GE Spent Nearly as Much on Its PAC as Its Employees Gave : Lawsuit: The company says the $1.85 million in corporate funds covered administrative costs of the committee for seven years.
General Electric spent $1.85 million in undisclosed corporate funds to operate its political action committee between 1984 and 1990--almost as much as company employees gave in voluntary political contributions, according to court papers obtained by The Times.
The expenditure data, disclosed by GE in response to a stockholder’s suit, offers the public its first glimpse of how much money big companies spend to bolster PAC activities. It is certain to be cited by reformers as proof that PACs are a tool of corporate influence-buying in Washington, not a system that spurs citizen participation in the political process, as Congress intended when PACs were sanctioned by law in 1974.
In addition, General Electric executives acknowledged in response to the suit that the company’s lobbyists in Washington are entirely responsible for choosing which politicans receive the money contributed by GE employees. The employees have virtually no role in deciding how the money will be dispensed.
Although GE was the defendant in the suit, it easily could have been brought against any big company, labor union or lobbying group that has a political action committee. Under federal law, these groups are permitted to spend unlimited sums to administer their PACs, as long as their contributions to the candidates come only from voluntary donations from employees or members.
In a statement to The Times, GE noted that, “under current federal election laws, it is both legal and in the best interests of GE shareowners for the company to support a PAC, as do our competitors, unions and other groups.”
But Larry Makinson, an expert on PAC funds and author of “Open Secrets: The Encyclopedia of Money and Politics,” said the GE data “proves the whole argument for PACs is a ruse. It belies the argument that PACs exist to promote democracy.”
Common Cause and other reform advocates have been asking Congress to require PACs to use voluntary donations to cover administrative costs or, at least, to force companies and unions to disclose publicly how much they are spending from their own treasuries to support their PACs.
“One way to reduce the role of PAC money in political campaigns is to require corporations and labor unions to pay administrative costs from the contributions they receive,” said Fred Wertheimer, Common Cause president. “In GE’s case, if they were forced to do that, it would drastically reduce the amount of money their lobbyists have to hand out to members of Congress.”
The GE suit was filed originally in 1986 by GE stockholder Philip M. Stern and has been continued by his heirs since his death last June. The suit seeks to shut down the General Electric PAC. But Stern--a philanthropist, author and critic of the PAC system--apparently was motivated in part by a desire to force GE to disclose the extent of corporate involvement in its political action committee.
Corporate lawyers who have watched the progress of Stern’s suit say it is unlikely that the court will order GE to close down its PAC, especially since plaintiff’s lawyers concede that the PAC benefits the company.
Internal GE documents show that the firm uses corporate funds to pay all PAC-related administrative expenses including salaries of PAC employees, office rent, office equipment, stationery, postage, travel and all costs of communicating with employees. In the years 1983 through 1990, the company disclosed that it spent $1,850,804 for these expenses while the PAC dispensed $2,159,580 in employee contributions.
According to the rules establishing GE’s political action committee, its purpose is “to support the nation’s political processes and advance the nation’s economic, social and political welfare by affording General Electric management personnel the opportunity to take a more active part in the political process. . . .”
In response to questioning in the Stern case, GE Chairman John F. Welch said the GE PAC exists primarily to make sure that GE lobbyists have “access” to members of Congress when they want to argue the company’s point of view on pending legislation.
Memos written by GE employees show that the firm views the contributions as a way to cement close relationships with politicans. In 1985, for example, GE lobbyists recommended giving an extra $250 to Rep. Charlie Rose (D-N.C.) because he “provides important intelligence on variety of issues.”
Under questioning in the case, one GE official boasted that the company had such good access to Sen. Daniel Patrick Moynihan (D-N.Y.) that their lobbyist was able to call him once at 3 a.m. to ask him to vote a certain way on a pending issue. “And if you want to think about access,” the GE official said, “that’s access right into the bedroom.”
Moynihan, however, said in an affidavit that he did not recall any such incident.
During the 1980s, a special committee of GE employees had the authority to review the proposed PAC budget each year. But on Aug. 28, 1990, at a PAC officers meeting, GE’s Washington lobbyists were given full, unrestricted responsibility for determining how the money would be spent.
“GE management has attempted to portray the company’s PAC as a spontaneous grass-roots organization which runs its own show with no involvement by GE management,” said a motion filed by Stern’s lawyer, Whitney North Seymour. “The facts are clearly otherwise.”
All eligible GE employees are contacted by “zone captains” and are asked to contribute according to their positions on a prescribed scale approved personally by GE Chairman Welch, records show. But GE officials said the firm has strict rules designed to prevent employees from being pressured by their bosses to contribute to the PAC.
