ing] the Kazakh president a propaganda coup … undercutting American foreign policy and criticism of Kazakhstan’s poor human rights record by, among others, his wife, then a senator.”
The Clinton Giustra Enterprise Partnership received at least $25 million in donations for its initiatives; Giustra has given at least $25 million more to the Clinton Foundation through a second vehicle. Unlike the Clinton Foundation and the Clinton Global Initiative, the Clinton Giustra Enterprise Partnership has been less than forthright about sharing the names of its donors with the public. Last year, Giustra posted a letter stating that his partnership does not accept money from foreign governments. The names of 30 of the partnership’s major donors, each of whom has given $100,000 or more, many of them mining companies, are posted online. According to CGEP’s website, this group of 30 constitutes a “majority” of the charity’s $100,000-plus donors. The identities of the remaining $100,000-plus donors are unknown. Also posted on CGEP’s website are two legal opinions explaining why, due to the privacy laws of Canada and British Columbia, the names of all other donors must remain secret. (There are more than 1,000 in all, most of them apparently under $100,000.) “We will not share or publicly disclose our donors’ information unless we received prior written consent,” Giustra wrote in the letter.
That is where things stand today. The voters who must decide one way or the other on Hillary Clinton in November, and whether to trust her promise to get rid of “secret unaccountable money in politics,” will do so without a complete accounting of where the money in her own family foundation came from. Why? Because of the privacy laws of Canada and British Columbia.
Unless the Clinton Foundation decides to revise its policies between now and the end of the year, the U.S. could wind up with a sitting president whose active family foundation, run in part by her daughter, will be receiving anonymous non-governmental donations through its Canadian partner as well as donations from six foreign governments. All six governments are U.S. allies, but the interests of allies are not always in perfect alignment. For example, the U.S. may find itself negotiating terms for the lease of its base on the island of Diego Garcia, a British possession in the Indian Ocean. It may be called upon by Germany or Australia to chip in for the costs of housing asylum seekers. It may have petroleum interests that clash with those of the Norwegian national oil company, dividends from which go into the largest sovereign wealth fund in the world, worth nearly $1 trillion. If one of these allies were to make a multimillion-dollar donation to the Clinton Foundation in the midst of a negotiation with the United States, how would President Hillary Clinton ensure that it had no impact on the outcome, if not through her own behavior, then through the perceptions of her 15 agency heads and 2 million subordinates throughout the executive branch?
If Hillary Clinton were running against anyone but Donald Trump, this might be a question that the Democrats would have already answered.
In June, Bill Clinton hinted that the foundation might step up its efforts around transparency, though not until after the election. “You have to be careful to avoid actual potential conflicts,” he said at a gathering of the Clinton Global Initiative in Atlanta. “I don’t believe in counting your chickens before they hatch. Let’s see how the election unfolds. There will clearly be some changes in what the Clinton Foundation does and how we do it, and we’ll just have to cross that bridge when we come to it.”
It remains unclear what those changes might be, or whether voters will be made aware of them before the election.
Last week, I spoke by phone with Craig Minassian, chief spokesperson for the Clinton Foundation. He referred me back to Bill Clinton’s June statements as the most current information on these questions. By email, CGEP Canada’s media office said they were unable to provide any donor information beyond what had already been published on its website.
In 2008, President Obama instituted a new rule for the Democratic Party: lobbyists and corporations would no longer be allowed to contribute money to pay for the party’s convention. At a $40-a-head convention-week fundraiser for 21st Century Democrats, I ran into Martin O’Malley, the former governor of Maryland who made a brief run for president against Hillary Clinton and Bernie Sanders. O’Malley, the former chair of the Democratic Governors Association, suggested that the 2008 rule change was partly responsible for the electoral drubbing that the Democrats received at the hands of the Republicans over the next eight years, which, he said, “crippled the full potential of the president’s administration.”
Between 2008 and 2015, the Democrats lost 10 governors and 16 statehouses. On Capitol Hill, they lost five seats in the Senate and 45 seats in Congress, ceding control of both chambers to the Republicans. O’Malley, who described his position on campaign finance reform as “agnostic,” likened the competition with the other party to an arms race. “It’s hard to unilaterally disarm,” he said.
Obama’s rule was repealed in time for 2016, a change that Bloomberg Politics attributed to Clinton’s campaign. And so Ed Rendell, former mayor of Philadelphia, former governor of Pennsylvania, former chair of the Democratic National Committee, set about raising the roughly $60 million it took to put the Philadelphia convention on. He did it through PHL 2016, a corporation with access to a $15 million line of credit from a public authority to cover any shortfalls. The identities of the donors who gave Rendell the $60 million are not yet known. PHL 2016 has been fighting to keep the sources of its money a secret for as long as possible. A chunk of the $60 million must have come from Facebook, judging by the vastness of the Facebook lounge on the ground floor, with its miniature Oval Office photo booth, good for a tongue-in-cheek Instagram, although one does wonder who the joke is on.
The price of access to the Victory Lounge, a well-guarded chamber high above the Democrats’ convention floor, is often greater than the cost of the average American wedding. The food that I ate was a cut above average American wedding food. Uniformed waiters circulated among curved banquettes and glass-walled rooms with platters of hors d’oeuvres: seared tuna on rice crackers, roast beef on toast, potato-stuffed pierogies in keeping with the menu’s Philadelphia theme. The dinner hour was approaching. Tall men in their dark suits and gingham shirts were gathering in clusters along the bar. Their exchanges of business cards and trade knowledge made it hard to hear what was happening on the other side of the glass, where, down on the star-encircled stage, Gov. Andrew Cuomo of New York was saying something about the minimum wage. On this side, the caterers were setting up their stations: steamed asparagus, roast split potatoes, tortellini alfredo, and an impressive “South Philly-style” porchetta, sliced by the inch off an umber-colored hock.
This year’s conventions embodied the twin American cultures of money and politics, with money flowing one way, and favors and credentials flowing the other. The preferred term, used by Rendell, the Democrats’ convention chair, and other Philadelphia-bred politicians, is “access,” access to special rooms and special people, more than what’s available to an ordinary delegate but less than an explicit quid pro quo. At the extreme end, access can become what is known in Philadelphia as “pay-for-play,” which has led to the conviction of several Philadelphia politicians over the past two decades, most recently former Congressman Chaka Fattah. On Friday, the FBI searched the Philadelphia home and union headquarters of John “Johnny Doc” Dougherty, another Philadelphia kingmaker.
What do donors get for their money? It is not always a specific piece of legislation. Sometimes it is just a sympathetic ear, a phone call returned, or even just an envelope of name tags that grant access to cushy VIP gatherings walled off from the party’s rank-and-file. In Cleveland, the Republicans wouldn’t let me off the elevator to walk around the levels of the Quicken Loans Arena where these parties were happening. I knew only the names of the rooms: the Founders Room, the 45 Club, the Grand Old Party Suite. In Philadelphia, with the right credentials hanging from my neck, I saw the inside.
Earlier that week, in the lobby of the Loews Philadelphia Hotel, I ran my qualms about the Clinton Foundation by a communications consultant affiliated with the Clinton campaign. “Is it illegal?” he asked. I said that wasn’t my point. I made it clear that I didn’t plan to cast my vote for Trump, and that I didn’t plan to stay home on Election Day. “Good,” he said. “That’s all we want.”
The Victory Lounge was more exclusive than the Loews bar. I did not run across any members of Club 106, just some mid-to-upper echelon lackeys, outer-perimeter friends of the Clintons, and friends of the Pennsylvania Democratic Party. I met a former senior Hill staffer turned lobbyist, and a Western delegate who held a key post on the convention’s credentials committee. There was a cluster of young suits in their early 20s who resembled extras from “American Psycho.” The painter Chuck Close rolled through towards the end of the evening, as did Rendell himself.
The wealthy ones were Clinton wealthy, not Trump wealthy. After all, the Victory Lounge was just one of several “VIP lounges” included as part of the Democrats’ donor “convention packages.” The highest level, named “Rittenhouse Square” for a tony Philadelphia neighborhood, required donors to raise at least $1.2 million or give $467,600 to the party over 18 months.
One self-described friend of the Clintons, who had brought along his spouse and children to the Victory Lounge, was gracious enough to engage me in a vigorous 40-minute debate about the propriety of the Clinton Foundation. He said the foundation’s work was good work. “What, poor people should give them the money?” he said. “I wish they would. Rich people are the ones who have got the money.” By this time I had finished my free glass of Johnnie Walker Black. My interlocutor refilled it with a slug from his own Budweiser, one of the convention’s sponsors. He compared my questions to those of Sean Hannity and other conservative journalists who mercilessly went after the Clintons in the 1990s, accusing them of everything short of the Kennedy assassination. I said that I agreed with him in part — the airtime given to such conspiracy theories was an abuse of the First Amendment — but the questions about the foundation were worth asking. He said that he didn’t care where the foundation’s money came from, so long as it went to a worthy cause. If Vladimir Putin wanted to give the Clinton Foundation money during a Hillary Clinton presidency, he said, then Putin ought to be allowed to do so. On this point, we agreed to disagree.
Hillary Clinton appeared onstage in her white suit. She was moving toward the circle of stars. I could have walked through a glass door out to the stadium seats, just above the press boxes, where her speech could be heard more clearly. But I did not have the required green wristband. Clinton said a line about putting Main Street before Wall Street. There was some polite clapping in the Victory Lounge.
I left the Victory Lounge. I wandered down the hallway, waited a few minutes for an elevator that did not come, and then walked up several flights of stairs, skipping over Suite to the highest level, Balcony, where (I was told) the Clintons had their skybox. Security was loose. Bill and Chelsea were down on the floor for Hillary’s speech. I found myself in conversation with another hallway wanderer, a Colorado delegate in a bright yellow Bernie Sanders shirt. To wear such a shirt on the Balcony level on the last day of the Democratic convention was bold. His name was Raffi Mercuri. He was in his mid 20s and had worked as an AmeriCorps volunteer and a public school teacher. Now he was employed as a full-time organizer working with Latino voters in Denver. Someone had lent Mercuri a Balcony-level credential, which he wore on a lanyard with a Black Lives Matter sticker and a Colorado Democrats pin. At the door of the skybox connected to Mercuri’s borrowed credential, we were stopped by a party official who questioned Mercuri’s right to be there. She was eventually convinced by the text messages on Mercuri’s phone. Inside, we found a fridge full of Amstel Light in cans, open bottles of Grey Goose and Johnnie Walker Black, and good sandwiches on marbled rye bread.
I did not recognize any of the 20 or so skybox VIPs who had pressed themselves against the rail to watch Hillary speak. I thought of a concert that I had attended that afternoon in Camden, New Jersey, another VIP event, closed to press, with live performances by Lady Gaga and Lenny Kravitz. George Norcross III, a local political boss and Democratic superdelegate, was the host. The advance press had the Obamas, Clintons, and Bidens as invited guests. None of them showed. Wandering about the grassy slope above the stadium, I met a man smoking a cigar. “My brother-in-law’s a bigwig at—,” he said, adding the name of a multinational corporation. “He donated 40 grand to put this thing on. He got us good seats down in front.” This is whom one meets in the VIP area. One does not meet or even see Norcross, let alone the members of Club 106. One meets the brother-in-law of a five-figure donor.
There was no room on the rail of the skybox at the Wells Fargo Center, so Mercuri and I watched Hillary Clinton’s speech on the skybox TV. Mercuri told me about working for AmeriCorps, and volunteering for the Sanders campaign. He said that earlier that night he had wandered into another skybox, empty except for one young woman. She seemed to have been tasked with guarding the skybox until the rest of its occupants returned. “People paid for this,” Mercuri remembered her saying, to explain why he could not be there. “I felt bad for her,” he told me. “It was a shitty box. She was just a midlevel staffer.”
“This culture of money and privilege,” Mercuri said, musing about his Balcony-level surroundings. “This difference between them and us. You can see it in the way I was treated at the door. I knew that they didn’t want me in. So I really wanted to get in.”
Clinton had spoken with some nervousness in the beginning, but her speech was going well. She was opening up the throttle now, her caution giving way to confidence.
“Are you going to vote for her?” I asked Mercuri. “Yeah,” he said. “Sometimes there’s stuff that you just gotta do.”
* Clinton disaster fundraising: Predatory humanitarianism?, interview with Charles Ortel, by Dady Chery, published on News Junkie Post, May 20, 2016
* ‘Foreign influence‘: A four-part series published in The Intercept on August 3, 2016, written by Lee Fang and Jon Schwarz, with additional reporting by Elaine Yu and Sheelagh McNeill. The Intercept was founded in 2014 by journalist Glenn Greenwald and his colleagues. Here is the series, in four parts:
With advice from Republican power lawyer Charlie Spies, APIC, a company owned by Chinese nationals, donated $1.3 million to Jeb Bush’s Super PAC.
Gordon Tang and Huaidan Chen have cultivated ties to American politicians through campaign contributions and other investments.
Citizens United turns the legal wall against foreign money in U.S. elections into something more like a sieve. (Note: ‘Citizens United’ is a conservative political action committee in Washington, D.C. and a 2010 Supreme Court case about election spending in which the aforementioned PAC was the plaintiff.)
The revelation of a substantial financial transaction between an American diplomat and a prominent citizen of the host country in which he was serving raises ethical flags.
And updating this story: FEC commissioner, citing The Intercept, calls for ban on foreign money in politics, by Jon Schwarz and Lee Fang, The Intercept, Aug 11, 2016
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