May 3, 2018 BY FAX: 202-224-7416 Honorable Johnny Isakson, Chair Honorable Christopher A. Coons, Vice Chair U.S. Senate Select Committee on Ethics 220 Hart Senate Office Building Washington, DC 20510 RE: Request for Investigation of Three Senators for Accepting Campaign Contributions in Exchange for Official Action Dear Chairman Isakson and Vice Chairman Coons: Campaign for Accountability (“CfA”) respectfully requests that the U.S. Senate Select Committee on Ethics (“ethics committee”) investigate whether the following three members of the Senate violated the chamber’s rules and criminal law by accepting campaign contributions from the payday lending industry shortly before or after taking official actions in support of the industry: Senator Richard Shelby (R-AL) and Senator Pat Toomey (R-PA). A recent report, Payday Puppets: How More Than A Dozen Members of the U.S. House and Senate Were Showered with Thousands of Dollars in Campaign Cash by Payday Lenders Within Days of Taking Official Action to Benefit the Industry,1 details the official actions each of these three members took in very close proximity to receiving campaign contributions from payday lending industry executives and industry political action committees (“PACs”). 2 Those official actions included opposing legislation that would have created a reserve fund to provide autonomy for the Consumer Financial Protection Bureau (“CFPB”) to adequately regulate predatory lenders, and voting for an amendment that would have weakened the CFPB. The facts for each member are set forth below. Factual Background Senator Richard Shelby 1 A copy of this report is available at https://alliedprogress.org/research/paydaypuppets/. The report also details the actions of and campaign contributions to several members of the House of Representatives who are not subject to ethics committee’s jurisdiction. 2 611 Pennsylvania Ave., S.E. #337 • Washington, D.C. 20003 • (202) 780-5750 campaignforaccountability.org Chairman Isakson and Vice Chairman Coons May 3, 2018 Page 2 Sen. Shelby has supported many of the congressional efforts to weaken the CFPB.3 On Mach 26 2015, Sen. Shelby voted against an amendment that would have established a “deficit-neutral reserve fund relating to consumer financial protection” to, among other things, ensure the CFPB “has authority and autonomy to continue to protect consumers from predatory lending.”4 Earlier in the month, on March 2, 2015, Sen. Shelby’s campaign committee received $46,250 from the payday lending industry.5 Sen. Shelby’s campaign committee reported contributions from several payday lending company PACs including $5,000 from Ace Cash Express, Inc. PAC, $5,000 from Checksmart Financial LLC PAC, and $2,500 from Pls Good Neighbor PAC. 6 Sen. Shelby’s campaign committee also accepted several contributions from executives at payday lending companies on the same day including $5,000 from an executive at Advance America, $10,000 from three executives at Amscot Financial, $2,500 from an executive at Check City, $5,000 from two executives at Checks Into Cash, $2,500 from an executive at Community Choice Financial, $5,000 from an executive at Moneytree, Inc., and $3,750 from an executive at PLS Financial.7 On May 6, 2010, Sen. Shelby introduced an amendment and gave a speech on the Senate floor in an effort to weaken consumer protection measures that were being debated by the Senate at the time. 8 Then-President Barack Obama said Sen. Shelby’s amendment would “gut consumer protections and do nothing to empower the American people by cracking down on unfair and predatory practices.”9 Four days after he offered the amendment, Sen. Shelby’s campaign committee received $1,000 from an executive at Select Management Resources, a payday lending company. 10 Ten days later, on May 20, 2016, Sen Shelby’s campaign committee received $4,800 from an executive at Integrity Texas Funding, LP, a payday lending company in Greenville, South Carolina. 11 Richard Shelby, The Danger of an Unaccountable ‘Consumer-Protection’ Czar, The Wall Street Journal, July 21, 2011, available at https://www.wsj.com/articles/SB10001424053111903554904576457931310814462. 4 S. Amdt.842 to S.Con.Res.11, 114th Congress, March 25, 2015, available at https://www.congress.gov/amendment/114th-congress/senate-amendment/842/text; Final Vote Results for Roll Call 117, available at https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=114&session=1&v ote=00117. 5 Shelby for U.S. Senate, FEC Form 3, 2016 April Quarterly Report, Amended, July 1, 2016, available at http://docquery.fec.gov/pdf/358/201607070200213358/201607070200213358.pdf. 6 Id. 7 Id. 8 Charlene Carter, Senate Rejects Effort to Weaken Proposed Consumer Regulator, Congressional Quarterly Today, May 6, 2010. 9 Id. 10 Shelby for U.S. Senate, FEC Form 3, 2010 Pre-Primary Report, Amended, July 14, 2010, p. 21, available at http://docquery.fec.gov/pdf/160/10020474160/10020474160.pdf 11 Shelby for U.S. Senate, FEC Form 3, 2010 July Quarterly Report, Amended, October 29, 2010, p. 29-30, available at http://docquery.fec.gov/pdf/651/10020972651/10020972651.pdf. 3 Chairman Isakson and Vice Chairman Coons May 3, 2018 Page 3 Senator Pat Toomey On Mach 26 2015, Sen. Toomey voted against an amendment that would have established a “deficit-neutral reserve fund relating to consumer financial protection” to, among other things, ensure the CFPB “has authority and autonomy to continue to protect consumers from predatory lending.”12 Two days before the vote, Sen. Toomey’s campaign committee received $10,000 from four payday lending industry PACs: Ace Cash Express, Inc. PAC, Checksmart Financial LLC PAC, Financial Service Centers of America, Inc. PAC (FISCA PAC), and Pls Good Neighbor PAC, as well as $2,500 from an executive at Amscot Financial, a payday lending company. 13 In the week following the vote, on March 30 and March 31, Sen. Toomey’s campaign committee received $3,000 from executives at three payday lending companies: Advance America, Advance Financial, and Moneytree. 14 Violations The timing of Sen. Shelby’s and Sen. Toomey’s official acts , either directly preceding or following campaign contributions from payday industry executives and industry PACs, suggests the campaign contributions may have been made in exchange for legislative assistance in violation of federal law and Senate rules. Acceptance of a Bribe Federal law prohibits public officials from directly or indirectly demanding, seeking, receiving, accepting, or agreeing to receive or accept anything of value in return for being influenced in the performance of an official act. 15 It is well-settled that accepting a contribution to a political campaign can constitute a bribe if a quid pro quo can be demonstrated. 16 If, as it appears, Senators Shelby and Toomey accepted donations to their campaigns in direct exchange for specific action on behalf of the payday lending industry, they may have violated the bribery statute. Illegal Gratuity The illegal gratuity statute prohibits a public official from directly or indirectly demanding, seeking, receiving, accepting, or agreeing to accept anything of value 12 S. Amdt.842 to S.Con.Res.11, 114th Congress, March 25, 2015. Friends of Pat Toomey, FEC Form 3, 2015 April Quarterly Report, April 15, 2015, available at http://docquery.fec.gov/pdf/750/15020141750/15020141750.pdf. 14 Id. 15 18 U.S.C. § 201(b)(2)(A). 16 McCormick v. U.S., 500 U.S. 257, 273 (1991); United States v. Biaggi, 909 F.2d 662, 605 (2d Cir. 1990), cert. denied, 499 U.S. 904 (1991). 13 Chairman Isakson and Vice Chairman Coons May 3, 2018 Page 4 personally for or because of any official act performed or to be performed by such official.17 In considering this statute, the Supreme Court has held that a link must be established between the gratuity and a specific action taken by or to be taken by the government official. 18 If a link is established between their votes on legislation or other official action and their accepting or agreeing to accept contributions to their campaigns, Senators Shelby and Toomey may have violated the illegal gratuity statute. 5 U.S.C. § 7353 A provision of the Ethics Reform Act of 1989, 5 U.S.C. § 7353, prohibits members of Congress, officers, and employees from asking for anything of value from a broad range of people, including “anyone seeking official action from, doing business with, or…conducting activities regulated by the individual's employing entity; or whose interests may be substantially affected by the performance or nonperformance of the individual's official duties.” In this case, Senators Shelby and Toomey appear to have taken official actions – including voting on legislation that would benefit the payday lending industry – either following close on the heels or slightly in advance of campaign contributions. Such conduct could violate 5 U.S.C. § 7353. Senate Rule XLII Senate rules specifically provide that “the decision to provide assistance to petitioners may not be made on the basis of contributions or services, or promises of contributions or services, to the Member’s political campaigns or other organizations in which the Member has a political, personal or financial interest.” 19 The Senate ethics manual recognizes that “special issues of ethics and propriety are raised when Members intervene in a particular matter before a federal agency on behalf of an individual who is a contributor to or fundraiser for their campaigns or other causes.”20 While the Senate ethics committee recognizes that some individuals who contribute to senators’ campaigns will “at some point request assistance from their elected representatives,”21 the ethics manual quotes Sen. Paul Douglas’s recommendation that “a decent interval of time should be allowed to elapse” between the favor and request 17 18 U.S.C. § 201(c)(1)(B). United States v. Sun-Diamond Growers of Cal., 526 U.S. 398 (1999). 19 Rule XLII(3). 20 Senate Ethics Manual, p. 183. 21 Id. 18 Chairman Isakson and Vice Chairman Coons May 3, 2018 Page 5 for a contribution “so that neither party will feel that there is a close connection between the two acts.”22 The ethics manual further refers to Senate Resolution 266, which admonishes Members that ‘[a] public office is a public trust’ and states that each Senator ‘has been entrusted with public power by the people; that the officer holds this power in trust to be used only for their benefit and never for the benefit of himself or a few.’23 As a result, senators are warned that “they must endeavor to avoid the appearance that the Senator, the Senate, or the governmental process may be influenced by campaign contributions or other benefits provided by those with significant legislative or governmental interests.”24 Questions senators and staff are to consider when they know a petitioner is a contributor include: 1) the amount of money contributed; 2) the history of donations by the contributor, i.e., whether the contributor donated previously; 3) the nature and degree of the action taken by the senator; and 4) the proximity of the contribution to the senator’s action on behalf of the petitioner. 25 Here, Senators Shelby and Toomey took official action that directly benefitted the payday lending industry and they accepted contributions from individuals and PACS connected to the industry in close temporal proximity to those actions. This suggests their actions were influenced by campaign donations in a manner proscribed by Senate ethics rules. Senate Rule Prohibiting Improper Conduct The Senate Ethics Manual provides that “[c]ertain conduct has been deemed by the Senate in prior cases to be unethical and improper even though such conduct may not necessarily have violated any written law, or Senate rule or regulation. Such conduct has been characterized as ‘improper conduct which may reflect upon the Senate.’”26 This rule is intended to protect the integrity and reputation of the Senate as a whole. 27 The Ethics Manual explains that “improper conduct” is given meaning by considering “generally accepted standards of conduct, the letter and spirit of laws and Rules. . .”28 22 Id., quoting Paul Douglas, Ethics in Government, 89-90 (Cambridge: Harvard university Press, 1952). Senate Ethics Manual, p. 184, quoting S. Res. 266, 90th Cong. 2d Sess. (1968). 24 Id. 25 Id. at 185. 26 Senate Select Committee on Ethics, Improper Conduct Reflecting Upon the Senate and General Principles of Public Service, Senate Ethics Manual, Appendix E, p. 432. 27 Id. 28 Id. at 433; see also fn. 10 citing a 1964 investigation into the activities of Bobby Baker, then Secretary to the Majority of the Senate, the Committee on Rules and Administration, which stated, “It is possible for 23 Chairman Isakson and Vice Chairman Coons May 3, 2018 Page 6 In 1991, the Senate Select Committee on Ethics concluded that Senator Alan Cranston had engaged in improper conduct which reflected on the Senate by “engaging in an impermissible pattern of conduct in which fundraising and official activities were substantially linked.”29 Although the committee found that none of Senator Cranston's activities violated any particular law or Senate rule, the committee nonetheless found Senator Cranston's conduct “violated established norms of behavior in the Senate, and was improper conduct that reflects upon the Senate…”30 As a result, the committee issued a reprimand to Senator Cranston.31 If, as it appears, Senators Shelby and Toomey accepted campaign contributions in return for legislative favors, their actions would constitute improper conduct in violation of Senate rules. Conclusion The payday lending industry preys on some of the most vulnerable members of our society, deliberately plunging them into a cycle of debt in order to reap high profits. The idea that members of Congress are trading the power of their offices to help unscrupulous payday lenders avoid badly needed oversight and regulation in return for campaign contributions undermines public confidence in the institution as a whole. As a result, the ethics committee should immediately commence an investigation of this matter to determine whether Senators Shelby and Toomey have violated Senate rules and criminal law. Sincerely, Daniel Stevens Executive Director Campaign for Accountability Encl. anyone to follow the letter of the law and avoid being indicted for a criminal act, but in the case of employees of the Senate, they are expected, and rightly so, to follow not only the letter but also the spirit of the law.” S. Rep. No. 1175, 88th Cong., 2d Sess. 5 (1964). 29 Senate Ethics Manual, p. 434. 30 Id. at 435. 31 Id.