The bulk of the money went to the Ohio Democratic Party, which controlled the attorney general’s office from 2007 to 2010, but the flow of money shifted to the Ohio GOP after Republican Mike DeWine defeated Democrat Richard Cordray in the 2010 election. The attorney general contracts with outside firms on litigation such as this.
All told, six law firms that sought to be assigned the Bank of America case contributed $1.25 million to the Ohio Democratic Party and $515,900 to the Ohio Republican Party, according to a Daily News review of state party campaign finance reports from 2006 to 2012.
The two winning firms — Bernstein Litowitz Berger & Grossmann and Kaplan Fox — were the most generous: $574,187 to the Democrats and $200,000 to the Republicans.
In addition, the half-dozen law firms seeking the state contract sent more than $1.5 million to a pair of national party organizations, according to OpenSecrets.org. Between 2004 and 2012, the firms contributed more than $1 million to the Democratic Attorneys General Association and $522,000 to the Republican State Leadership Committee, which includes the Republican Attorneys General Association.
The pattern of giving does not appear to violate Ohio’s campaign finance laws, which sets a limit of $34,631 on an individual’s contribution to a state political party’s candidate fund. Multiple lawyers in each of the firms made donations under that limit. Also, federal campaign laws allow unlimited contributions to the Democratic Attorneys General Association and other tax-exempt 527 organizations.
But Robert Stern, former director of the Center for Governmental Studies and author of some of California’s campaign finance laws, said the donations — particularly when they abruptly shift from one party to the new party in control — are troublesome.
“This, absolutely, looks like the only reason they’re giving is because they want to curry favor with the attorney general’s office,” Stern said. “It looks like they’re buying access. It looks like they’re buying the contracts and if you don’t give, you don’t get the contract.
“It’s sort of like you have to ante into a poker game. You don’t get to play poker unless you ante in.”
Who benefited?
Ohio has “pay to play” laws that prohibit requiring campaign contributions as a prerequisite for getting a government contract.
It is also illegal to earmark donations — giving money to a political party with the explicit intent that it be directed to a particular candidate.
Although there is no evidence the donations surrounding the Bank of America case were explicitly earmarked, in a round-about way the law firms’ contributions may have benefited the Cordray and DeWine campaign accounts, the Daily News investigation found.
Money regularly flows in and out of campaign accounts, so tracking it is difficult. But in the 2008 and 2010 elections, the Ohio Democratic Party gave the Cordray campaign $1.88 million and spent another $2.18 million on in-kind services such as mailings, research and slate cards.
Meanwhile, during those two election cycles the six firms vying for the Bank of America contract gave the party a total of $1,065,686.
After DeWine was elected on Nov. 2, 2010, the giving shifted to the Republicans, and between Nov. 19, 2010, and Dec. 28, 2010, the six firms sent $225,000 to the Ohio Republican Party.
Two days before those checks began arriving, the Ohio GOP donated $226,000 to the DeWine campaign committee out of the $3.2 million the party reported spending during the reporting period.
DeWine declined to comment. Cordray, who is now President Barack Obama’s director of consumer financial protection, did not return messages seeking comment.
Cordray’s legal services chief, Russ Balthis, led the team that evaluated the firms seeking the Bank of America work, but said he had no clue about money flowing from those firms to the Ohio Democratic Party.
“I had no communication with anyone in regard to the giving,” he said.
Balthis said Cordray simply agreed with the staff’s recommendation to pick Bernstein Litowitz and Kaplan Fox in April 2009.
Cordray’s long-time political fundraiser Melissa Barnhart did not return telephone messages seeking comment. Barnhart’s attorney, former Secretary of State Jennifer Brunner, said her client worked as a fundraiser for the party but she couldn’t say whether Barnhart asked the law firms to make donations.
“Her business is raising money. That’s what she has done and she knows the rules,” Brunner said.
Ohio Democratic Party spokesman Jerid Kurtz said the Cordray campaign put Barnhart on the party payroll but she didn’t answer to party officials.
Kurtz said the Ohio Democratic Party follows state and federal laws when raising money to back candidates but doesn’t ask donors why they contribute or why they stop giving. “Elections have consequences, and as our statewide electoral success paused in 2010 during the strongest Republican election in a generation, Democrats lost some of our fair-weather financial backers,” Kurtz said. “Only Mike DeWine and Republicans can comment on what, if any, promises and inducements may have been made to persuade previous donors to end their financial support to our party and candidates.”
After the 2010 election, Bernstein Litowitz hired Republican fundraiser David Myhal as its lobbyist, state records show. DeWine’s office renewed agreements with Bernstein Litowitz and Kaplan Fox in August 2011.
Ohio GOP spokesman Dave Hopcraft said he isn’t sure why or how the firms started sending the party money.
“There is no record that anyone reached out to them,” he said.
Landmark case
Ohio’s two largest pension funds — the State Teachers Retirement System and Ohio Public Employees Retirement System — teamed up with funds in Texas, The Netherlands and Sweden to bring a lawsuit against Bank of America in 2009. They allege that the megabank broke federal securities law by failing to disclose Merrill Lynch’s losses when the two financial giants announced their merger in the fall of 2008.
By the time Merrill Lynch’s troubles were disclosed, the plaintiffs argue, shareholders — which included a large stake by the Ohio pension funds — lost $50 billion in value.
Ohio successfully sought lead plaintiff status, meaning the state will represent all aggrieved investors in the entire class.
Columbia University Law Professor John Coffee, an expert in securities litigation, has said the Bank of America case could potentially crack the top 10 biggest securities cases, all of which have settled for $1 billion or more and generated millions of dollars in legal fees.
However, Bernstein Litowitz and Kaplan Fox are working on a contingency basis, meaning they will get a cut of any settlement or jury award but get zero if they lose.
The two firms have clients coast to coast. Bernstein Litowitz has offices in New York, San Diego and New Orleans, while Kaplan Fox is located in New York, San Francisco, Los Angeles, Chicago and New Jersey.
The case could soon come to a head. “It’s scheduled for trial in October. It should come to fruition fairly soon,” said Dayton area attorney Dennis Lieberman, who was hired as local counsel to assist Bernstein Litowitz and Kaplan Fox.
Lieberman’s payment arrangement with the two firms is not a public record. Cordray said when he hired Lieberman’s firm that he did so because of experience. He did acknowledge that he had known Lieberman, a former Montgomery County Democratic Party chairman, for more than 15 years.
Coffee has said there is no reason that Ohio counsel would be needed for the case pending in U.S. District Court in New York.
Stern didn’t dispute that Bernstein Litowitz and Kaplan Fox have extensive experience in complex securities litigation, but he said the political contributions taint the process.
While perhaps not explicit, he said, there was probably an implicit understanding of what was required.
“It’s just understood, I think, that in Ohio, this is how you play the game,” Stern said. “It’s almost a tax.”
Contact this reporter at (614) 224-1624 or lbischoff @DaytonDailyNews.com.
About the Author
