Mike DeWine, Richard Cordray donors got big contracts from Ohio Attorney General's Office

In 2014, when news first broke that campaign contributions appeared to influence the allocation of collections contracts, Ohio Attorney General Mike DeWine insisted that such a connection did not exist.

In this November’s election, voters will choose between two candidates for governor: DeWine and his predecessor as the state’s top law enforcer, Richard Cordray. An Eye On Ohio review of public records for the past 10 years, however, found a strong correlation between the amount of campaign contributions and the revenue received by law firms doing collection work for the attorney general’s office.

Firms in the top quarter of contributors during DeWine’s tenure averaged 425 percent more revenue than those in the bottom quarter. During Cordray’s term, the top quarter of contributors earned 156 percent more, on average, than the bottom quarter of contributors. Visit eyeonohio.com to view graphics and additional coverage.

Unlike neighboring states like Michigan and Indiana, Ohio does not screen and select collections contractors based on a formal scoring system. There is no competitive bidding process.

Eye On Ohio, a nonprofit investigative news outlet based in Columbus, asked both candidates for interviews to discuss the subject. Both declined. 

Every year, the government of Ohio engages in a massive fox hunt for hundreds of thousands of people who owe money to the state. The state of Ohio salvaged almost $417 million for state offices and institutions in the 2016-17 fiscal year, half by the office of DeWine, the state’s chief collector, for a total of approximately $207 million. It received $36 million for its trouble.

About 70 private lawyers and 13 collection companies ran down other $210 million. They keep up to a third of what they collect. The work is lucrative. In fiscal 2017, they received a total of $53 million.

Over time, compensation can range from a few thousand dollars to more than $10 million. Charles “Chuck” Mifsud of Dublin, Ohio, received $17.6 million in collections commissions during DeWine’s first six years in office, starting in 2011. 

Officially, collections firms are chosen by meeting a dozen standards set by DeWine’s office. 

But is there a 13th factor, one nowhere in writing? The Ohio Center for Investigative Journalism examined political campaign contributions made by the busiest debt collection firms under Cordray, who served as attorney general from January 2009 through January 2011, and DeWine, who has held the position ever since.

From 2009 through 2017, people affiliated with those firms – and their family members – made at least $4 million in political contributions to DeWine, the Ohio Republican Party, the Summit County Republican Party and to Pat DeWine, the son of Mike DeWine and a current Ohio Supreme Court justice. The attorney general’s office paid $301 million to those firms in DeWine’s first six full years in office, or about $75 worth of business for every dollar donated.

During Cordray’s two years as attorney general, firms received $69 million in payouts as they made at least $1.3 million in campaign contributions to Cordray and the Ohio Democratic Party. That comes to $54 in revenue for every dollar donated.

“All of this is your classic pay-to-play abuse,” said Craig Holman, an expert on campaign finance and lobbying at Public Citizen, the Ralph Nader-founded advocacy group in Washington, D.C. “When you’re talking 90 percent or more of these contractors making campaign contributions, it is a strong indication that these types of contributions are expected.”

Trevor Burrus, a research fellow at the libertarian Cato Institute, said the situation was much more complex.

“In general, I don’t immediately infer some sort of corruption when firms that stand to benefit from a certain person or party in power contribute to that person’s campaign,” he said. “It’s very difficult to draw a principled line there."

DeWine defeated Cordray in the 2010 attorney general’s race and won re-election over Democrat David Pepper in 2014. DeWine and Cordray now face a rematch in the election for Ohio governor in November.  

A leaky law

In Ohio, anyone owning more than 20 percent in a company or their spouse can only give up to $1,000 per year to a candidate, if that official has “ultimate responsibility” to award noncompetitive contracts of $500 or more. However, it’s perfectly legal to give to other organizations that have much higher contribution limits. For example, donors can give up to $38,123 to a political party’s state candidate fund.

Other loopholes abound. The  $1,000 limit doesn’t apply to workers in the same firm, and wouldn’t stop, say, 100 or 500 workers in the same company – and their spouses, parents and children – from maxing out those $1,000 gifts.

A miniature version of that scenario played out in May 2013 at the Dayton law firm of Flanagan, Lieberman, Hoffman and Swaim. In the final week of that month, 11 employees – and 11 other people with matching last names and addresses – gave $1,000 each to the DeWine campaign a year ahead of his re-election bid.

“The window’s open for family members and partners to make coordinated contributions,” Holman said.

Tracking dollars swimming through other campaign accounts borders on the impossible. For example, firms doing collections work for DeWine donated $3.2 million to the Ohio Republican Party’s state candidate fund between 2010 and 2017. Over the same span, that fund gave $5.7 million to DeWine’s campaign committee. 

“It’s a huge loophole in Ohio’s pay-to-play law,” Holman said. “The party committees are almost complementary committees to the candidate committees themselves. They work very closely together.”

Enforcement of the Ohio law falls to the Ohio Elections Commission. The OEC, though, does not look for violations.

“The only way the commission can act is with the filing of a complaint by an individual or upon a referral from the secretary of state or Board of Elections,” said its executive director, Phil Richter.

Only twice since he took his job in 1995 has the OEC received complaints about violations of the pay-to-play law. Both, he said, were dismissed.

A continuing issue

In 2014, when the Dayton Daily News published articles about the influence of politics in the hiring of outside collection agents, DeWine denied shaking down vendors for campaign contributions.

Four years later, DeWine’s office still denies any connection between contributions and contracts.

“I would have absolutely no idea if somebody contributed to anybody in the state of Ohio,” said Lisa Iannotta, DeWine’s collections chief since 2013. “That’s not something I ask or talk to someone about.”

The Ohio Center for Investigative Journalism called the 10 special counsels who were paid the most money during the first six years of DeWine’s term. 

David Douglass of Cleveland said his contract with DeWine precluded him from talking to reporters. Douglass nonetheless said politics had nothing to do with getting the work.

“I make contributions to people all over the state, all over the country. I’ve been doing it my whole life. I contribute to people based on the merit of the candidate, not on their party,” he said.

“We do the work we do, and it’s assigned to us based on merit, based on how we do our work,” said Douglass, whose firm has done state collections work in Ohio for 23 years, for attorneys general of both parties. 

Collections firms whose contracts were not renewed during the DeWine years were skeptical about the political purity of the contracting process.

Value Recovery Group subcontracted for five previous attorneys general. The Columbus company was dumped in DeWine’s second year in office. 

“We were doing flawless work and were getting money back that they never would have had,” said Barry Fromm, founder and chief executive. “We handled a couple billion (dollars) at the peak. They were thrilled to death at us – and then Mike DeWine ran for office.”

Fromm said no explanation was given for his non-renewal. He said he believes it came down to his lack of financial support for the DeWine campaign.

The attorney general’s office has also cut down on the number of collections firms. In 2007, under former Attorney General Marc Dann, the number of subcontractors stood at 125. Cordray sliced it to 98. Today it’s 70.

DeWine spokesman Dan Tierney said 98 vendors was too unwieldy to manage effectively. 

Another change took effect soon after DeWine’s arrival. Under Cordray, applicants were assigned scores based on experience, information systems and other variables. DeWine ditched that program. He replaced it with the minimum requirements that are in use today.

“It wasn’t like there was any objective analysis with computer numbers,” Tierney said of the old process. “It was basically staff being asked to put their recommendations into a numerical form.”

Ron Leix, a spokesman for the Michigan agency, said that state has used a scoring system to choose collections vendors for more than a decade.

“A scoring system is used to ensure a fair process for all vendors and to ensure the state receives the best value,” he said. “It’s a basic procurement best practice.”

Does friendship count?

State and federal ethics laws try to keep elected officeholders and contractors at arm’s length from each other through various means such as prohibiting gifts, restricting campaign contributions and barring officials from being in the same financial boat as their vendors. They steer clear from other ground that can be ethically spongy: friendships, political ties and personal associations.

But several contracts appear to have been awarded to close friends, or at the behest of a lobbyist with close ties. 

Special counsel Robert Schuerger attended Pat DeWine’s 50th birthday party in Cincinnati along with J.B. Hadden, Mike DeWine’s campaign treasurer, in 2014. Hadden today works at the same Columbus law firm as another collections special counsel, Jennifer Fate.

A spokeswoman for the Ohio Supreme Court said Pat DeWine declined Eye On Ohio’s interview request.

The Legislature tried to bulk up the state’s pay-to-play law in 2006 and 2007 but a Franklin County judge invalidated the laws in 2007 and 2008.

“This is the office that’s supposed to crack down on other officials when they are violating the public trust," said David Pepper, chairman of the Ohio Democratic Party. "But if the person who’s supposed to enforce the laws is actually the greatest practitioner of pay-to-play, he will have a hard time cracking down on anyone else.”