Kaptur criticized for circumventing new earmark banWritten by Kristen Criswell | | email@example.com
Rep. Marcy Kaptur is under national scrutiny from critics accusing her of helping for-profit businesses find a way around a ban on earmarks. But Kaptur told Toledo Free Press on July 13 that she believes she is in compliance with the ban.
On March 10, the House of Representatives announced the ban on earmarks to for-profit companies, but according to articles by The New York Times and The Huffington Post Investigative Fund, Kaptur (D-Toledo) and area businesses have found a way around that ban.
The New York Times article, “Companies Find Ways to Bypass Ban on Earmarks,” and The Huffington Post story, “Despite Pledge to Curtail Corporate Earmarks, Politicians Pursue Them,” both found instances where for-profit companies, which were previously receiving earmarks, were indirectly benefiting from earmarks through a nonprofit organization or university.
Kaptur, along with some of her colleagues, sponsored $150 million in earmarks that indirectly benefited for-profit companies, according to The Times. Within days, commentators such as Rush Limbaugh and David Asman of the FOX Business Network singled out Kaptur as an example of “corruption” and “kickbacks.”
The Times article said despite Kaptur’s public praise of the new earmark ban, privately her “office encouraged Ohio companies whose earmark requests were in peril to quickly line up deals with nonprofit organizations.”
Kaptur told Toledo Free Press she sent an e-mail on March 11 notifying those for-profits that were asking her office for earmarks of the new rules.
“We have worked with for-profit organizations and we have worked with not-for-profit organizations for a very long time. But, now with the new rules, they said no for-profit could be eligible, so we had to let people know that,” she said.
Kaptur said all of the companies named in the stories have patents, so with the intellectual property and the investment involved, the companies needed to be notified of the new rules.
“I thought it was important to notify them that they had to comply with the rules if they were to proceed,” she said. “We absolutely thought we were straightforward. We provided the information to them. We didn’t keep it secret. We told them, ‘this is what you have to do if you want to submit this year’ … I felt an obligation to move them forward. They had been proceeding in good faith, they didn’t do anything wrong.”
The e-mail Kaptur’s office sent to companies stated:
“Due to yesterday’s announcement by the United States House of Representative’s Committee on Appropriations your proposal for a Congressionally Directed Initiative is not eligible for consideration by the House Appropriations Committee, due to the recipient being a for-profit entity. As a result your organization’s proposal must be resubmitted through a not-for-profit institution or not considered by our office. The deadline for resubmission is Monday, March 15, 2010, by noon and due to time constraints this is a hard deadline.”
The e-mail asked any business with questions to contact her office and concluded with a press release from the House Appropriations Committee about the new rules.
The House passed a ban on earmarks to benefit for-profit companies to create a competitive process for funding based on merit, according to a news release by the House Appropriations Committee.
Only nonprofit organizations, government entities and universities can receive earmark funding. To ensure compliance with the rule, the committee will require at least 5 percent of all earmarks directed at nonprofits to be inspected annually.
Recent reforms on earmarks require Congress members to post their earmark request online for public review. The Appropriations Committee hopes to establish an online “one-stop” link to all members’ earmarks.
In 2009, more than $16 billion in earmarks were passed by Congress. If the March ban had been implemented one year earlier, it would have resulted in $1.7 billion less spending and 1,000 fewer earmarks.
For the 2011 fiscal year, House Republicans, with the exception of a few, have decided to participate in a ban on all earmarks. The Republicans made the decision to propose the one-year ban to reform the earmark process and come up with set procedures for choosing earmarks, said Bob Latta (R- Bowling Green).
“The American people are demanding that their money be well spent,” he said. “That is why we’ve instituted the earmark ban for this year.”
The Republicans’ goal is to make earmarks as transparent as possible so every American can “follow the money,” Latta said. The Republicans want to make sure there is a proper way of using earmarks and the process isn’t being abused, he said.
The Democrats’ reform left earmarks “half open and half closed,” making it difficult to enforce reform, Latta said. The for-profits finding a way around the ban, “goes back to why, for this year, the Democrats should have had a total ban. We should have taken the fiscal year to work out the procedure for earmarks and there would have been a clear cut process on how any earmark would be given to a nonprofit,” Latta said.
The Senate has no ban on earmarks to for-profit companies.
Armor to nowhere?
Kaptur has faced criticism, nationally and locally, that some of her sponsored earmarks are not viable and are “pay to play,” kicking back funds to her campaign chest.
In the 2010 fiscal year, Kaptur is ranked 24 out of 435 representatives in the number of sponsored earmarks. She has sponsored 57 earmarks, 36 as sole sponsor, accounting for $71.3 million in funds, according to OpenSecrets.org.
During a recent FOX Business Network show, “America’s Nightly Scoreboard,” David Asman summarized examples from The Times article criticizing Kaptur’s support of Toledo-based Imaging Systems Technology.
“For years, Ms. Kaptur has been getting tens of thousands of dollars in campaign cash from Imaging Systems Technology … that makes parts for body armor. In exchange, the company has received $8.2 million … in earmarks that Ms. Kaptur has inserted into federal spending bills,” Asman said. “Now, that’s bad enough, this kind of circle of corruption, but what makes matters worse is the Pentagon isn’t even buying what the company is being paid by taxpayers to produce. So a company that can’t sell its product in the marketplace gives tens of thousands of dollars to their congressman and gets in return millions of your tax dollars for something that will probably never even be used. That sounds like a kickback to us.”
Rich Iott, Kaptur’s Republican opponent in the fall, uses the same example to criticize Kaptur.
“In many cases like [Imaging Systems Technology] it’s a waste of taxpayers’ dollars. They received $8 million previously and now another $10 million in taxpayer money for making a product for which there is no market,” he said. “You have to back up and look at what the issue is. Basically, she is getting federal earmarks, funneling them through a sham nonprofit to a for-profit company. The principals of those companies donate to her campaign chest and, incidentally, they’re producing a product that there is no market for.”
Kaptur should return any campaign dollars received from a company that received earmark funding, Iott said, adding that although Kaptur has legally given earmarks to nonprofits and universities, that doesn’t mean it’s moral.
“To say it’s legal isn’t a good response, if it’s not right,” Iott said. “It’s a circumvention of the rules.”
Iott is opposed to earmarking and believes the money should stay in the district, he said.
“Using this process of earmarks, what the federal government is doing is interfering in the free market — who is going to be the winners and who is going to be the losers, it puts [companies] at an advantage to others who are in the same industry and that’s not right,” Iott said.
Kaptur, who according to the Federal Elections Commission website has received approximately $7,300 in campaign contributions from employees and family members of Imaging Systems Technology between 2006 and 2008, said her earmarks aren’t influenced by campaign contributions.
“Under current law, any citizen or organization that is properly constituted under the law, can give to your campaign. But you have to have a firewall between your campaign and official duties,” she said. “There isn’t any individual or any group that has given us extraordinary amounts of money … I think we struggle to raise funds for campaigns and there isn’t any interest or individual that predominates.”
Kaptur also argues that earmarking funds for Great Lakes Research Center, a nonprofit set up by a principal of Imaging Systems Technology to develop light-weight armor, is not another “bridge to nowhere.”
“They’re trying to create a lightweight material for the armed forces. They aren’t the only company, but if the [Department of Defense] didn’t want them, they wouldn’t have signed agreements with them. Now, will they succeed in what they are attempting to do? We don’t know,” she said.
Kaptur said the Army solicits proposals from all over the world to compete for contracts and to have a company in the district that is in the mix is “great.”
Carol Ann Wedding, president of Imaging Systems Technology (IST), told Toledo Free Press the company has been working with the Army Research Laboratory (ARL) since 2007. The Army has purchased and tested some of their materials and is interested in further development, Wedding said.
Great Lakes Research Center, a nonprofit established by Victoria Kurtz, vice president of IST, could receive $10.4 million in earmarks in 2011. The nonprofit was established to promote “technology, job creation and opportunity in Northwest Ohio.”
IST and Deep Springs Technology, a spin-off company of Imaging located in the same building, will work with Great Lakes Research Center.
Kaptur gave Toledo Free Press a Jan. 25 letter from the Department of Defense that said the ARL is interested in the research and development of syntactic foams based on light metals.
The letter, from Vincent H. Hammond, materials engineer at the ARL, to Deep Springs Technology, stated:
“Your ongoing efforts in these material systems are of special interest in the development of lightweight armor and energy absorbing materials capable of meeting the current and projected needs of the Army.”
Pairing with universities
The Times and Huffington Post articles reported on several businesses that previously received earmark funding in partnership with UT and will still receive earmarks.
Frank Calzonetti, vice president of research and economic development at UT, said Kaptur’s office contacted him earlier this year about the university collaborating with new businesses.
“We deal with [Kaptur’s office] very frequently relating to federal projects and industry projects. They bring to our attention a company that may have an interest in coming into the district or developing a collaborative project with us,” Calzonetti said.
UT determines if there is a possibility of a collaboration with a private business and the school and decides what to do next. Not all of the companies referred from Kaptur’s office end up collaborating with the university, he said.
“We’ve referred many companies there, little startups. I do it every day,” Kaptur said. “We use the university to help companies to advance their technology so they can make a difference in the marketplace.”
Kaptur said the businesses in The Times story were not referred to UT just because of the new earmark ban.
“We have worked over the years to build some capacity in our community to create jobs of the future, higher tech jobs. We can’t do that without the university because we’re not big enough,” Kaptur said. “The university is important because even with business people who have some assets, you have to have a basic research staff — which most of them can’t afford — to do the scientific work necessary for high-tech research.”
Calzonetti said The Times inaccurately reported that UT receives “at least $70,000 on a $1 million appropriation to cover the cost of faculty members and a researcher to work with the partners.”
No predetermined or set amount for who receives what is determined before a project, Calzonetti said. Funding is determined after the collaborating groups decide who is bringing what to the table, he said. All collaborations must be mutually beneficial to the faculty, staff and students at UT and the collaborating business.
Early on in her 14 terms as congresswoman, Kaptur discovered the importance of earmarks.
Kaptur noticed that out of the transportation gas dollars, 83 cents on every dollar that Ohio sent to Washington came back to the state. Kaptur, who was interested in where the funding was going, discovered that when the government sent the money back, funding ended up in Cleveland, Columbus and Cincinnati.
“I thought, ‘Hey, what’s going on here?’ I began in transportation bills to say if my state isn’t helping our region, then I’m going to. If my federal government isn’t helping my region — then I’m going to,” Kaptur said.
Kaptur began writing earmarks, into the transportation bills that created projects, such as the Buckeye Basin Greenbelt Parkway and the I-280 interstate lift bridge, bringing some of the area’s dollars back to the region, she said.
“I have the right to fight for my district. I have the right to fight for my state and I do. When they say earmark … earmark has come to be kind of an ugly word,” Kaptur said. “For me, it’s actually supporting the advancement of something in my district — an interest in my district and that’s my job.”
On March 15, right after the new Congressional ban on earmarks to for-profit companies was announced, The Washington Post published an article, “Curbing earmarks: Even with new restrictions, for-profits play a role.” The article discussed how for-profit companies were likely to collaborate with nonprofits to still receive earmark funding, noting that many for-profit companies were already receiving earmark funding through collaborations with universities.
Steve Ellis, vice president of Taxpayers for Common Sense, who was quoted in the article, told Toledo Free Press he was not surprised by the results found in The New York Times and Huffington Post articles. He said the biggest issue is which companies are contributing to which candidates and what was the motivation of the congress members to go against the chairman of the appropriations committee.
“Why did the representatives, the Kapturs, decide to pursue this approach?” he said. “Why did they subvert the intent of the ban?”
Ellis believes the earmarks that have been reported on now have a “scarlet letter,” and people are paying more attention to those businesses, so he wouldn’t be surprised if the earmarks weren’t approved.
Ellis said the current earmark approach is a “political muscle system rather than a project merit system.”
SIDEBAR: What is an earmark?
Every year, Congress passes budgets for each federal agency to operate within. An earmark is funding, taken from the agency’s budget as a whole, that is designated by members of Congress to support a specific project.
“By specifying exactly how and where money is to be spent, Congress can use earmarks to bypass executive branch agencies,” said John Wright, professor of political science at The Ohio State University. “In the typical appropriations process, Congress approves lump sum budgets to executive agencies who then administer previously authorized programs and projects. But with earmarks, Congress essentially ‘mainlines’ money to pet projects in their districts.”
Earmarks are a common part of the legislative process and are Constitutionally valid, but they aren’t a required component of the process, Wright said.
Earmarks limit the ability of agencies to decide where their funding should be allocated and removes merit-based allocations, said David King, public policy lecturer at Harvard Kennedy School. The policy justification for using earmarks is members believe they know more about their district and the needs of their district than the bureaucracy, King said.
“[Earmarks are] positive when a member legitimately knows more about how the money should be spent on a program, but usually it’s just an excuse for sending money back to a Congressional district,” he said.
Earmarks are often criticized in the public “for good reason” King said.
“It looks like members are taking money from the public as a whole to benefit their own district,” he said. “It’s great if you happen to live in the member’s district, but it’s not so great if you live anywhere else.”
The main complaint about earmarks is “they circumvent the usual channels of public accountability, while adding billions of dollars to the federal budget,” Wright said.
“The only way to find earmarks is to read the text of legislation. Since so few of us do that, and because earmarks are not administered by executive branch agencies, earmarks often go unnoticed and avoid public scrutiny,” Wright said. “Thus, earmarks are a convenient way for legislators to reward contributors or provide other favors to key interests in their constituencies.”