California Blurs the Line between Gift and Graft
Welcome to the behested-payment swamp.
Imagine that you run a large company and the governor of the nation’s largest state asks you to donate to a cause he cares about. Seems like a shakedown, right? Nope, perfectly legal in California. It’s called a “behested payment,” if it’s done at the behest of a public official. And you just have to disclose it if the donation exceeds $5,000. As opposed to political donations, there are no caps on behested payments.
While these behested payments are technically legal, corruption charges and prison sentences have resulted from their abuse. As CalMatters recently reminded us, an undercover FBI agent bribed then–state senator Ron Calderon to advance legislation in part by paying $25,000 to a nonprofit run by his brother, former assemblyman Tom Calderon. Both brothers wound up in prison. Recently, former Maywood mayor Ramon Medina was charged in a criminal complaint alleging widespread corruption, including one charge of failure to report behested payments.
And some behested payments are definitely unseemly even if they don’t break the law.
For example, Qatar donated $5 million to a nonprofit Los Angeles mayor Eric Garcetti referenced often last year called the “Mayor’s Fund of Los Angeles.” The fund also received a gift of $1 million from the Taipei Economic and Cultural Office in Los Angeles. As an ethics professor asked at the time, “Why are countries making such big donations?”
Five-million dollars might sound like a lot. Until you get to Governor Gavin Newsom. In 2019, before he had god-like emergency powers to bestow no-bid contracts worth billions in total, he reported only $12 million in behested payments. In 2020, individuals and organizations reported $226 million in payments at Newsom’s behest. Facebook donated $25 million in gift cards to skilled-nursing-facility workers. Which sounds great, and we should appreciate Facebook for doing this. But it wasn’t done out of the goodness of its heart. If Facebook wanted to just donate the money as a charitable donation, it could have done so. But it was done at Newsom’s request. With Facebook located in California and under intense government scrutiny, it’s worthwhile to note that the donation was reported as a behested payment.
As if that were not concerning enough, Reason magazine and CapRadio conducted an analysis that tied no-bid contracts to some of the biggest donors of political contributions and behested payments. Blue Shield of California and Kaiser reported behested payments of $45 million. The governor’s office recently awarded the two companies no-bid contracts for vaccine distribution. And Blue Shield’s CEO was co-chair of CA’s task force on COVID-19 testing. Verily Life Sciences (formerly Google Life Sciences; Google donated $7 million towards online advertising to the governor’s office) has cost California $62.5 million for operating COVID-19 testing sites, until California ended its partnership after facing criticism from public-health experts. UnitedHealth has donated $220,000 in 2018–19 to political committees controlled by Governor Newsom. During the pandemic, Governor Newsom’s office has awarded $492 million in contracts to UnitedHealth subsidiaries in no-bid and expedited bidding situations.
At least these companies were in the health-care space. But Bloom Energy is a company specializing in high-tech fuel cells. It donated $85,000 in 2018–20 and received a $2 million no-bid contract to refurbish ventilators. The president of BYD, an electric-vehicle manufacturer, donated $40,000 from 2018–19 to Newsom, and BYD received a $996 million no-bid contract for masks in 2020, which was later extended by $316 million.
The former general counsel to the California Fair Political Practices Commission (a registered Democrat) said that “the governor has a tin ear in terms of receiving huge campaign contributions and providing sole-source contracts for corporations that were giving him these contributions.”
“Tin ear” is one way of saying it. What would you call it?