Detroit City Council President and former U.S. Rep. Brenda Jones accepted campaign contributions that violate state rules against pay-to-play activity, according to a review of campaign finance records and interviews with ethics experts. During her 2017 bid for reelection to city council, Jones accepted $5,500 in campaign contributions from then-First Independence Bank Chair and CEO Barry Clay, and an additional $4,000 in campaign contributions from First Independence Bank board member Douglas Diggs. The donations occurred as First Independence had a contract with the Detroit police and fire pension fund, of which Jones, as president of the city council, is a trustee. First Independence runs a loan program for the pension fund.
State rules cap campaign contributions from senior leadership of contractors with public pension funds at $350 per election. For the 2017 primary and the general election combined, then, the cap was $700.
Now, Jones is running in a competitive race against incumbent Rep. Rashida Tlaib. In 2018, Jones, who was first elected to Detroit City Council in 2005, was elected to serve out the remainder of Rep. John Conyers Jr.’s term in Congress after his early resignation. In the primary, she faced off against Tlaib, who bested Jones by just 900 votes and went on to win that race and claim the seat. The rematch will take place on August 4.
“The conduct certainly looks to me to be in violation of the relevant law,” said Duke Law professor James Cox, who has studied ethics and pay-to-play issues. “It strikes me as pretty blatant.”
Another First Independence Board member, Alan Young, contributed $800 during the 2017 cycle — $100 over the limit. The political action committee for the Clark Hill law firm, which is of counsel to the pension fund, donated $850 — $150 over the limit. Clay and Young also donated $500 and $250, respectively, to Jones’s 2018 congressional campaign. It is unclear whether federal campaign contributions apply to the state pay-to-play rules.
Mario Morrow, spokesperson for First Independence Bank, said in a statement to The Intercept on Monday afternoon that the bank would immediately review the payments. “Thank you for reaching out to First Independence Bank and bringing this matter to our attention,” he wrote. “We will formally review this issue immediately. We will also be contacting our board members to make sure that they are aware of the state and federal regulations. In addition, we will also seek counsel from our attorneys on what next steps need to be taken.”
Jones did not respond to requests for comment.
“There is no way of reading [the contributions to Jones’s council campaigns as] other than a violation of the pay-to-play law,” said Craig Holman, an ethics lobbyist with the good government group Public Citizen. “The law is very clear: A ‘covered associate’ of a service provider, which is defined as any authoritative individual [of the firm], is expressly prohibited from making campaign contributions in excess of $350 to their own governmental representatives or $150 to any other official per election. Barry Clay, Alan Young, and Douglass Diggs were all covered associates subject to this limit. And all violated the limit.”
“This is pay-to-play politics at its classic behavior,” continued Holman. “Executives of an enterprise that depends on government contracts seeking to curry favor with officials responsible for awarding the contracts by handing campaign cash to those same officials. Both the enterprise and the officials who accepted those campaign contributions should face the consequences of violating the law.”
Both First Independence Bank and the Detroit police and fire pension fund have been mired in controversy in recent years. Former Detroit Mayor Kwame Kilpatrick made thousands of dollars in monthly cash deposits into his account at First Independence, an activity that failed to trigger the bank’s anti-money laundering compliance protocols. The bank, which is based in Detroit and has three branches, was later fined $250,000 for violations of Bank Secrecy Act and anti-money laundering regulations.
Diggs banked with First Independence while he was a receiver for an earlier real estate investment made by the pension fund that had gone wrong. Diggs paid himself $132,500 out of funds that should have gone to the pension.
The investigation into Kilpatrick’s administration produced indictments for two former trustees, two former investment advisers, and the former counsel to Detroit police and fire pension fund. To replace the indicted counsel, pension fund trustees hired Joseph Turner of the Clark Hill law firm 2013, who later admitted in court testimony that he had provided envelopes full of $100 bills to trustees of the fund at parties. After the “gifts” were made, Turner’s hourly rate as special counsel increased from $225 to $300. Turner and his wife have donated over $2,200 to Jones’s campaigns for city council from 2011 to 2017. None of Turner’s contributions violated the pay-to-play rules. Turner remains at Clark Hill. A different Clark Hill attorney, Ron King, is now the counsel to the fund. In total, Clark Hill, its PAC, and its attorneys have donated over $5,000 to Jones and her city council and congressional campaigns. Neither Turner nor Clark Hill responded to requests for comment.
Ted Siedle, a former attorney with the Securities and Exchange Commission and author of “Who Stole My Pension?” underscored the importance of pay-to-play rules: Pension funds are stewarding large pots of assets and campaign contributions from vendors can warp the process away from sound financial management.
“Pay-to-play rules are commonplace and they are created in recognition of the fact that campaign contributions from would-be vendors can undermine the management of pensions” said Siedle. “The business of pensions is managing or safeguarding assets. The concern in the pension context is does pay-to-play undermine the protection of the assets? In other contexts, pay-to-play rules can be created to ensure that roads don’t get built by poor contractors — here the goal is to ensure that the assets of retirees are protected.”
The pension funds have been a controversial political issue in Detroit, as the city’s bankruptcy resulted in cost of living adjustment cuts of more than 50 percent, and substantial reductions to retiree health care benefits.