Mattel-Backed Bills OKd as Gifts Came In

During the period that a Mattel Inc. executive laundered $120,714 in political contributions to federal campaigns, the firm lobbied for, and in some cases won, congressional approval of bills to ease U.S. Customs procedures and reduce tariffs on certain toys, according to government records.

The executive, Fermin Cuza, also made some of the laundered contributions to national Democratic Party committees and leaders at a time when he was being discussed in the trade industry as a possible contender for an appointment by President Clinton to head the U.S. Customs Service.

Cuza dropped out of contention for the federal post after Mattel gave him a promotion. He resigned as senior vice president for Mattel in March 2001 after the company told authorities he had made the laundered political contributions without permission or knowledge of the firm.

A federal investigation concluded that Cuza and a Mattel political consultant made or arranged contributions to more than two dozen candidates and political organizations, then used Mattel funds to reimburse themselves and others for those donations. That practice is illegal because it disguises the actual source of money used to pay for political campaigns. In the Cuza case, regulators have uncovered no evidence that the recipients of the contributions knew that Mattel was paying for them.

“The biggest concerns are that laundering is used to circumvent contribution limits, and it deprives the public of who is the true source of the funds,” said Jim Knox, executive director of California Common Cause.

The former Mattel executive declined direct comment through his attorney, Mark E. Beck, who said his client thought making the contributions “was necessary to get out there politically.”

Cuza signed an affidavit admitting that he used Mattel money to reimburse himself for contributions made in his name and the names of others. Beck denied that Cuza sought any favors in return, but he declined to answer whether Cuza believed the contributions might help his bid for the job of customs chief or advance legislation beneficial to Mattel.

Federal, state and city ethics investigations have resulted in Mattel, Cuza and political consultant Alan M. Schwartz’s agreeing to pay $931,000 in fines for violations of campaign finance laws. The state Fair Political Practices Commission is scheduled to vote Friday on approving its settlement with the trio, and the Los Angeles Ethics Commission will vote Tuesday.

The federal investigation found that between June 1996 and November 2000 Cuza and Schwartz used a combined $120,714 in Mattel funds to make contributions to 23 candidate committees, two party committees and five political action committees, but used their names and others’ on the checks to disguise the fact that Mattel actually paid for the contributions.

Among the recipients of those donations were: Democratic Reps. Richard Gephardt of Missouri; Loretta Sanchez of Garden Grove; Jane Harman of Venice; Adam Schiff of Burbank; Brad Sherman of Sherman Oaks; Hilda Solis of El Monte; Lois Capps of Santa Barbara; and Juanita Millender-McDonald of Carson. Democratic Sens. Hillary Rodham Clinton of New York and Barbara Boxer of California also received contributions whose true source was Mattel funds.

During that same time, Mattel directly contributed $219,000 to national Democratic and Republican political committees.

Federal law prohibits companies from contributing funds from their corporate treasuries to candidates for federal office, but Cuza and Schwartz circumvented that law by appearing to give the money as individuals.

Records indicate that some of those who received laundered political contributions from Mattel, including California’s U.S. Sen. Dianne Feinstein, a Democrat, and Rep. Xavier Becerra (D-Los Angeles), wrote bills backed by Mattel, although those officials and others denied knowing the contributions were made with money from the toy company.

The federal filing specifically notes: “The commission found no evidence that any of the recipient political committees were aware that Mattel was the true source of the contributions.”

Mattel officials also said that whatever Cuza did involving the contributions was done without the company’s knowledge or permission.

Company spokeswoman Jules Andres said, “There is simply no connection between Mattel’s business practices and a former employee’s misuse of company funds. We didn’t know what was going on, and as soon as we discovered it, we self-disclosed.”

The Federal Election Commission said in a statement that it found no evidence that “any Mattel executive other than Cuza was aware that the payments to Schwartz were for the purpose of reimbursing federal political contributions.”

A former Customs Service official, Cuza joined Mattel in 1985. From June 1997 until his resignation, Cuza was the firm’s senior vice president of International Trade and Worldwide Government Affairs -- a high-level post at a company that makes Barbie dolls in China and imports other toys from Mexico, Thailand and elsewhere.

Cuza’s duties, according to government ethics filings, included monitoring U.S. trade policy, managing Mattel’s worldwide customs activities and representing Mattel’s interests before customs-related agencies and Congress.

As part of his work, Cuza streamlined Mattel’s customs clearance procedures. He hired Schwartz to help with government relations.

To smooth its imports, Mattel supported several pieces of legislation and spent an average of $60,000 annually on lobbyists to push the bills.

In addition to lobbying the Consumer Product Safety Commission on toy safety issues, the lobbying firms reported that Mattel backed a number of bills, including:

* HR 4444, which authorized permanent normal trade relations with China. The bill passed in October 2000 with support from many legislators who received laundered contributions from Cuza and Schwartz. The bill received the public backing of thousands of companies, including Mattel.

* HR 4871, which passed in July 2000. It paid for a new computer system for the Customs Service to streamline its procedures.

* SB 2770, which was written by Feinstein and proposed to temporarily suspend the duty on electronic machines principally designed for the education of children. The bill was referred to the Senate Finance Committee, where it stalled.

* HR 3704, which was introduced by Becerra in February 2000. It tried to exclude from a list of items subject to certain tariffs specific toys including “dress-up outfits marketed year-round for the amusement of children in role-play activity.” The bill was supported by Mattel and the Toy Assn. of Southern California, but did not advance after it was sent to the House Ways and Means Committee and subcommittee on trade.

Becerra said he did not know that any of the contributions he received were actually paid for by Mattel.

He said that he has known Cuza and Schwartz for several years, but that there was no link between his introduction of the bill and the laundered political contributions he received.

The congressman said he is mystified about what Cuza and Schwartz were trying to accomplish, given that they could have had Mattel form a political action committee and directly contribute to his campaigns through that entity.

“I don’t understand what they did or why they did it,” Becerra said.

The Federal Election Commission filing indicates that Becerra’s campaign committees for Congress and his run for Los Angeles mayor made him one of the main benefactors of the laundered contributions: He received $14,000 from 11 people and businesses that actually were backed by Mattel money.

Those who were listed as contributors to Becerra and who later were reimbursed by Mattel included Cuza, Cuza’s wife, his daughter and his son-in-law.

Becerra recalled that he met Cuza around 1997, when Cuza’s name was being floated as a possible head of the Customs Service.

Although the congressman said he knew Cuza had raised money for him -- and that Cuza worked for Mattel -- Becerra said he does not grant access to constituents based on whether they are financial supporters.

By comparison, Feinstein received relatively little of Mattel’s laundered money. Schwartz donated $1,000 to her campaign committee, then reimbursed himself with Mattel money. That is a small fraction of Feinstein’s overall campaign treasury, and aides to the senator said it would not likely have caught her attention or theirs.

“It probably would not register with anybody,” said Mark Kadesh, Feinstein’s chief of staff.

Kadesh said that Feinstein and her campaign did not know the money was laundered, and that Feinstein routinely introduces trade legislation if requested by California companies and it is not controversial.

Feinstein played an important role in the customs office, where Cuza at one point hoped to land a position. In 1997, she actively pushed for the ouster of customs chief George J. Weise, whom Feinstein criticized for not adequately emphasizing the law enforcement aspects of the work. Weise’s resignation that year set off a scramble of potential candidates wanting to be considered for the job.

Sam Banks, who ended up running the agency as acting commissioner for a year, recalled that Cuza was among those whose names were discussed early on.

“Fermin Cuza had spent some time with customs early in his career and he did a lot of international trade work,” Banks said “It was because he was so engaged that people in the trade industry saw him as a good candidate.”

Many of the laundered political contributions arranged by Cuza were made in 1997, including $10,000 each to the congressional campaign committees set up by the Democratic and Republican parties.

Cuza later dropped out of contention after he was given a promotion by Mattel, and Feinstein backed another contender for the customs chief job.