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Behind the Story: “The Favor Factory” from The Seattle Times
By David Heath
Business Journalism
November 17, 2008
You would think it'd be easy to track down an 85-foot boat, especially one that Congress ordered the Navy to buy. But call after call to a high-level Navy spokesman only netted me this response: They knew nothing about the boat.
It was baffling because I'd already found the vessel on my own and told the Navy where to look--next to a University of Washington pier right in the heart of Seattle.
"Yes, that boat is here at the UW," Russell McDuff, director of the School of Oceanography, told me. Turns out the Navy had no use for the $4.5 million boat and had "loaned" it to the university without bothering to take delivery first. The school could never find a use for it either, so McDuff had asked the Navy months earlier to come take it back.
The useless boat was just one of thousands of purchases in recent years that Congress forced the military to make. This micromanagement of military spending is done through earmarks buried in appropriation bills, a legislative trick invented by lobbyists, usually to funnel tax dollars directly to one of their clients.
Guardian Marine International, the company that sold the Navy the $4.5 million boat, was a floundering business run out of the CEO's house in Edmonds, Wash. But shortly after the company's founder started giving money to the campaign of Rep. Norm Dicks, the Congressman got the company their first earmark. That was followed by more donations and three more earmarks, including a boat the Coast Guard gave away to a county sheriff and the boat the Navy loaned to the University of Washington.
In all, taxpayers spent more than $17 million on Guardian Marine boats, while the company's three executives gave more than $50,000 to the campaigns of a select few in Congress.
It's a pattern one critic calls "circular fundraising." It may be legal, says Arizona Congressman Jeff Flake, but it has the smell of kickbacks.
At The Seattle Times, we wanted to know how widespread this practice was. Could it be that earmarks were a fundraising tool? Answering that question proved to be the most daunting challenge of my career.
Buried details
Earmarks are shrouded in secrecy, which is amazing given their explosive growth and sheer volume. When Ronald Reagan took office in 1981, earmarks didn't exist. Yet by 2005, the Congressional Research Service estimated that taxpayers spent $52 billion to pay for more than 16,000 earmarks.
Still, an obvious question--"Where's all that money going?"--is nearly impossible to answer. For starters, if you carefully read all 12 appropriations bills passed last year, you won't find many earmarks. Congress hides them in a separate document called the conference committee report.
And I mean it when I say they hide them. While the bill is all text--usually simple to capture electronically and throw into a database--Congress tinkers with the format of the earmarks to make them difficult to gather. Staffers convert the text to an image and then shrink the type down so that it is 1/20th of an inch, much smaller than newspaper agate type. This makes scanning the pages and converting the material back to text an onerous chore.
After spending several mind-numbing days doing this on my own, two interns came to my rescue. Liz Burlingame and Chanel Merritt from the University of Washington were not only willing to help but seemed bent on a mission.
We zeroed in on the 2007 defense bill, one of only two spending bills that passed Congress last year, and found 2,700 earmarks costing a total of $11.8 billion. But cataloguing earmarks reveals little by itself. They read like a secret code, cryptic phrases with dollar amounts attached. Now came the hard part: figuring out who got the money.
The only decent source for that information were press releases from members of Congress boasting about the bacon they'd brought home. We went to the Web site of each member of Congress and carefully searched for any release about the defense bill. We knew we weren't going to find all earmarks this way, but we hoped to get a large enough sample to do meaningful analysis of campaign contributions.
We found statements from 277 of the 535 members of Congress and put all of them into a database. The quality of press releases ran the gamut. Sens. Hillary Rodham Clinton and Charles Schumer of New York issued joint releases that meticulously identified each of their 60 earmarks exactly as they appeared in the defense bill. Pennsylvania Congressman John Murtha, on the other hand, reworded a lot of his earmarks, often combining them and offering little explanation.
I also sent out scores of e-mails and made dozens of calls to military bases asking them to identify the recipients of earmarks. Though the bases initially seemed willing to help, they almost uniformly told me they either couldn't track the earmark or that a vendor hadn't been chosen yet.
Burlingame and Merritt devoted about four months to helping me gather this data. We succeeded in tracking more than 40 percent of the earmarks to a specific member of Congress and a recipient of the money.
Finding the donors
I was naïve enough to think we might almost be done, but we still had major obstacles to overcome. One was building a database of the companies that got the money. This was more difficult than it sounds because the details in the press releases were often sketchy or even inaccurate. But the most daunting challenge turned out to be matching those company names to campaign donations.
The Federal Election Commission has maintained electronic records of campaign contributions since 1979. But decades later, those records remain a near disaster for doing analysis. Candidates for Congress are supposed to report the name, occupation and title of any donor giving more than $250. But the field for the donor's occupation is often left blank. Or a company name is abbreviated or misspelled. In its downloadable data, the FEC strangely mashes the occupation and title together, not even leaving enough room for both. Then there are the issues of spouses, consultants or company directors. They are often identified only as "homemaker" or "self-employed" or "retired."
Several outside groups have made valiant efforts to clean up campaign finance records, and we talked to one of them about using their data. But I concluded that because I had a discreet set of about 500 company names, I'd have more success and control working with the raw FEC data. During three or four weeks of round-the-clock computer work, I inspected more than 40,000 records to make sure they matched. Burlingame and Merritt, meanwhile, spent the time typing in information about the companies' lobbying activities.
Here's what we found, as reported in our project titled "The Favor Factory": People who benefit from earmarks generally give money to those who deliver them. Of the nearly 500 companies identified as getting 2007 defense earmarks, 78 percent had individual employees or political action committees making campaign contributions to Congress in the past six years. And though individual contributions are limited by law, people at companies that received defense earmarks collectively gave lawmakers more than $47 million.
Bill of goods
We also wanted to get a sense of what happened to the items Congress forced the military to buy. Hal Bernton, who covers the military for The Times, joined the project, and we began focusing on earmarks to companies in the Pacific Northwest. Microvision Inc., for example, had received $55 million in earmarks over the years, and its executives were big campaign donors. On May 10, 2004, five Microvision executives each gave $1,000 to Washington Sen. Patty Murray's campaign. A month later, Murray announced that she had gotten a $5.5 million earmark for the company.
Investigating where that money had gone, Bernton tracked down soldiers in the Army's Stryker Brigade, based out of Fort Lewis, Wash., who served in Iraq. They told us that hundreds of Microvision's helmet-mounted computer monitors--mostly bought with earmarks--had been stored away in unopened boxes. Soldiers didn't like them, especially ones that interfered with their vision, in battle. In August 2005, Microvision had lost a competition set up by the Army to test various helmet-mounted monitors. Yet four months later, apparently acting on an earlier lobbying effort by Microvision, Sen.Murray managed to get the company another $6 million earmark to sell 1,599 of the rejected devices to the Stryker Brigade.
Bernton also tracked down the story of a polyester T-shirt earmarked for Marines in Iraq. In late 2005, Congressman David Wu of Oregon got a $2 million earmark for InSport, a small athletic clothing company. Wu said Marines would be more comfortable in InSport's polyester shirts than in their standard-issue cotton ones. But polyester melts when exposed to heat and was banned in early 2006 after a Marine caught in an explosion suffered burns over 70 percent of his body. His melted polyester shirt had to be cut from his body.
Despite the ban, the Marines went ahead and bought the InSport shirts, saying they could only be used in training. InSport later made a shirt with fire resistant sleeves, but the Marines wouldn't approve it for use in battle because most of the shirt still was made of polyester. Even so, Congressman Wu got InSport another $1 million earmark last year to sell the shirts to the Marines.
InSport executives gave Wu's campaign $6,100 on a single day in the spring of 2006. The day after the defense bill with the earmark passed in September 2006, one executive gave another $750 to Wu. Two others followed with identical donations within three weeks.
We posted our database online, allowing readers to search for any member of Congress or any recipient of earmarks.
* “The Favor Factory” by The Seattle Times was the runner-up in the 2008 Barlett and Steele Awards for Investigative Business Journalism. The annual awards are sponsored by the Donald W. Reynolds National Center for Business Journalism.
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