Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Under Gov. Christine Todd Whitman, Scarinci & Hollenbeck got a negligible amount of work from the state. In fiscal 1999, for instance, the firm earned only $120,000, representing the University of Medicine & Dentistry of New Jersey. That, perhaps, was to have been expected given that the firm donated only $28,250 to Republicans in the election. Then, in the four years between the 1997 election of Whitman and the 2001 election of successor James McGreevey, things changed. The Lyndhurst firm donated more than $130,000 to state Democrats in those years, plus tens of thousands of dollars to municipal and county races. It was a surprise to no one, therefore, when in fiscal 2003 the firm received more than $2 million from discretionary, no-bid legal assignments from the state. The dramatic upswing in Scarinci & Hollenbeck’s state-level work is merely the most spectacular example of pay to play, the informal system by which government contractors – and law firms in particular – are rewarded with lucrative work after they have filled politicians’ war chests. A review by the Law Journal of all 65 state agencies — encompassing 347 law firms and $80.4 million in legal bills — shows a strong correlation between the sitting governor’s major donors and the law firms that get the most state business. [ Related chart: Political Contributions by Firms Who Service the State] To be fair, Scarinci & Hollenbeck is a frequent and easy target for such critics. Founding partner Donald Scarinci is a boyhood friend of one of the most powerful Democrats in the state, U.S. Rep. Robert Menendez, D-Hudson. He is also Menendez’s chief fundraiser. That dual leverage has led to the firm’s installation as counsel to dozens of municipalities, counties, independent commissions and six state agencies. And it has made Scarinci – who did not return a call for comment – the favorite punching bag of Menendez’s enemies. In fact, while the Scarinci firm may well have experienced generous treatment from McGreevey, its track record is not unusual. The majority of state-level legal assignments show the same correlations between donations and contracts. In fiscal years 1999 and 2003, the first periods in which governors had free hands to reward those who helped fund their victories, the money trail looks like this: � McGreevey, prior to his election in 2001, raised about $5.8 million, not counting matching funds. At the same time, $2.4 million – the equivalent of 41 percent of his election budget – went to Democratic coffers from the 20 law firms that ended up with the most state work after the election. � Of the 20 law firms that received the most work, 17 made substantial state-level donations to McGreevey and the Democratic Party. � Those 17 firms were given $19.3 million in billings. � Put another way, the 17 firms that provided the equivalent of half McGreevey’s campaign money received almost half the state’s $44 million legal budget. � Even the last firm on the top 20 totem poll – Schwartz, Tobia, Stanziale, Sedita & Campisano in Montclair – received an assignment worth $554,762, which followed donations of just $35,200. � The other half of the state’s outside legal expenses were divided mostly into loose-change assignments worth less than $200,000 each, sprinkled among 222 other firms that mostly donated far smaller amounts than did the top 20, or not at all. The numbers affirm an earlier study of state government legal billing published in the Dec. 22 Law Journal, which looked at 55 major state departments such as the Attorney General’s Office. That study also found a broad correlation between legal bills and campaign fundraising activity. The new study includes agencies that appear less often on the public radar but can still be lucrative for law firms, such as the Passaic Valley Sewerage Commission, the Casino Reinvestment Development Authority and the Delaware River Joint Toll Bridge Commission. Both reviews should still be read with a pinch of skepticism: The campaign contributions include only donations made by the law firms and certain prominent individual firm partners; they do not include all donations made by all lawyers. The numbers also do not reflect donations made at the municipal or county level. Those caveats are significant because they mean that law firm giving is underrepresented in the survey. Further, the practice of “wheeling” donations renders the intention of a donation almost untraceable. When a donor exceeds contribution limits, he or she may be asked to give a donation to an apparently unrelated campaign in another county or at a different level of government. The candidates then make a gentleman’s agreement that the receiving campaign will make a similar donation of its funds to the original campaign. Money can be wheeled through several intermediate campaign accounts before it finally reaches the politician for whom it was originally intended. A Practice of Both Parties The McGreevey administration has taken most of the heat in the pay-to-play debate, but the numbers show that the system was as much a practice of the Republicans as it is of the Democrats. Fiscal 1999 was the first year of Whitman’s second term and her first opportunity after her 1997 re-election to repay those who had helped her. In that year: � The 20 top-earning firms billed the state $19.8 million – a little more than half the state’s $36 million legal pie. � The remaining 221 law firms got the crumbs, assignments mostly worth less than $200,000. � Of the top 20, 14 firms raised $1.1 million for the Republicans, or an equivalent of 24 percent of Whitman’s $4.6 million campaign chest. � Those 14 firms were favored with $14 million in legal fees. While the broad appearance of a link between donations and legal work has persisted across administrations, there have been other changes worthy of note. Among them: The pie is getting bigger. The state’s legal bill went up 20 percent between 1999 and 2003. The bigger pie appears to have resulted in bigger slices for all concerned, as the number of law firms serving the state has remained steady – 241 in 1999 and 232 in 2003. Under McGreevey, the average assignment was worth $189,193. That figure, however, overstates how much most firms earn from the state. The median bill – the bill earned by the law firm in the middle of the state’s billings list – was just $46,265. Under Whitman, the mean bill was $151,319 and the median bill was $27,069. The larger revenues for contributors have come at some cost to those seeking the work. Under McGreevey, the 17 big-giver firms paid a rough ratio of $1 in donations for every $8 earned back in fees. Whitman’s big givers got more for their money: Her 14 biggest law firm donors earned about $14 for every $1 they gave her. Taken as a whole, the increasing size of the billings pie, coupled with the declining ratio of donations to billings, indicates that while the state is making law firms progressively richer, those firms are paying more to benefit from the largesse. Top Earner Is Lowenstein Sandler The top-earning firm under McGreevey in fiscal 2003 was Roseland’s Lowenstein Sandler, which billed $2.5 million as counsel to Rutgers University and UMDNJ. The firm made at least $228,000 in donations to McGreevey, the State Democratic Committee and the legislative leadership committees, and only about half as much to the Republicans. Like many firms that make donations in the hundreds of thousands of dollars, the firm has a specific giving system. A committee composed of some partners and principals at Issues Management Inc., the firm’s Princeton-based lobbying outfit, meets each year, says the firm’s managing partner, Michael Rodburg. After candidates are recommended, the firm cuts checks from its accounts for those deemed worthy of support. The checks are given to Issues Management executives, who pass them on to the correct campaigns, according to Rodburg. “Part of their effectiveness,” Rodburg says, referring to Issues Management, “is we make political contributions, being committed to the state and good government. And we’re not ashamed of that at all.” Issues Management was, for the second year in a row, the most successful lawyer-lobbying firm in Trenton, according to the Election Law Enforcement Commission. It earned more than $2 million in revenues. Rodburg bridles at the suggestion that his firm is paying to play, however. The firm has represented Rutgers for so long that Rodburg cannot remember whether the relationship started under the Kean or Byrne administrations. “It’s gone through Republican and Democratic administrations and none of them have ever suggested to us that this was an engagement because we were associated with any particular cause,” he says. “We just don’t do work for the state. We’ve not been part of the patronage system.” The reason Lowenstein Sandler chooses to avoid the quadrennial jump-ball for the New Jersey Turnpike Authority or N.J. Transit jobs is because state agencies require their lawyers to bill at far less than the hourly rate the firm can command in the private sector. For the state, rates of around $120 an hour are common. In the corporate world, partners can see more than $500 an hour. “Most of the state work does not command the rate that our normal clients do. That’s the prime reason we don’t engage in it – it’s not very profitable,” Rodburg says. Rutgers is charged the firm’s not-for-profit rate, he says. Rutgers’ fiscal 2003 had more than double the legal expenses of 1999 because of several factors, Rodburg says. They include an influx of construction litigation, duties surrounding the search for a new president and suits filed by Rutgers’ basketball players who had been forced to run naked during training sessions after a coach decided they had missed too many free throws. Still, the firm’s good fortune has waxed along with the good fortune of the Democrats it has historically favored. In 1999, under Whitman, the firm earned only $838,051 and represented only Rutgers. Lowenstein Sandler checks had favored Whitman’s enemies by a ratio of three to one in the years before her second term. Absence of Out-of-State Firms Another salient feature of the list is the paucity of out-of-state firms. While New Jersey firms would be expected to serve New Jersey agencies, there are a large number of cross-state agencies that could be served equally well by foreign firms. Those agencies include the Port Authority of New York and New Jersey, based in New York; the Interstate Environmental Commission, also based in New York; the Waterfront Harbor Commission of New York, and several authorities that monitor the Delaware River and its banks and crossings in New York, Delaware and Pennsylvania. Despite the out-of-state interest, only two firms in the 2003 top 20 had no significant presence in New Jersey – Shapiro, Lifschitz & Schram in Washington, D.C., and Hayt, Hayt & Landau in Great Neck, N.Y. There were at least four foreign firms under Whitman. Remove them from Whitman’s list and the correlation between donations and bills appears tighter. None of the foreign firms on either list made political contributions to New Jersey campaigns. This week, the Legislature is poised to move closer to reforming pay to play. At least two bills percolating in the Statehouse would curb campaign gifts from government contractors. One of those, A-1660, would restrict law firms to $5,000 a year in donations. It is sponsored by Assemblyman Kevin O’Toole, R-Wayne, and favored by watchdog organizations such as Common Cause New Jersey, which heads a coalition of good-government groups favoring reform. A rival bill, being written by Assemblyman Joseph Roberts, D-Brooklawn, has not yet been unveiled. The governor has said he would like to see a bill by July. Although Democrats control the Statehouse and the governor’s office, their initial attempts to curb campaign donations from government contractors fell apart over the new year. The governor had pressed for a bill that covered all levels of government while the Democrats in the Legislature had favored a bill that covered only state-level giving. Republicans accused both branches of deliberately stalling over the bills. Law firm managers generally have taken a compromise position on reform, asserting that although pay to play may exist, their firms were chosen on merit alone. They also note that several top-earning firms that get state work gave very little or nothing and that critics paint a vulgar, unsophisticated picture. The nexus between gifts and contracts is a nuanced and complicated one, not a quid pro quo, they claim. Interestingly, Rodburg says he would be happy to see the end of his check-writing meetings. Although the firm – which on paper at least has the most to lose – has no official policy, speaking personally he says, “I would urge the governor and Legislature to pass a strict prohibition against anything characterized as pay to play. Nothing would make me happier if the law firms were prohibited from giving.” “It taints the quality of the work when people assume they got it because of pay to play,” Rodburg adds. “In a merit system, I’d like to think we’d be chosen our fair share of the time.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.