Shell companies are given the green light to interfere campaign finance, with the allowance of FEC, again.

Its election season again, it seems that this year Donald Trump, the real estate mogul, won continuous public attention with progressive policies and bold sayings. Although some of his statements were ridiculous and quite inconsistent, Mr. Trump was right about one thing – the broken Campaign finance system–“I will tell you that our system is broken. I give to many people,” he said. “I give to everybody, when they call I give, and you know what? When I need something from them, two years, three years later, I call, they are there for me.”[i]

Whether Trump could get the support as he stated is unclear, but the chaos of campaign finance is definite. Especially with a deadlocked FEC decision March 5th regarding the complaint filed by Campaign Legal Center about the shell groups funding the Romney Super-PAC. Yes you are not reading this wrong, and Romney is not campaigning for president this year, because the complaint was filed 5 years ago regarding the 2012 Romney campaign.

Let us briefly review the case. During the 2012 election cycle, three shell companies were set up to transfer $1 million apiece into the super-PAC supporting Mitt Romney, known as Restore Our Future.  Two organizations donor identities were obscured behind a mysterious office suite in Utah, and the founder of the third shell group voluntarily revealed himself to the media as a former partner of Romney’s at Bain Capital. He admitted that putting $1 million in to W Spann LLC which then directed the case into Romney’s super-PAC.

Our campaign finance law clearly stipulated that donor cannot make political contributions in another person’s name. Besides the clear fact that the action above is clearly unlawful, FEC responded to CLC saying they could not reach an agreement to open an investigation thus decided to close the case.  The Campaign Legal Center’s deputy executive director Paul S. Ryan, tweeted, “Just when I thought the dysfunctional FEC couldn’t get any worse.”

This is not the first time shell companies were given green light to hide donors behind them. The Supreme Court’s 2010 Citizens United ruling paved the way for corporations and unions to make unlimited political expenditures.  It tossed out the corporate and union ban on making independent expenditures and financing electioneering communications, allowed corporations and unions to spend unlimited sums on ads and other political tools, calling for the election or defeat of individual candidates.[ii]

Illegal campaign spending surge quickly after this ruling was published. According to Election Confidential, in the 2012 election cycle, 17% of all business money in Super PACs, totaling nearly $17 million, passed through a shell corporation and was thus not traceable to a legitimate original source. With its anonymity nature, easy-to set up process, and regulations loopholes, Shell Corporations became the perfect tool for candidates and their campaign aids to funnel illegal money into their campaign finance, and sometimes, their own pocket as well.

Shell Corporations have come into existence for quite a long time. It serves as a vehicle for business transactions without itself having any significant assets or operations. It is also called “Anonymous Company” because it’s almost impossible to track down ownership information and money transaction records. The only searchable information is a clearly-faked lettered company name like “XYZ Company” and an address that leads to nowhere. Delaware, as indicated by Stepanie Ostfeld, senior policy advisor with Global Witness, the capital of U.S. Shell Corporation[iii], and was one of the most important home for shell corporations with its loose regulations and corporate-friendly state position.

Setting up a shell corporation is easier than you think. Hiring a surrogate to file the paperwork is all you need. “In Delaware, It takes less identifying information to set up a company than it does to obtain a driver’s license or register to vote”, said Ostfeld. Most states do not require filer to report, or even retain proof of the identity of the company owner—“beneficial owner”, making tracing suspicious money almost impossible.

“If there were no campaign manager to keep a handle on spending and fees, you basically have just a few people getting together to check the box on legal structure, and they basically just divide up the money.” commented Mark McKinnon, former strategist for George W. Bush in 2000. Since Marco Rubio announced his 2016 campaign, Reclaim America paid a total of $100,751 to nine staffers and firms in 2015 that also received $1.2 million from his campaign account.  Its largest expense between April and December: $32,000 paid to Terry Sullivan, Mr. Rubio’s full-time campaign manager, for “strategic consulting.” [iv]The candidate and their campaign aids made more in a year than most Americans earn in a lifetime through Shell Corporations.[v]

It is more than clear that shell corporations are harming our campaign finance system, and we need to end them, requiring that the actual owner of a company be listed somewhere available to law enforcement. Showing our support by backing the Incorporation Transparency and Law Enforcement Assistance Act (ITLEA) is one solution. ITLEA called for ending the use of shell companies, requiring companies to disclose their ultimate owners when the company is set up, and keep this information up to date. This would make it much harder for money launderers to hide their identity behind webs of shadowy companies to stash their ill-gotten gains in banks.

Your efforts and support are crucial to create a healthier and more transparent campaign finance system. Start with supporting ITLEA today, do not allow money tricks interfere our election process, and let us work together to eliminate the shady shell companies.

 

-YW

[i] http://www.motherjones.com/politics/2015/08/trump-just-made-case-for-campaign-finance-reform

[ii] http://www.publicintegrity.org/2012/10/18/11527/citizens-united-decision-and-why-it-matters

[iii] http://www.mintpressnews.com/delaware-remain-u-s-shell-corporation-capital/192674/

[iv] http://www.wsj.com/articles/pac-payments-raise-questions-over-rubio-campaign-finance-1454707035

[v] http://www.bloomberg.com/politics/articles/2015-05-27/bill-clinton-s-shell-company-game

Reinstating Postal Banking-Save the Poor from Paying More

Congresswoman Eleanor Holmes Norton presents 150,000+ petitions signatures to a representative from the United States Postal Service on Dec. 17. -Photo credit W.

Earn, invest, save; these are the words that we frequently put before the word “money.” Some of us can do those things on our phones as easily as making a call, but that’s certainty not true for all Americans.

Nearly 28 percent of US households (or 68 million people) do not have access to affordable financial services. And even if they want, they have to pay far more (on average of $2,400 per household per year) to only have access to banking services. But, shouldn’t it be a right to be banked?

Politicians, economists, and the general public are craving a change to this unethical phenomenon, through a proven method: postal banking.

International or older people may be more familiar with this term. Postal banking, which allows anyone to do their banking — from bill payment to taking out small loans — at the same post office where they buy stamps, is not a new concept in this or other countries. In fact, it was used in the US from 1911 to 1966, and was so central to our banking system that it was seen as a precursor to the safety provided by federal deposit insurance.

Postal banking was phased out so quietly that only after high-cost payday lenders and check-cashers flooded the low-income neighborhoods that banks had deserted, did people begin to worry. As the US Postal Service (USPS) Office of the Inspector General (OIG) explained in its 2014 report, unscrupulous financial services like check-cashing stores, pawnshops, and payday lenders gouged a total of $89 billion in interest and fees from the unbanked.

“The poor pay more,” wrote US Sen. Elizabeth Warren in a recent blog post, “and that’s one of the reasons people get trapped at the bottom of the economic ladder.” Righting that wrong is one of the main reasons we should promote a reinstatement of postal banking.

There are other reasons to bring back postal banking, too. OIG’s report showed that post offices could deliver these same banking services at a 90 percent discount, saving the average underserved household over $2,000 a year while still providing the USPS with $8.9 billion in new annual profits, significantly improving its troubled balance sheet.
Mehrsa Baradaran, associate professor at the University of Georgia School of Law, published her new book on postal banking this October to further lay out its necessities and promising effects:

… providing these services at much lower costs through postal offices has a triple advantage of reviving the beleaguered but too-important-to-fail postal service, putting the money back in the pockets of the poor, and providing an alternative to a harmful industry that has proved difficult to regulate …

Postal Banking is getting attention as a winning solution for good reason. The USPS is the world’s largest retail network, with over 30,000 locations, more than the total number of Walmart and Starbucks stores. Its public trust and confidence is ranked highest among all federal agencies by millennials. Natural advantages like security, existing experience in dealing with financial products, and a skilled workforce would make implementation easy.

The products that USPS can offer are diverse. Besides basic functions like money transfers, bill pay and check cashing, it can also provide its own prepaid debit cards and provide small-dollar loans. As Professor Baradaran mentioned in her book, postal savings accounts could provide a much-needed financial buffer that would even diminish the need for short-term credit. Having just a few hundred dollars stored away can make a significant difference to a moderate-income family facing an emergency.

Postal savings accounts can even reinvigorate a culture of bank saving that has been long lost in the US, but retained in Japan and Germany, precisely because of their strong postal banking network, Professor Baradaran explains in How the Other Half Banks. A 2015 survey discussed in the book shows that over half the US population have savings they do not deposit in banks, many admitting they store their cash in sock drawers, cookie jars, under mattresses or in their freezers. Professor Baradaran muses in her book whether it might be possible that, just as in the 1900s, hoarded money from across the country would pour into postal banks from under mattresses, as well as from prepaid cards or from funds otherwise wired abroad.

Y. Wang attending the Postal Banking Petition Delivery on Dec.17. -Photo credit W.

With promising benefits and an underbanking crisis facing the poor, Congress needs to take immediate action to bring a public option for financial services back to the United States. Senators Warren and Bernie Sanders, along with the US Conference of Mayors, have voiced their support for The Campaign for Postal Banking. Nobel Prize-winning economist Joseph Stiglitz also included a call for a postal savings bank in his report, Rewriting theRules of the American Economy.

The number of supporters is increasing. In fact, on Thursday, 150,000+ petition signatures were delivered to the USPS Postmaster General, Megan Brennan, to push for immediate implementation of simple financial services like fee-free ATMs, bill paying and check cashing.

We are seeing the progress in the fight to protect low income Americans from predatory lenders and other unscrupulous financial services, but that’s not enough. The poor are waiting for a helping hand, and postal banking is a proven and familiar one. Your support and voices are needed to push Congress for action. The sooner postal banking is made law, the easier the road will be to getting the poor back on their feet.

-W.

Hi there

First blog here, just wanna say hi to our future readers.

This blog is set up originally because Qing and I are both policy graduates wishing to pick up our “long-lost” writing skills. Well, as a matter of fact, it is not long lost yet, because we are two still fresh graduates after all that memo- and research paper-writing at graduate school. Then why?

Actually, I am not sure myself yet.

Is it the curiosity about unknown things happening right in front of us? Is it our priceless desire to advance pushed us into this seems-hard-to-last activity? Or is it the anxiety that we would all eventually settle with everything and stop fighting for our dreams? Could it be that we are just so boring and it is always better to write and be intellectually challenged than becoming a couch potato? Either way, we are going to find out in the coming months.

We will, update our opinions and research results every month on one or two policy related topics, or any interesting topics that capture our attention. That is to say, we will have two pieces posted each month, one from me and another from Qing. If everything goes well, in a month you will get to read our words, and you will see how legit and sharp Qing and I could be! 😉

That’s it, a short announcement of this new born. Let’s keep our fingers crossed and wish it a happy childhood.

W.

14:16 pm, Feb.11 2016

Washington D.C.