Looks like Wisconsin Republican Sen. Ron Johnson, the man who took down Russ Feingold last year, has yet to answer some extremely interesting questions as to how he did it and with what money.
Last week the Milwaukee Journal-Sentinel started asking uncomfortable questions about $10 million in deferred compensation Johnson received from his former company, Pacur, weeks after his $9 million self-financed successful 2010 campaign came to an end.
For those of you playing the home version, even in a post Citizens United world, direct corporate contributions to a candidate is a no-no, especially when the corporation in question employs the candidate. The $10 million just happened to cover the cost of Johnson’s campaign, which Johnson says is a complete coincidence. If that’s true, then Johnson surely has a written agreement with the company covering the deferred compensation, yes?
So far Johnson has not produced a written deferred compensation agreement that was signed and dated before he launched his campaign. Absent such an agreement, Johnson could face serious charges that he violated campaign-finance laws barring direct corporate funding of federal candidates, election law experts tell TPM.
Arent Fox’s Brett Kappel, an election law attorney, said evidence of a written agreement before Johnson ran for the Senate is critical to prove he did not rely on corporate funds for his campaign.
Well then, that might be a problem if the FEC takes a look at…
Even though watchdogs are raising serious red flags over Johnson’s deferred compensation, they’re not counting on the FEC, a broken agency that either deadlocks over critical and controversial decisions or fails to take up cases at all.
Never the hell mind. This ledger domain legerdemain is just how the Galt’s Gulch Bandits operate. Any of them will tell you the real problem would be the FEC existing at all. Smaller government means there’s nobody to complain to…well, unless a Democrat gave the appearance of conflict of interest, that is.
Best part is the guy who had $9 mil to spend on his own Senate seat and getting $10 mil payback is a real salt-of-the-earth, Real ‘Murican hero.
[UPDATE 12:30 PM] Didn’t Blago just get convicted of trying to sell a Senate seat? Buying one seems to be pretty okay by comparison, IOKIYAR.
4jkb4ia
Ooh, nice!
Almost back to the days of “The Treason of the Senate” when a random corporate mogul could just buy a seat.
evinfuilt
The Republican Party is bought and paid for, and no one is getting in the way of that. Regulations and oversight are things of the past (except if its to prevent the eroding of the power already paid for.) Corporate owned Democracy, thats what we have.
Yevgraf
If the SCOTUS hears the appeal today, the vote is 5-4 striking down the direct corporate contribution ban.
The Perry/Palin Administration SCOTUS will strike the direct contribution ban on a 7-2 vote.
artem1s
yea, but we’re just a 5/4 vote away from this being declared speech too dontchaknow! IOKIYAR!
besides, pretty soon the company will just BE the candidate so everything is good. nothing to see here.
piratedan
strange how these questions always show up AFTER the Republican is elected, how about a bit of journalistic due diligence BEFORE the election guys, especially for guys like this who show up out of nowhere.
Davis X. Machina
The Impairment of Contracts clause in the Constitution will prevent Johnson from losing his seat, come what may. Pacur bought him, fair and square, and unless they can be made whole some way, say, by being given another, equally valuable Senator, there’s also the Takings clause to worry about.
Bullsmith
Backdating solves the problem, I presume. IOKIAR after all.
Timothy Trollenschlongen (formerly Tim, Interrupted)
Anyone know why, three years into a Democratic administration, the FEC remains so pathetically ineffectual?
Serious question.
ThatLeftTurnInABQ
$10 million in vs. $9 million out. At least he was smart enough to turn a profit on the deal.
piratedan
@8 maybe because roughly 30% of all this administrations nominees for various government positions are still held up in the Senate thanks to the filibustering of Sens Kyl and McConnell and their abuse of the secret hold process.
arguingwithsignposts
@T,I:
From the FEC web site:
Do you really need to ask that question?
Jim C.
@8
Reasonable question. I guess the only answer I can hazard would be some combination of Republican obstructionism and Obama having such a backlog of broken crap to fix when he took over after 8 years of Bush.
Just a guess here but when a dam is leaking from 50 different spots it’s hard to plug those holes with only 10 fingers and 10 toes.
Jim C.
Ah.
I see by #11 that my guess was an accurate one.
SteveM
Let’s play Guess the Future GOP SCOTUS Picks. Coulter? Bachmann? Sekulow? Cuccinelli?
cleek
here’s a new SCOTUS bad decision that makes Citizens United look meek.
Martin
Remember, Hans von Spakovsky was a recess appointee by Bush to the FEC. Half the FEC feels that voter fraud means anyone registered Democrat arriving at a polling place.
arguingwithsignposts
@SteveM:
Don’t you know, SteveM? Obama = Bush. Kagan has been a remarkable liberal voice in her time on the court. Sotomayor too. Anyone who doesn’t think it’s crucial to re-elect Obama in 2012 is an idiot.
Shalimar
Tim, how would you expect the Democratic administration to have any influence on the FEC if Obama can’t make appointments? Terms for 5 of the 6 commissioners have expired, but no replacements are on the way due to legislative deadlock. Translation, Republicans like the FEC just the way it is.
ThatLeftTurnInABQ
@cleek #15:
If God had wanted poor people to be able to afford political speech, he would have made them rich. It is obviously unconstitutional for the govt to step in to try to alter the results of natural law. Doh.
Next up: Food Stamps are unconstitutional because giving free food to poor people devalues the lobster and caviar of the rich, depriving them of their property without the benefit of due process.
some other guy
Damned straight. You elitist liberals need to stop looking down your nose at these oppressed and downtrodden millionaires. Now those fat cat public school teachers, on the other hand…
Han's Solo
Bullsmith @ 7 is correct. If there isn’t a deferred compensation agreement dated to before the election now, there will be in a few short days.
Mark B
I’m sorry, he hasn’t twittered any pictures of his junk has he? He could have bought a whole lot of junk pictures with that $10 million payday, but instead he bought a senate seat. Waste of money.
Comrade Javamanphil
@piratedan It pains me mightily to do so but in this case the media deserves a defense. It would literally be impossible to have known before the election that he was going to back compensate himself after the election. They did try to probe why some of his company’s employees were on the Wisconsin low income health plan (BadgerCare, I believe) but I don’t know how big it played in the state.
Commenting at Balloon Juice since 1937
Shouldn’t we conclude that if Blagojevich didn’t try to sell Obama’s Senate seat then he would have been incompetent?
me
@cleek: Well, on the bright side, they could’ve ended public financing entirely.
Mark B
The FEC is pseudo-nonpartisan, but I believe it’s still mostly composed of Bush appointees. But he was never able to sneak Hans Spakovsky past the Senate, so at least there’s that.
On Edit: I see I’m just repeating information offered earlier in the thread. Carry on.
Ash Can
I agree that it would have been dandy if the MJS had unearthed this gem about two weeks before the election. As things stand, however, I have to wonder if this story is showing up in a broader context of folks in Wisconsin thinking, “The current Republicans are such shit heels, I wonder what else they’re pulling.” In other words, maybe the digging into this guy’s past that the MJS is doing now has been prompted by a general atmosphere in Wisconsin of mistrust of Republican politicians. If so, I can’t help but feel glad that the people of Wisconsin, at least, are waking up to what the GOP is really up to these days.
Han's Solo
Does it make any sense to anyone that people who proudly and loudly proclaim they are “Businessmen” are willing to pay 10 million dollars for a job that pays, what, a couple hundred thousand a year? The ROI (return on investment) on that money is really crappy unless you plan on stealing the government blind once in office.
JPL
I have to agree with hans statement and add one more detail, the media will report that the dems were mean to poor Sen. Johnson.
Guster
“By law, no more than three Commissioners can be members of the same political party.”
Paging the Green Party …
the fenian
That’s a truly terrible situation with the FEC. The president should probably say something about it, repeatedly, and loudly.
PeakVT
especially when the corporation in question employs the candidate.
Not to defend Johnson, but he owns the company, AFAICT. The only difference between Johnson and Bloomberg is that the latter took enough money out of his company to run for office before actually running for office. Johnson was sloppy and forgot to do that.
The ability of people to use their personal fortune to run for office is why I think limiting corporate money in politics is would only be a partial solution. It would prohibit the explicit purchase of candidates by corporations, but having executives or former executives run would produce basically the same results.
shortstop
Because he got the $10 million after the election. See post above.
Not that your point in general doesn’t stand.
daveNYC
That just means that he’s a super awesome Galtian overlord, since he’s willing to sacrifice so much in order to save others from the crushing oppression of the government. Sacrifice like that is what Real Americans do.
ant
damn, yall are a cynical bunch.
what a turd, to replace Feingold.
Pococurante
No surprise. Isn’t this sort of thing the intended outcome from the Supreme Court’s last two rulings on campaign finance?
Han's Solo
daveNYC – I like the way you snark.
arguingwithsignposts
@ant:
can you provide some evidence why we shouldn’t be? Seriously.
KG
Even if an agreement is produced at this point, don’t count on it being worth more than the paper it’s written on. Old rule of discovery when it comes to the production of corporate records: they are good from the day they are produced on, and not a moment sooner.
shortstop
It’s not about the dinky senatorial salary. It’s about what happens after you leave the senate, a lot of things that pay a hell of a lot: lobbying gigs, board seats, speaking and “consulting” fees, willing investors/partners in future corporate enterprises, stock options, etc. It’s about the nearly limitless lifelong political and corporate power and influence that accrue to members of this very exclusive club.
burnspbesq
@ Han’s Solo:
There are a surprising number of ways to detect backdating.
You’d be amazed how many people forget to scrub the metadata from the Word file, and get caught that way.
In this case, he may have backdated the deferred comp agreement, but the funds were transferred when they were transferred, and there are almost certain to be witnesses who can testify as to when things were done.
There’s a famous U.S. Tax Court case, Medieval Attractions, where the IRS sent somebody to Curacao to look at the corporate registry, and found out that the Netherlands Antilles corporation that supposedly owned the valuable IP wasn’t created until four days after the date of the transfer agreement.
Yutsano
Now how come I can’t get gigs like that? :)
shortstop
In my defense, the diving is so good there that I just didn’t get to business until a few days after I’d arrived. I never thought they’d really look.
Martin
@cleek:
From the dissent:
Remember when the left was busy shitting themselves that Soto and Kagan were too far right? And further, that Obama had fucked up by nominating that blank slate, Kagan.
[sigh] Good times…
Han's Solo
burnspbesq @ 41 – Yes there are. However, though I’ve never been involved with anything like it myself, companies routinely backdate certain documents when under audit. It isn’t legal, and as you’ve pointed out there are ways of detecting it, but it happens all the same.
Sure, if the “authorities” really wanted to push the case they could detect abnormalities with a post dated contract, but that would take a level of commitment we are unlikely to see. That kind of thing takes expertise, and expertise cost money.
I don’t expect anything to come of this. FSM do I ever hope I’m wrong.
JGabriel
piratedan:
Well, Ron Johnson didn’t pay himself the $10 mil until after the election. Kind of hard for the press to pick up on that one ahead of time.
.
piratedan
@23 and @46
ty for catching my gaffe, guess I’ve just been reading about too many nutjobs that are just now entering the national consciousness (our gal pal Michy for one) that I wrongly categorized it as a “hoocouldanode” moment.
Linda Featheringill
I have a question about the Supreme ruling on public financing of political campaigns in Arizona.
Does that mean that the public financing cannot happen any more?
Southern Beale
Speaking of Citizens United ….
Imagine!
PeakVT
@Linda – my understanding is, no, it only means there can’t be an escalation of a public subsidy based on what a self-financed candidate spends. AZ tried to both ward off self-financed candidates and keep the costs low by having a low initial subsidy that would increase based on certain criteria. Now they can either try to keep costs low, or provide a much bigger initial subsidy to discourage self-financed candidates.
MonkeyBoy
I’ve often heard small businessmen brag about what a wonderful tax dodge owning a business is. You can arrange things so that much of your personal expenses become deductible business expenses – most of vacations can be
written off, etc. [ I think it was the WSJ that recently analyzed flight plans of business owned jets and planes and found a huge number of “business” flights were to vacation destinations. ]
The “creative” class deserves their name in part for their use of creative accounting.
Ron Johnson may have just been a bit sloppy about maintaining the fiction that his company is distinct from his person.
Dennis SGMM
It’s a truism that those who are present at the occurrence of major historical change often fail to recognize it. In this case, I think that we’ll be able to safely date the end of American democracy to the innovations of the Roberts court.
Southern Beale
@MonkeyBoy:
Oh shoot, I have a friend who had her own PR business and she wrote off expensive oriental rugs for her house as business furnishings.
The Spy Who Loved Me
I’m a little confused over the outrage. The company in question was private, and Johnson owned it outright, along with his wife. When you own the company, you can pay yourself however much you want and in whatever manner you deem appropriate. It would be different if it had been a publicly owned corporation, with this possibly violating campaign finance laws if there was no deferred compensation agreement in place, but that isn’t the situation here.
burnspbesq
@ shortstop:
“In my defense, the diving is so good there that I just didn’t get to business until a few days after I’d arrived.”
Somehow, I don’t think that explanation is going to keep your malpractice insurance carrier from denying coverage. ;-)
bkny
be sure to read the nyt piece on rep mica and the hundreds of millions of dollars he’s gotten for a train that will daily carry 2000 passengers (and he swears that this project has nuttin’ to do with the tens of thousands in campaign contributions from those companies who are benefitting from this little train).
what is always amazing to me is how paltry the campaign donations always are despite the hundreds of millions in taxpayer dollars shoveled to these corporate assholes.
http://www.nytimes.com/2011/06/28/us/politics/28mica.html?_r=1&scp=1&sq=mica&st=cse
bkny
via nyt:
A Congressman’s Pet Project; a Railroad’s BoonBy ERIC LIPTON
ORLANDO, Fla. — Here in sun-parched Central Florida, workers are ready to break ground this summer for a 61-mile commuter rail project that the federal government ranks as one of the least cost-effective mass transit efforts in the nation.
With a price tag of $1.2 billion at completion, the rail line is expected to serve just 2,150 commuters a day when it starts operating in three years. It will not link to the Orlando airport or Disney World, among the region’s biggest traffic generators. Florida’s governor is even considering killing the project, worried that local government officials will rebel if they have to cover any shortfalls at the fare box.
But the so-called SunRail project has survived, at least so far, a testament to the ability of one congressman to help push through hundreds of millions of dollars in federal spending, even at a time of deep concern over ballooning federal deficits.
burnspbesq
@ The Spy Who Loved Me:
Not exactly. When you choose to operate in corporate form, you accept all of the consequences, and form matters.
Also too, a controlling shareholder of a corporation can cause it to pay him or her pretty much whatever he or she wants, but under Section 162 of the Internal Revenue Code only an amount that represents reasonable compensation for services actually rendered to the corporation is deductible in determining the corporation’s taxable income. The excess is a distribution to the shareholder qua shareholder, and if there is E&P, that distribution is a dividend. There is a huge body of case law on this topic.
Southern Beale
@bkny:
Just got hip to a new tool that actually tracks campaign contributions and legislation. It’s MapLight.org, “Connecting the Dots between Money and Votes.”
Omnes Omnibus
@ The Spy Who Loved Me: If Johnson was a sole proprietor, you would be onto something. Johnson opted for the protections of the corporate form and he must live by the restrictions that are placed upon him.
ETA: I see burnspbesq got there first. What he said.
The Spy Who Loved Me
@burnspbesq:
He bought the company in 1997. He says he took no salary from the time he purchased it until he received the deferred compensation in 2010. As the owner/CEO of a company with, apparently, huge annual revenues and a workforce of over 100, would compensation of approximately $769K (10 million divided by 13) be considered unreasonable by the IRS? I find that doubtful.
As long as he claimed it and paid taxes on it, which is probable, given it’s on his financial disclosure form, I fail to see the problem.
Omnes Omnibus
@ The Spy Who Loved Me: Timing, for one thing.
burnspbesq
@The Spy Who Loved Me:
He might win, particularly given that he’s in the Seventh Circuit where the Menard’s case is controlling precedent. However, reasonable comp cases are expensive to litigate, because you need experts. Could end up as a Pyrrhic victory.
I am also constrained to wonder why you think it’s “probable” that he reported it. Almost three decades of practicing tax law leads me to believe that he almost certainly did something to try to shelter it. After all, $10 million minus federal and Wisconsin income tax is substantially less than $9 million, so if he paid tax on the deferred comp he is net out of pocket by approximately $3 million.
Han's Solo
The spy who loved me – Per TPM:
Yutsano
2010 – 1997 = thirteen years. In thirteen years, he NEVER collected a paycheck? Not once? No contributions were made to any sort of retirement nor any health care distributions were paid on his behalf? FOR THIRTEEN YEARS?? Does that sound anywhere near reasonable?
Suffern ACE
Dennis SGMM – Yep and barring some unforseen and unfortunate accident, this is the court we’ll have for quite some time. I can see Scalia hanging on until he’s 90 or leaving when he knows he’ll be replaced by a republican of equal ideology. My guess is the next conservative justice will be a 19 year old.
shortstop
Apparently I have a very conservative accountant, or a very honest one (which has nothing to do with conservatism, when you think about it).
I think many of those stories are just blowharding bravado. There are really strict limits to what you can write off and the documentation requirements are fairly stiff. Yeah, many people game the system and don’t get caught, but an audit will find them with their financial pants down and they ain’t gonna like the results when the penalties are added to the back taxes.
burnspbesq
@Yutsano:
I’ve actually seen controlling shareholders of S corporations try to not pay themselves any salary, because their distributive share of the corporation’s income is not subject to FICA (or SE tax, whichever one is applicable). Makes for strange audits, because the normal positions of the parties in reasonable comp cases are reversed.
But you’re right to wonder what’s going on here. I doubt this guy was living in the back seat of a ’73 Nova and subsisting on Spam and Kraft mac & cheese.
Suffern ACE
Yutsano – yeah. I thought the whole “I get a stipend for my food and the company bought my house. And pays for my kids to go to private school as part of the “executive training program” is kind of disallowed as a shelter.
shortstop
From Bice’s column:
“Records show the Oshkosh businessman still had income of $1.3 million and $2.3 million annually from 2005 to ’08 from capital gains, corporate earnings and real estate. In the first half of 2010, he received $650,000 in what he called ‘pass-through income’ from a limited liability company that owned Pacur.”
Omnes Omnibus
@ shortstop: I may be cynical here, but, from that same column, it appears that he negotiated an “appropriate” deferred compensation amount with himself. Obviously, this was an arms length transaction (Ha!). This does not pass the smell test for me.
Editorial parenthetical added.
Just Some Fuckhead
I’m sure there will be a written deferred compensation agreement “produced” shortly. In for a penny, in for a pound.
Yutsano
They do realize if you never pay into FICA you can’t collect on it later, amirite? We get a few of those cases every year when a proud real Merikan suddenly realizes that and liquidates some taxable asset to suddenly pay in. And forgetting the taxes on the asset. Those cases are fun.
LB&I revenue officers call those lunch. This could indeed trigger an audit into Johnson’s finances, which might suck for me cause he may just cut the IRS budget for revenge.
arguingwithsignposts
On the larger topic – what is with these fuckers? He’s like Rick Scott in Fla. So fucking brazen.
pj
I called Sen. Johnson’s Oshkosh office.
Me: Does Sen. Johnson’s office have any statement or explanation on whether there was a written agreement on deferred compensation prior to the campaign?
Office: He did give a statement.
Me: You mean the statement he gave to the Journal-Sentinel that he didn’t owe them an explanation?
Office: Yes. That qualifies as a statement, right?
Han's Solo
Um, that is kind of like the back dated contract issue. Sure, lots of S corporation shareholders do that, but it is still illegal. They should pay self employment tax on there earnings if they own a certain percent of the S Corporation and participate to a certain level. We can get deep in the woods about this if you’d like.
Now shareholder-employees are a different matter. Shareholder-employees don’t pay SE tax because they take a salary. Of course they try to shift as much of their income from salary to income distribution, but the IRS, should they audit you, can deem that you’ve not been paid a reasonable compensation if you get too aggressive.
Here is a quick link on the subject:
http://taxes.about.com/od/scorporations/qt/scorp_payroll.htm
Quicksand
Ooh. (Golf clap.)
bill
@bkny, I’m with you on that. A while ago, I read that some senator or congressman had taken $50,000 in contributions from some corporation and I thought, “That’s all it took?”
That’s our American politcal class: sleazy and cheap.
Emerald
Dennis SGMM #52
Earlier than that. It was in 2000, when the Supremes found it necessary to appoint the losing candidate as President.
Roberts wouldn’t even be on the court had that not happened. In fact, we’d have decades of liberal justices instead. No Roberts, no Alito. The count would be six to three.
dave
Wonderful, I lose Feingold, Obey, and Hubler and here I am represented by Johnson the corporate criminal, Duffy who can’t make ends meet on $171,000 and at the state level I’ve got Roger “I can afford healthcare I’ve got plenty of money” Rivard, and now Tommy Thompson is going to run for Herb Kohl’s seat and he’ll probably win, folks liked him I don’t know why but they did. Wisconsin, the manure pit of the north.
Yutsano
Then work your tail off for the lesbyterian, because A) she’s awesome and B) you’ll avoid the unpleasantness Thompson will turn himself into to avoid the RINO label.
Egypt Steve
Isn’t this quite close to what Tom Delay got nailed for — basically money laundering? Seems like an enterprising DA or US attorney could go that route, even if the FEC takes a pass.
Judas Escargot
Me, too. Often immediately followed by complaints about how all their tax money is “going to the sp!cs and n!66erz”.
It’s cookout season up here. Can’t wait to hear this year’s BS memes.
grandpajohn
Our country will be haunted,demeaned, and defiled for the next generation as a result of the 2000 theft of the presidency which was ably aided and abetted by the conservatives of the supreme court. men of honor and integrity indeed. May they all rot in Hell.
rikryah
C-R-O-O-K