The Skybox Is The Limit

Ross E. Getman

Lobbyist Jack Abramoff pled guilty to breaking federal lobbying laws and conspiring to bribe lawmakers and congressional aides with campaign contributions, meals, trips and sports tickets. This sort of gift-giving can be put in some historical context to see just what sort of lousy public policy can result. A nationwide pattern of such gratuities has caused soda to be promoted to a captive audience of kids at school. In his plea, Abramoff detailed the perks he provided Bob Ney and his staff in exchange for political favors -- a golf trip to Scotland, the Super Bowl bash in Tampa, the free meals and the sports stadium box seats. It was Bob Ney (R-Ohio) who issued a press release against threatened school soda litigation (although not even Ney objected where the law has been broken).

Coca-Cola has a long tradition of gift giving to high officials. For example, according to the Atlanta Journal Constitution, in 1994, Coca-Cola paid $1,200 to pay to have Zel Miller, then Governor of Georgia, to listen to country music in Branson, Mo. Miller has served as Chairman Education Commission of the States. The next year, they paid $500 to treat the State Agricultural Commissioner Tommy Irvin four tickets to the Dayton 500, that then were reimbursed by Irvin following a reporter's inquiry. (Mark Sherman, "...Special access for officials 'bad idea', attorney general says." The Atlanta Journal Constitution, May 12, 1995, p. 1A.)

On a national scale, Coca-Cola has funded groups that have made substantial payments to Superintendents and to education leaders. ("The Superintendents' Field Trip," Fox13, Nov. 21, 2004; Scott Parks, "Fee to former superintendent raises issues," Dallas Morning News, Sept. 7, 2004; "School superintendents paid to hobnob with vendors [Coca-Cola]." Dallas Morning News, July 23, 2004)

Under the ERDI program, Superintendents are paid $2000 to attend a 3-day expense paid trip to a posh resort. Coca-Cola reports that the program has made the Superintendents the friends of Coca-Cola. "ERDI and HERDI *have greatly helped us to understand and know our education customers and their needs. The quality of the educators is unmatched as is the insight they provide . They have become our friends!" The Coca Cola Company (ERDI homepage, accessed January 2, 2004)

Does Coca-Cola (through a "Council" it founded) really make annual $6,000 payments to this country's key education leaders to promote business partnerships? ("Fee to former superintendent raises issues: Group financed by Coca-Cola paid Moses $6,000," Dallas Morning News, September 7, 2004) Coca-Cola founded the Council for Corporate & School Partnerships in March 2001 with members including the Chief Executive Officer of the National PTA, Executive Director of the National Association of Secondary School Principals, and the Executive Director of the National Association of State Boards of Education.

State Assembly Majority Leader Michael Bragman, D-Cicero -- who provided the key push to the launch of the "pouring rights" agreements in New York and then indirectly nationwide -- was one of the legislators on a Puerto Rico trip with the Coca-Cola Enterprises Vice-President in the mid-1990s. He said he saw no problem with lobbyist-sponsored events and was pictured in the Syracuse Post-Standard leaving the luxury hotel with Coca-Cola Enterprises Vice-President Robert Lanz in an article called "Secrets of the Chamber." Regular deliveries of pop were made to Michael Bragman's home according to a former Coca-Cola employee who made the deliveries. Vending machines were delivered too according to former CCE employees. Nice work if you can get it.

As announced in a Press Release in January 2003 by the Office of Manhattan District Attorney Robert M. Morgenthau, former New York State Assemblywoman and majority whip Gloria Davis (Michael Bragman's successor) pleaded guilty to bribery charges in connection with manipulation of the competitive bidding of a contract, illustrating the importance of complying with the competitive bidding laws. It was an undercover FBI sting. She was arrested a few weeks after taking office with $10,000 from the undercover FBI operative in her purse. (See also "Focus turns to soda mark-up in corruption trial," Philly.com, March 15, 2005)

In 2004, the Tennessee State Comptroller criticized the Tennessee University President for lying about having accepted Super Bowl tickets from a food service vendor and recommended that the Board of Regents impose discipline. Rep. Ulysses Jones, D-Memphis at the time called for a similar audit of other university programs. But he should have started with his colleagues who have even greater control over state institutions. ("African-American Leaders Rally Around TSU President," Tennessean, April 18, 2004 ) In 2003, it had been reported that in Tennessee, Coca-Cola gives legislators expensive tickets to state legislators such as Tennessee's John Ford (D-Memphis).

"And what about expensive gifts like Super Bowl tickets? Listen to what state Sen. John Ford, D-Memphis, tells a group in a Capitol Hill bar. "So how do you get all these tickets?" someone asks. "He knows the right people," explains a nearby lobbyist. "No, different times -- Coca-Cola most of the time," Ford responds. Coca-Cola, however, doesn't have a lobbyist, although there is a lobbyist for the Soft Drink Association. Under the state's ethics law, it's just the lobbying association that's prohibited from providing certain gifts. "But any individual member of that association, who is clearly affiliated with that association can do that," Dick Williams explains. "Trips -- anything?" asks Phil Williams. "Yeah, right -- big fancy trips or whatever."

("NewsChannel 5 Investigates: Perks of Power," NewChannel15, February 11, 2003)

John Ford (D-Memphis) was indicted this year for bribery this year in another undercover FBI sting, Ford was the Chairman of the General Welfare, Health, and Human Resources Committee of the Tennessee State Senate. Subpoenaeing the records of Coca-Cola Enterprises relating to its use of skyboxes around the country in the face of this filmed admission would seem too obvious -- not involve any drama.

Instead, E-Cycle Management, an Atlanta company, quietly came into the picture filing with the Georgia Secretary of State in January 2004. E-Cycle "was an undercover business operated by the Federal Business of Investigation to respond to allegations of corruption of elected officials. Ford allegedly told E-Cycle representative that he makes the deal and that E-Cycle could benefit from legislation regarding its business. The bill would have allowed electronic recycling companies to contract with the state to dispose of surplus state computer equipment not claimed by school districts. E-Cycle responded that it required more exclusivity in government contracts in order to profit. Ford received repeated payments of $5,000 (for a total of $55,000) for introducing and making changes to the bill as directed by E-Cycle.

Ford told the E-Cycle person at one point that if he was working with the FBI he would shoot him. Ford told the undercover operative's partner that he wanted to know that he was "okay" too because while he would mind shooting the one guy, he did not want "to shoot the individual to whom he was speaking." A member of the Hamilton County School Board also pleaded guilty. ("Crutchfield, Love plead innocent in Tennessee Waltz corruption case," Associated Press; NewsChannel 5 Investigates: Capitol Hill Corruption, Dec. 29, 2005);

In civil discovery, as noted by one commentator in Arkansas, the most telling question directed to the corporation would be: was the expense deducted as a business expense? ( "Huckabee's Lewinsky," Max Brantley, Arkansas Times, April 12, 2002),

Such gifts have become common enough that they are actively sought by some legislators and school officials, as illustrated by one transcript of a tape recording in which a principal sought tickets worth $2,500. On the tape, she sought tickets to a second game so she could compare the two games. Transcripts of the audiotape are provided at Fullerton, "Purging and Courting," Austin Chronicle, April 27, 2001 and Fullerton, "Soda Jerks: Does the AISD Vending Machine Scandal Reveal a Web of Scoundrels -- or Just a Ship of Fools?," Austin Chronicle, April 27, 2001

In Arkansas, a Coca-Cola executive named Steve Powell testified that the canoe that the Governor failed to report had a Coca-Cola logo on it and the purpose of the gift was to get free publicity. In 2001 alone, Huckabee reportedly also took expensive watches from a grocery magnate. ("Arkansas governor fined $250 for accepting gift from Coca-Cola," Post and Courier (Associated Press), January 18, 2003; John Brummett, "Cokes, canoes and politics," Arkansas News, June 10, 2004)

The Governor, through his Attorney Crass, sued the state ethics regulators to stop an investigation of a potential violation of gift rules and to overturn the ban on accepting gifts over $100. The Governor challenged the rules in Court and an appellate court ruled in his favor on the canoe -- finding that there was no proof that the gift of the canoe related to performance of his job. As a matter of sound policy, such gifts must be prohibited and such prohibitions strictly enforced.

This sort of gift-giving goes to the very heart of the launch of the "pouring rights" agreements in New York in the Spring of 1998. In March 1998, a Coca-Cola Enterprises Vice-President Robert Lanz took his long-time friend Carl McCall and his wife to the Knicks v. Bulls game on March 8, 1998. The same month, the Vice-President was negotiating the agreement that would launch "pouring rights" at our schools.

The New York State Comptroller had concurrent jurisdiction over the lawfulness of "pouring rights" agreements -- for example, whether such an agreement could be 10 years and bind future Board members; whether they needed to be competitively bid; whether non-soda companies could be excluded from selling healthy beverages on campus; whether 6-foot high electronically backlit display panels could advertise to the captive audience of kids; whether price increases were limited to cost-of-living increases; and whether an exclusive license be granted that in the past had always been denied yearbook salesmen and class ring salesmen.

McCall did not report it, his spokesman said, because he and Bob Lanz "were friends." (Joe Mahoney, "McCall's Letter Pile Keeps Growing," Daily News, Oct. 5, 2002 ; Michael Kramer, "Ignore the Rule -- Pay the Price," Daily News, Oct. 1, 2002; Kenneth Lovett and Fredric U. Dicker, "Writer's Cramp," New York Post, Oct. 5, 2002 (McCall at least twice accepted tickets to the Knicks for him and his wife from a top Coca-Cola official.")

At the time of the games, McCall was auditing a multimillion irregularity in the Stony Brook pouring rights agreement, in which contrary to GAAP very large sums were diverted to non-official, unauthorized purposes.

Then CCE VP Lanz continued the gift-giving, with the most recent example the 12 Rhode Island legislators comped to a game in Boston, complete with a luxury bus for the trip. ("Democrats accused of ethics breach," Providence Journal, May 13, 2005; "Legislators Watch Celtics Game in Coca-Cola's Luxury Box," News Channel 10, Mar. 11, 2005; "Watchdog Group Considers Complaint Against Murphy: House Speaker Criticized For Trip To [Celtics] Basketball Game," Channel 10, March 9, 2005)

Now did Mr. Bragman -- the key legislative mover and shaker in New York behind the launch of the "pouring rights" scheme in 1998 show Coca-Cola favoritism? Well, he certainly was a big collector of Coca-Cola memorabilia. A separate building needed to be built to house his various collections, to include the baseball memorabilia and Coca-Cola memorabilia. In a television interview a few years ago the camera panned around his office to show numerous expensive memorabilia. Did he receive them as gifts, as the former Coca-Cola employee says was the case in the mid-1990s? Did he report them? Were they all under the $75 limit? In 2004, Mr. Bragman announced that he would be giving lots of memorabilia to the Cicero Historical Society. He also is a big baseball fan and has lots of valuable baseball memorabilia.

On June 30, 1998, the New York State Education Department faxed an "Order to Show Cause" to Liverpool School District. It stated:

ORDER TO SHOW CAUSE

"You are hereby directed to show cause pursuant to Education Law 310 why an order of the Comissioner of Education should not issue (1) declaring null and void the agreement entered into on May 11, 1998 between the Board of Education of the Liverpool Central School District ("respondent" or "district") and the Coca-Cola Bottling Company of New York, Inc. ("Coca-Cola"), for exclusive sale and distribution rights of Coca-Cola beverages on campus; and (2) enjoining the implementation of said agreement pending an ultimate determination in this proceeding." In The Matter of the Action Of The Board of Education Of The Liverpool Central School District Concerning an agreement with Coca-Cola Bottling Company of New York, Inc. for the exclusive sale and distribution of Coca-Cola beverages on campus, signed by NYSED counsel Kathy Ahearn in June 30,1998

(The NYSED says it gave me this Order to Show Cause by mistake and it has refused under FOI to produce the petition that was annexed to teh Order To Show Cause. So its legal objections at the time will never see the light of day.)

Mr. Bragman's real estate attorney, on behalf of Coca-Cola Enterprises, had promptly gone to Albany and overcome the legal objections. Under one report, Michael Bragman angrily yelled at Commissioner Mills, demanding that the "pouring rights" agreements be allowed. Mr. Bragman at the time effectively held the purse strings of the NYSED. After Coca-Cola's and Bragman's lobbying of the State Education Department, the so-called "Model Agreement" was simply the North Syracuse agreement with the names whited out.

That's government for Coca-Cola, by Coca-Cola, and of Coca-Cola.

Mr. Bragman's real estate lawyer, working for Coca-Cola, provided a copy of the North Syracuse agreement to the State Education Department, whose counsel then issued it as a "Model Agreement" and sent it out to Administrators throughout the state. The NYSED Counsel's suggestion that school districts hire a lawyer to determine whether it was illegal was a bit gratuitous given that it was being circulated by Albany as a "Model Contract." Coca-Cola used Michael Bragman's real estate lawyer in defending the legality of the agreement both before the Commissioner and in Court.

Under the pouring rights agreement, there were matching funds provided by Albany (in a ratio of ten to one) that permitted a multimillion dollar stadium that was then named after Mr. Bragman. Nice work if you can get it. Former Coca-Cola marketing people say that after the deals involving pork barrel from Albany, their phones started ringing off the hook. But the marketing person emphasized that they were under strict instructions not to approach a District without first contacting Mr. Bragman.

The fact that Michael Bragman was Attorney General Eliot Spitzer's biggest fundraiser in Upstate New York must not be allowed stand in the way of enforcing the rule of law. Spitzer is appropriately recognized as a tremendous champion of the public good, citizens and consumers. While Spitzer has used his bully pulpit to rail against gifts to politicians, that falls far short of the mandate of his office. The New York State Ethics Commission is dominated by the politicians. The Lobbying Commission has inadequate investigative powers and statutory authority. But the Comptroller and Attorney General are still charged with enforcing laws such as the competitive bidding laws.

When they see a contract steered to a particular developer for exclusive rights to the Erie Canal for $30,000, that's an easy one. But when the film at 11 shows unreported museum-quality gifts -- and other gifts are admitted by former company employees and the politicians themselves -- that also merits investigation. The competitive bidding process is more than a little flawed in New York State. It would be nice if Spitzer at least set straight the NYSED's compliance with the New York State Constitution, Education Law and competitive bidding laws before assuming the Governor's office and inheriting the mess.

Attorney General Spitzer and Comptroller Hevesi are either part of the problem or part of the solution. The Philip Morris lobbyist was barred from lobbying in New York State for giving free tickets to athletic events. Coca-Cola should be too. At the very least, Coca-Cola's gift-giving practices should be the subject of discovery and not merely a polite phone call from the Lobbying Commission.

More broadly, in the major cities throughout the country, the FBI should issue subpoenas relating to the use by corporations of skyboxes in influence peddling where there is reason to think that there is a practice of exceeding the applicable statutory limit for gifts to public officials. (The permissible level varies by state). Public confidence requires nothing less.

The debate to date about soda in schools has been about obesity and other health issues. But that is a bit of a distraction. Everyone has overlooked that the bad policy resulted in the failure to apply the rule of law and common-sense rules relating to good government.

First, public officials should not be allowed to receive gifts or payments from corporations that do business from the State in excess of the statutory amount. Second, companies that sell healthy beverages should not be required to sell soda to kids in order to compete to sell healthy beverages on school property. Under the present scheme orchestrated by Coca-Cola through its manipulation of the political and administrative process, that's the case. Third, corporations that give gifts to public officials in violation of the controlling state rule should be barred from lobbying officials in the state and barred from government contracting.

State consumer laws are the least of the soda industry's troubles if the tobacco companies' experience is any guide. The main difference between the soda and tobacco matters is that soft drinks have involved government contracting, greatly increasing the stakes for the soda industry.

The soda industry should get things right now before it is the FBI who has to bat clean-up as in the Abramoff matter. ( "Multiple Federal Agencies Want L.I. School Data, NYSSCPA.org, Aug. 30, 2005; Karla Schuster, "They're All Subpoenaed," Newsday, Nov. 17, 2005; Tom Robbins, "Too Hot to Handle, Village Voice, Dec. 13, 2005; FBI email, THIS IS NOT AN AUTOMATED RESPONSE)

Links to the cited articles can be found at "Soft Drinks in Schools" under "gratuities."   http://mysite.verizon.net/vze443zw/pouringrights/bidding.html