Extortion (3 page)

The practice is the same, but the payments have become much bigger. The extortion process with a milker bill occurs in steps. A congressman or a senator announces that he is gathering data on a certain subject and doing “prep work” on a particular piece of threatening legislation. He and his cosponsors consult with the Office of Legislative Counsel in the Capitol Building on how the bill should be drafted and reach out to fellow legislators to gather support. So far, so good. They also reach out to lobbyists, most especially former staffers who are now lobbyists, and let them know what is planned. Next, a call is placed to their fund-raisers so they can zero in on lucrative targets.

Then the politicians hold committee hearings and hand out draft versions of the legislation. Along the way, their personal staffs communicate with fund-raising aides, who begin soliciting the targeted companies who stand to win or lose with the bill’s passage. If they play it right, they can extract money and favors from both sides. (Presidents do this too, but instead of using legislation, they announce that the federal bureaucracy is looking at a new regulation.) The point of the exercise is not necessarily to pass the bill or regulation, but to exert threats of impending legislation to extort benefits.

No explicit verbal threats, or quid pro quo, need be made. The “squeegee men” in New York City would not utter a word about extortion when they began “cleaning” windshields. They didn’t have to. It’s the same in Washington. Politicians and their fund-raisers usually don’t call a donor and state outright that the donor has to give money or do a favor. Politicians and their fund-raisers have plenty of ways to signal their intentions loud and clear. The Permanent Political Class is well aware of the power it possesses. Its members don’t need to shout. As John Hofmeister told me, “These engagements themselves take place with carefully orchestrated behaviors, such that a distant observer would never know what is actually taking place.”
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So what you find is that corporations and wealthy individuals often have to “walk both sides of the street” by giving to both candidates in a congressional race. Or they feel they must give generously to a powerful congressman who faces no challenger. As we will see, members of Congress often have very successful campaign fund-raisers immediately
after
an election. Conversely, giving to the wrong candidate in a tight race can make a donor a target. One lobbyist recounts how his firm gave money to the loser of an election (a Democrat). After the election, the winner (a Republican) called the lobbyist and asked for a donation that was much larger than the check the lobbyist had cut to the Democrat. Why the difference in amount? “The late train is a hell of a lot more expensive than the early train,” he was told.
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Companies know how the game gets played. When a small defense firm was invited to a congressional wine-tasting fund-raising event for Congressman Jim Moran a couple of years ago, senior executives tried to figure out who had the time to attend. The one executive who could make it was a nondrinker. When he protested, the company’s chief technology officer emailed him: “You don’t have to drink. You just have to give.”
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Timing is everything in comedy—and in extortion.

Americans write checks to politicians for a host of reasons. Sometimes it is out of admiration. Sometimes it is out of fear. To extract the maximum amount of revenues in the shortest period of time, politicians from both sides have discovered the importance of asking for money at just the right time. Along with milker bills, another popular method of extraction used by a congressman in a position of leadership or the chair of a powerful committee is the “tollbooth.” The Speaker of the House or a powerful chairman will erect one on the eve of an important vote. Donations are solicited days before a vote is scheduled to take place. If the tribute offered by those who want the bill to pass is not large enough, the vote will be delayed. Tom DeLay made an art of this practice. As we will see, Speaker of the House John Boehner has perfected it.

Presidents operate in a similar manner. The vast machinery of the executive branch affects every sector of the economy and can be leveraged for donations. President Richard Nixon was a master at this. He regularly mixed the regulatory powers under his control with his fund-raising needs. Dairy farmers who made up the Associated Milk Producers accused the Nixon White House of extorting money from them by threatening antitrust action by the Department of Justice unless they coughed up hundreds of thousands of dollars. Likewise, American Airlines was reportedly shaken down for campaign donations to avoid retaliation by the Civil Aeronautics Board.
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As we will see, the Obama administration is using a similar approach when it comes to extorting and threatening large companies, using legal ambiguities and threats of criminal action to extort campaign contributions or to attempt to intimidate those who are donating to their opponents. It’s an exercise in power that also enriches the political and business allies of senior administration officials at the Department of Justice.

Even bureaucrats can get in this game, though they don’t need campaign funds. Indeed, extortion is a regular part of bureaucratic behavior. Many of the complex rules and regulations that we have to comply with are written by unelected bureaucrats deep in the bowels of government. There are about 170 federal entities that issue regulations. There are about 60 federal departments, agencies, and commissions, with about 240,000 full-time employees who make and enforce them. Americans are awash in regulations that are increasingly complex and difficult for the average person to understand.
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Simple rules are easy to follow. Complex rules require an interpreter. The Depression-era Glass-Steagall Act, which reformed the entire U.S. banking system, was thirty-five pages long. The recent Dodd-Frank financial reform bill is
twenty-three times
longer—and many of the new rules have not even been written yet. Even savvy Wall Street attorneys say they are befuddled in their efforts to understand what major portions of the law actually mean.

Famed criminal defense attorney and civil libertarian Harvey Silverglate and Harvard law professor Alan Dershowitz believe that many professionals in America—particularly lawyers, accountants, bankers, and doctors—commit on average three felonies a day
without knowing it
.
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Why is this happening? Because of liberals running rampant? Bureaucrats with bad grammar? Lobbyists in control? The deeper answer can be found by the traditional route: follow the money. The commercial possibilities for bureaucrats explain what’s really happening. There is money to be made in creating complex rules and laws that nobody can understand. Those who write these laws and regulations can leave their posts and charge companies large fees to decipher the very regulations they wrote. This has become a common practice, a form of indirect extortion.
You might be breaking a law and not know it
, the pitch goes.
Pay me money and I will tell you if you are or not
. We will see this in the case of Dodd-Frank. And elsewhere: the author of complex Medicare reforms in the Bush White House was able to cash out and charge health care companies $1,000 an hour to interpret the convoluted regulations he wrote.

The United States has relied on English common law to guide our thinking on extortion.
Blackstone’s Law Dictionary
defines extortion as “an abuse of public justice, which consists in any officer’s unlawfully taking, by colour of his office, from any man, any money or thing of value, that is not due to him, or more than is due, or before it is due.”
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What we often see as bribery is often actually a form of extortion. The two, of course, overlap. If you give money to a politician, it can both (a) get you unfairly
favorable
treatment and (b) protect you from unfairly
negative
treatment. Donating to campaigns and hiring lobbyists are essentially forms of paying insurance money. In the annals of case law, courts have conceded that “the line is a fine one” between “an altogether ‘voluntary’ payment” and those who are giving money or favors “in fear of retaliation.”
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Or, as one professor puts it, “the difference between legalized extortion and illegal corruption is largely definitional, the incentives are virtually the same except that the cost of corruption might be punishment or jail.” The simple fact is that bribery and extortion are “not distinctly different.” The same transaction might be both. In fact, corrupt officials who take bribes are often prosecuted under statutes forbidding extortion. As federal judge Richard Posner has put it, the difference between extortion and bribery is difficult to determine because in either case the politician or bureaucrat is
active
. They are not the passive recipients of money or favors. Cows don’t milk themselves. And oranges don’t juice themselves.
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Because of the way our laws are written, this political extortion is extralegal rather than illegal.
³⁴
So long as politicians and bureaucrats don’t explicitly demand a quid pro quo, their actions are not illegal. As long as they don’t spell out precisely what they are selling and demanding what they will get in return, they are fine.

But it’s different for the rest of us. By Congress’s standard, the squeegee men in New York City weren’t committing extortion either. And the Mafia street thug who offers a business “protection” from violent criminals on the street would also not be guilty of extortion by this definition—so long as there is no explicit quid pro quo. If a threat is only implied, and the mafiosi are subject to Congress’s rules, they can extort to their heart’s content. In the real underworld, there was reportedly a mobster named William “Butch” Petrocelli who was so intimidating that he simply stared at the target. He didn’t need to utter a word. The target knew what he meant—and gave him the extortion money. Perhaps he missed a lucrative calling in politics, where such a skill would not have landed him in jail.
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The great thing for the Permanent Political Class is that they get paid either way. They can get paid for doing something, or they can get paid for not doing something. As they propose legislation that will harm or help certain companies and industries, they are simultaneously calling those affected and soliciting donations, on both sides of the issue. This is a wealth strategy that is unavailable to anyone in America today outside of politics.

At least in one respect, dealing with the Mafia is easier. With the Mafia, businesses can feel confident that if they pay the fee, no harm will come. Mobsters don’t like other mobsters extorting on their turf. But in Washington paying for protection only buys that peace for a little while, and only from certain politicians. A competing politician can always step up and demand more.

And like the Mafia, political extortion can often involve a web of family members, who extract from the target on several levels: campaign contributions and favors for the politicians, jobs for the politicians’ children, and lobbying contracts for their spouses.

The rampant extortion in Washington explains why government continues to grow, regardless of who is in power. And it also explains why government is getting meaner. It’s more lucrative for the Permanent Political Class that way. Just as the Mafia likes to expand its turf to seek more targets for extortion, an expanding government increases the number of targets for a shakedown. And the meaner government gets, the more often threats of extortion are successful. No wonder that now a large portion of the American people distrust the federal government, regardless of who is in power. According to Pew Research, only 30 percent of the American people trust the federal government. This also explains why Transparency International, an international organization that tracks “perceptions of corruption” in countries around the world, has the United States well below Singapore and Barbados on its “corruption perception index.”
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Meanwhile, Washington, D.C., and the Permanent Political Class prosper.

The numbers are startling. The World Bank scores what it calls “worldwide governance indicators” and measures each country’s “control of corruption.” In recent years, the United States has continued to slip in the rankings.
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Since 2009, the United States has dropped to the very bottom of developed countries in that category. The World Economic Forum has created a similar scale as part of its
Global Competitiveness Report
. Here, too, the United States scores below most other developed countries when it comes to dealing with corruption.
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What happens in Washington doesn’t stay in Washington. It undermines the entire country.

Is it any wonder that the Italian Mafia was initially developed in Sicily—by politicians?
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2

America’s Most Expensive Tollbooth

Politics is the art of putting people under obligation to you.

—
JACOB ARVEY, ILLINOIS PARTY BOSS
(1990)

T
HEY CALLED IT THE “MOB TAX.”

If you are in the New York City construction business, you need permits from a myriad of government agencies to get your construction project approved. For quite a while, the mob controlled everything—not just unions but also the city employees who approved the permits. So you had to pay a fee, or a “tax,” to the mob to make the normal permitting process work for you. Paying the mob to get institutions to function the way they were supposed to was just the regular cost of doing business in the New York City construction industry.