Huge Pay-For-Play Scandal Embroils Oregon Democrats, As Big Donor Law Firms Are Awarded State Contracts
The corruption is running so deep in Oregon that even NPR affiliate Oregon Public Broadcasting is calling out the democrats. Left-oggling OPB can usually be counted on to protect and make excuses for the democrats, but reporter Dirk VanderHart has uncovered an elaborate pay-for-play scandal involving several law firms from across the country who get contracts with Oregon agencies after contributing large sums of money to the politicians.
To get out his campaign pitch, [state treasurer Tobias] Read will have help in the form of tens of thousands of dollars from out-of-state law firms. As of early December, more than 40% of the money the treasurer reported raising in 2019 came from big-time firms headquartered in places like New York City, Washington, D.C., and Wilmington, Delaware.
That in itself is notable, but the donations come with a further wrinkle: Nearly all are being made by lawyers who seek work from the state of Oregon — work that Read’s office can help provide. A 12-year-old state law gave firms a chance to make millions of dollars if they are picked to work one of the potentially lucrative lawsuits that Oregon files against powerful corporations.
The result is a torrent of outside money to state candidates, much of it solicited by Oregon treasurers and attorneys general — the same elected officials whose offices decide which firms get the work.
Read’s just one recipient of the largesse, albeit a dramatic one. Attorney General Ellen Rosenblum and an array of past treasurers and attorneys general have been helped by the same lawyers.
Legal experts and campaign finance watchdogs say this is a system that smacks of self-dealing, giving influential politicians a stable of moneyed and motivated campaign supporters while law firms get a shot at making millions.
Recipients of the money say donations haven’t influenced the state’s choices, but evidence suggests generosity has its perks.
While dozens of firms have vied for the chance to represent Oregon, only a few have historically gotten the business. Those firms have given substantial amounts to sitting state treasurers and/or attorneys general — a practice that wouldn’t be allowed in a growing segment of states. They have also reaped or shared more than $250 million from legal settlements won on behalf of Oregon retirees and others.
In at least one case involving Oregon, attorneys with a favored firm were awarded more than $1,000 an hour.
Now that the tragedy is out there, it’s time for the comedy. Listen to what the politicians say to defend this:
Rosenblum and Read say the money they’ve taken from out-of-state firms has no bearing on state work.
Each says they keep completely out of the process for selecting firms eligible to work for the state. Attorneys with DOJ and Treasury both participate in vetting applicants for that list, and DOJ has final say.
State officials who responded to inquiries for this story all insist that campaign contributions play absolutely no role in which law firms win work. Oregon candidates who accept campaign money have made a habit of explicitly walling themselves off from choosing firms, they say.
Read insists there’s nothing untoward about the donations he’s received. Both he and Rosenblum say they remove themselves from decisions about which lawyers win state work, even as they ask law firms for reelection money.
“I assume it’s because they like the agenda I have and they’d like to see me succeed,” Read said when asked why out-of-state firms support his campaign. “I have that same reaction anytime we’re lucky enough to have a contribution from someone. Beyond that, you’d have to ask them.”
The firms, for their part, largely refuse to discuss their donations. One Florida attorney who did grant an interview said her interest is in supporting candidates that align with her values.
Read and Rosenblum both dismissed any suggestion that Oregonians might be suspicious their campaigns are being funded by people who want state business. They argue class-action lawsuits are, first and foremost, a way to battle corporate misdeeds and pry back millions of dollars from powerful interests.
“There are corporations in the world who are doing bad things, who are misrepresenting their behavior, who are tolerating sexual harassment, who are signing customers up for things they didn’t want,” Read said. “And there are people out there who are holding them accountable. … If that’s the question, I’m happy to have the support of those good guys.”
Not everyone who’s received interest from those good guys is as sanguine about the arrangement.
In 2012, when he was battling Rosenblum in the Democratic primary for attorney general, Dwight Holton received more than $55,000 from securities class-action law firms in a four-month span.
Oh but it gets worse. Former attorney general John Kroger and former treasurer Randall Edwards got a bill passed that, on the outside, looked like it would be protecting pensioners. Enter the vulture lawyers who sought to profit bigly:
Oregon law used to prohibit the state pension fund — which wields $75 billion that it invests for retirees — from suing on behalf of itself and others.
That changed during the 2007 legislative session, when then-Treasurer Randall Edwards pushed a bill to allow Oregon to serve as a lead plaintiff in class-action lawsuits, effectively taking a more aggressive role against companies that defraud investors.
“From my perspective, this was another way to protect investments and to protect investors,” Edwards said recently.
By serving as lead plaintiff, officials at the Oregon State Treasury and Department of Justice argued they could win back millions lost when a company’s stocks tanked because of its own misdeeds. Oregon could use its heft to force companies to implement lasting fixes, they said.
Securities class-action suits — the technical term for the cases — can generate huge paydays for firms who take them on, even as they win back a small portion of investors’ total losses. But the suits come with risks. Attorneys often receive no money unless the outcome is favorable to the investors they represent.
In the years after that act passed, big checks started flowing to pension officials in states like New York, Louisiana and Ohio, spurring concerns about impropriety. In 2009, for instance, the treasurer of Rhode Island returned thousands of dollars in contributions from firms angling to represent that state in class-action suits, acknowledging the money might create a perception of a conflict of interest that he wanted to avoid.
Even before Oregon filed its first class-action suit in April 2009, class-action firms had pumped tens of thousands of dollars into the campaign accounts of then-Treasurer Ben Westlund and Attorney General John Kroger.
They never stopped.
In the last 11 years, firms or their lawyers have given at least $690,000 in Oregon. About 93% of that money has gone to incumbent attorneys general or state treasurers, or to leading candidates for those posts when no incumbent exists.
The interest in those two positions is not a coincidence.
The Oregon Department of Justice, overseen by the attorney general, selects which law firm will get the contract for a given case. To make that decision, it relies on a short list of firms pre-cleared to work for Oregon — a list that DOJ lawyers create with input from the Oregon Treasury Department.
Firms on this short list have the ear of state officials. They can monitor lawsuits and news reports nationwide, and pitch the state on companies it might sue.
And often, while they’re vying for that work, law firms are writing checks.
Ted Wheeler [yes, that Ted Wheeler who is now "mayor” of vichy Portland], who became treasurer in 2010, took at least $33,000 in contributions from class-action firms or their individual attorneys. Attorney General John Kroger, who pursued lead status in seven class actions while in office, received more than $115,000 in contributions affiliated with law firms, three of which were tapped to represent the state under his watch.
The most recent duo with oversight over class actions have benefited from more generous giving than any of their predecessors.
Rosenblum has accepted at least $141,000 from plaintiffs firms since her first attorney general race in 2012. As of early December, about 18% of the money the attorney general’s reelection campaign reported collecting in 2019 came from out-of-state firms interested in class actions.
Read, meanwhile, has enjoyed more support from firms in the business of class-action suits than any other Oregon elected official. As of Dec. 3, he had reported more than $104,000 from class-action law firms in 2019, accounting for 41% of the $250,418 his campaign had taken in for the year.
In 2018, the same year the state began updating the list of firms eligible to handle cases on Oregon’s behalf, Read accepted $55,000 from many of the same entities — a full 30% of his contributions.
In total, Read has received more than a quarter-million dollars from firms or attorneys with an interest in class-action work, state records show. None of them contributed money to Read’s campaigns in his previous role as a state representative.
“There are two motivations, if you are a state politician, to bring securities fraud class actions,” Pritchard said. “One is to reap campaign contributions, and the other is political grandstanding. The two are not mutually exclusive.”
Since 2008, the state has filed 11 class-action lawsuits, according to information supplied by the Department of Justice. In every one of them, the state was represented by an out-of-state firm that — either before it was selected or after — became a major campaign donor in Oregon.
VanderHart used one case study as an example of these kickbacks:
Here’s one example: After the mortgage crisis hit in 2008, Oregon’s pension fund lost $46 million via investments in two financial institutions: Bear Stearns and Countrywide Mortgage-Backed Securities.
Oregon officials believed they’d been misled into investing heavily in the companies, and the size of the state’s losses put it in a prime place to lead class-action suits. So Attorney General Kroger and Treasurer Wheeler filed two lawsuits in 2010. The state chose Washington, D.C., firm Cohen, Milstein, Sellers & Toll to represent its interests.
“Oregon is taking a stand against predatory lenders and the financial wreckage they caused for families and for investors including Oregonians,” Wheeler said at the time.
The cases took years to play out in court. In the meantime, Cohen Milstein became an enthusiastic campaign supporter in Oregon.
The law firm donated $10,000 to Kroger in August 2011. Wheeler got a boost, too, pulling in $8,000 from the firm or its employees for his 2012 reelection.
For good measure, Cohen Milstein put $10,000 apiece into the campaigns of Democrats Dwight Holton and Rosenblum, who ran against each other in 2012 to replace Kroger as attorney general.
In total, the firm and its lawyers have contributed at least $45,625 into attorney general or treasurer races since 2012, and been tapped to represent Oregon in securities class-action suits four separate times.
Those contributions are a pittance compared to what Cohen Milstein has reaped by working for the state.
Out of $1 billion recovered via settlements in the Bear Stearns and Countrywide suits, Cohen Milstein and other firms were awarded around $170 million from the settlement funds — awards that were sought by the firms and approved by a judge. In one of those cases, currently under appeal, Cohen’s attorneys were awarded more than $1,000 an hour.
The firm would not answer questions about its interest in Oregon politics.
You can read much more on this story from the original OPB report here. That is until the politburo orders the story removed.