Ailing Firms Revive PACs

Posted April 4, 2003 at 6:21pm

Last July, when WorldCom plunged into bankruptcy amid massive accounting fraud, the generous stream of cash flowing from the firm’s political action committee evaporated as politicians of all stripes tripped over one another to rid themselves of scandal-tinged cash in the weeks before the election.

Now, 10 months later, even as the $11 billion accounting scam is still unfolding and the company is struggling to emerge from bankruptcy protection, the firm’s once-shunned and now-bloated PAC is beginning to hand out checks to lawmakers willing to accept the cash.

Although creditors are fighting in bankruptcy court for payment of massive debts incurred by the firm, the coffers of WorldCom’s political war chest are bulging. WorldCom’s PAC, with $552,650 in its coffers as of Dec. 31, ranked as the nation’s ninth largest corporate PAC, according to an examination of year-end cash-on-hand figures compiled by the Federal Election Commission. The PAC connected to Enron, last year’s other notorious corporate scoundrel, came in at No. 14, with $450,000 resting in an account that has seen little activity for more than a year.

Enron hasn’t attempted to hand out money to candidates since its December 2001 bankruptcy filing and the firm is in the midst of deciding how best to dissolve the PAC, according to an Enron spokesman.

The large political war chests of both companies may soon draw the eyes of creditors attempting to recover funds in bankruptcy proceedings, experts say, potentially setting up an unusual conflict between election and bankruptcy laws.

The Mississippi telecommunications firm, though, has different plans. “It’s WorldCom’s intention to continue using these monies to promote pro-competitive public policies,” says Peter Lucht, a company spokesman.

Since the beginning of the year, the PAC has handed out $1,000 checks to Reps. Bart Stupak (D-Mich.) and Ric Keller (R-Fla.) and Sen. John Ensign (R-Nev.). Rep. Steve King (R-Iowa), who received $2,500 from the PAC in October 2002, was the only candidate between July and December to take money from the PAC without returning it or donating the funds to charity.

Nearly two dozen lawmakers returned a total of $42,000 to the PAC between July and December. And dozens of other lawmakers and the four House and Senate party campaign committees gave their WorldCom PAC money to a charitable relief fund to assist the thousands of company employees who were laid off when the firm fell.

“I think we’re seeing less and less of that as the dust has settled and people are looking forward to us coming out of bankruptcy later this year,” said a company official. “The level of activity is starting to tick up. Our lobbyists are attending more and more fundraisers. I think we’re seeing a gradual return to a more normal level of activity.”

But WorldCom’s plan to revive its political clout angers many of the thousands of WorldCom employees who lost their jobs in the wake of the corporate malfeasance.

“It’s like taking crack money,” said Bill Kewin, who worked in WorldCom’s Richardson, Texas, office for 10 years before being laid off a month before the bankruptcy filing. “It’s really dirty money. I think it’s absurd that this corrupt institution is still out there trying to buy politicians.”

Lawmakers who bucked the trend and took the PAC money defended their decisions by insisting that the money contributed to the PAC came from rank-and-file WorldCom employees who had nothing to do with the corporate shenanigans.

“I didn’t feel a pang of guilt at all,” said King, who recalled accepting the check in October after touring a WorldCom facility in his district that employs about 1,200 people.

“This would be different if this money had been contributed by the management of WorldCom … but these are hard-working employees, they dug into their individual pockets and made these contributions. A lot of them are real small contributions, 10 or 20 dollars,” King noted.

WorldCom’s PAC has reported taking in around $30,000 a month from its remaining employees through payroll deductions, an amount that is less than half the monthly take before the bankruptcy filing. Enron, by contrast, hasn’t received any employee contributions to its PAC since late 2001.

Stupak, a Michigan state trooper turned lawmaker who has taken $23,000 from WorldCom’s PAC since his election in 1992, also insisted on the distinction between money coming from WorldCom’s corporate account and employees who donate to a PAC.

“The PAC contribution is not corporate money. It’s individuals within that corporation who voluntarily gave to a PAC. So I don’t see that as a problem here. It’s not corporate money,” Stupak said.

“Those people who contributed to this accounting fraud should be and will be held responsible. I have been one of the people on Enron, WorldCom and Global Crossing, all of them, who has been quite critical of them,” the lawmaker noted. “It hasn’t dampened my enthusiasm for going after or seeing that these people are prosecuted. In fact, quite the opposite. As a former police officer, I believe that these people who have done wrong should be punished. But for anyone who ever did business with them having to give back money, I don’t think that’s appropriate.”

For some lawmakers, though, the stigma remains. The PAC reported giving $500 in January to Rep. Eric Cantor (R-Va.), who last year returned $2,000 to WorldCom after he came under fire from his political opponent for being too cozy with corporate interests. After Roll Call inquired about the apparent reversal, a Cantor spokesman said the campaign was returning the check. “At this juncture, we’re continuing to return WorldCom checks,” said Rob Collins, Cantor’s spokesman.

Both King and Stupak maintained that it would be inappropriate to donate their WorldCom PAC proceeds to a charitable relief fund set up by ex-WorldCom employees that funnels emergency aid to laid-off workers facing foreclosure, medical bills and other financial emergencies.

The group, which operates a Web site describing its work, www.exworldcom5100.com, has raised more than $200,000 by contacting lawmakers and party officials who received WorldCom PAC money and asking that it be donated to the relief fund. Rep. Frank Wolf (R-Va.) was the first to make a contribution, and nearly 60 other candidates and officeholders have followed suit.

Last month, the National Republican Senatorial Committee chipped in $23,500 to the fund and, after a phone call from Roll Call, its Democratic counterpart said it would send a check for $15,000 to the group.

Many lawmakers have given the group the cold shoulder, however. Kate Lee, a former WorldCom employee who chairs the group, wrote to Florida’s Keller on Feb. 4, noting that “WorldCom’s Political Action Committee reported that your campaign received $9,000 in 2002, a year in which the company’s financial statements were fraudulent. I ask you to donate those funds to the ex-WorldCom Employee Assistance Fund, a 501(c)3 charitable foundation.” She noted that the fund has helped more than 140 former employees who have faced eviction, medical bills from breast cancer and disabilities, and other financial strains due to the layoffs.

Lee said Keller never responded to the letter or other messages sent to his office. And later that month, the two-term lawmaker took another $1,000 from the WorldCom PAC, according to FEC records. His office did not return numerous phone calls last week.

When a similar appeal was made to Rep. Mike Thompson (D-Calif.), who received $1,000 from the PAC, it landed in the trash.

“If they ask again, tell them unfortunately that it was all spent,” a Thompson aide said in an e-mail inadvertently sent to the group.

“Everything we took in during the last election was either spent on our election, helping other candidates or donated to charity. We have less in the bank now than when we began the last election 2 years ago. Otherwise, round file it.”

Some lawmakers made a gesture toward the relief fund, but their money didn’t get there. Sen. Russ Feingold (D-Wis.) was quick to send back the $3,000 his campaign took on July 2, 2001. Although the relief fund wasn’t set up at the time, Feingold asked that his money be used to help displaced workers. The PAC took back Feingold’s money, but a company spokeswoman said they have no plans to convey a donation to the relief fund, despite a follow-up letter from Feingold in February inquiring about the money he returned.

King expressed surprise that so many of his colleagues decided to return their PAC money or donated to the relief fund.

“It was a real surprise to me that that was the case,” said King, who questioned whether the money donated to the relief fund actually gets into the hands of the former employees who may need it. “It’s amazing to me that all of those Members wrote a check to that fund” without asking questions about who controls the money and whether the group has paid staff.

According to King, nobody from Iowa has ever asked him to return his WorldCom PAC money. “For me, to say you wanted me in Congress and now I’m going to take the money you sent to help me get here and give it to somebody outside the state of Iowa, I don’t think it would be appropriate at all for me to do that.”