February 9, 2004


Are Wall Street employees pressured by bosses to give?


A few weeks before Christmas bonuses were doled out, a Wall Street executive complained that the chairman of his firm wanted him to write a $2,000 check to George Bush's re-election campaign. "I was so shocked and appalled because I'd never been hit with something like this," said the banker as he nursed a beer at Rolf's, an east side Manhattan restaurant. "But from what I hear, this is business as usual."

The checks were not to be sent to the Bush campaign, he explained. Instead, they were to be sent to the chairman's office. That way, the chairman could give all the checks to the Bush campaign himself and get credit for his fund-raising efforts. "The thing that galled me, though, was not that the chairman was pushing his political views on me," explains the banker, "but rather that I was expected to enhance the reputation and status and power, the personal power, of the chairman in the Bush arena with my contribution." At the same time, of course, the chairman could keep tabs on which employees had complied with his request.

Employees have long been buttonholed by their bosses to give to various political campaigns and charities, with some complaining that the request is not as voluntary as it sounds. It doesn't help that these requests sometimes come around bonus time, making some think they'll be punished if they don't play ball-even if that's not necessarily the case.

This year, such employee donations have turned the financial industry into George Bush's biggest backer. As of Jan. 26, the financial industry had raised $9.5 million for the President, according to the Center for Responsive Politics, a nonpartisan group that researches campaign financing. But the money wasn't donated by the firms themselves. Instead, it came largely from individual employees and their families. The individuals wrote checks for as much as $2,000-the maximum they are allowed to contribute. The money was then collected and handed over to the campaign in a lump sum, a process known as bundling.

While bundling has gone on for years, it has reached new heights in this election, given that corporations can no longer give money to the national political parties. New campaign finance laws passed in November 2002 banned so-called soft money-the unregulated contributions companies gave to the Democrat and Republican national committees for party building or issue advertisements. At the same time, the law raised the amount individuals can contribute from $1,000 to $2,000. The result is that the fund-raising burden has largely shifted from Corporate America to its employees. Some $17 million of the $20 million the financial industry has given so far to all candidates in the 2004 election came not from the firms but from their employees and families. About 98% of Bush's war chest has come from individuals. In the 2000 election, the comparable figure was only 42%.

A banker who has worked at several bulge-bracket firms says the process works like this: "Top brass at a firm send out letters to relatively high-level employees asking them to give money to a fund, which the firm uses at its discretion to support political candidates," he says. "The letter explicitly states that the employee's compensation and career will not be affected by a donation or by a decision not to donate." But the banker believes that last sentence is included as a legal protection. Indeed, pressuring or coercing employees, in order to make them donate, is illegal, according to the Federal Election Commission.

But whether pressured or not, the practice goes on. Pat Gillespie, deputy director for the Senate Democrats in the New Jersey legislature, puts it more bluntly: "The head honchos at the firm buttonhole all their employees and get them to write checks. Then they gather them up and give them to the campaigns in bulk."

Gillespie, who has worked on campaign finance reform in New Jersey since 1993, says the typical scenario is for senior executives to say they're hosting a fund-raising event, such as an informal breakfast or cocktails, and that they need employees to write checks for $1,000 or $2,000. But the event is simply window dressing, according to Gillespie.

"The chairman then collects the checks and either gets a meeting with Bush or [Karl] Rove or somebody, and hand delivers the checks," Gillespie says. "Remember, this is Wall Street, so they can all afford it."

That's certainly what happened in the weeks leading up to June 23, 2003, when the Bush campaign had one of its biggest fund-raisers at a Sheraton hotel in New York City. The fund-raiser-described by one Wall Street employee as one of those events where "you pay a fortune for a hot dog"-put $4 million into the President's re-election coffers. That's more than Wesley Clark had raised for his whole campaign as of Jan. 7.

Around early June, Merrill's chairman, E. Stanley O'Neal, sent letters to the homes of hundreds of senior executives asking them to attend the event. Some went, some didn't. But the request resulted in about 120 Merrill employees writing checks to the Bush campaign, most at the $2,000 individual limit. O'Neal was able to raise about $240,000 for Bush in less than three weeks, according to filings from the Center for Responsive Politics.

A similar phenomenon was going on at CSFB at about that time. Several senior executives were involved in the fund-raising event and solicited contributions from others at CSFB, according to an employee there, enabling the firm to raise $71,000 in the same three-week period.

The Center for Responsive Politics reports that about 65 Bear Stearns employees ponied up $111,000 in that same time frame and that nearly 75 Lehman Brothers employees contributed $148,000.

Lehman declined to comment, and Bear Stearns did not return calls for comment. Both CSFB and Merrill Lynch say they do not pressure their employees to give.

"CSFB encourages good citizenship by our employees, but the firm explicitly does not tolerate coercion or pressure to contribute to any political group or candidate," says Victoria Harmon, a spokeswoman for CSFB. "A CSFB employee can actively engage in politics and make personal political contributions as they deem appropriate, so long as these activities are in compliance with the laws applicable to CSFB and its employees." But employees may not solicit other employees for campaign contributions without prior permission from CSFB's D.C. political office, she says.

Mark Herr, a spokesman for Merrill Lynch, says no one at the firm is ever pressured to contribute to a particular party or candidate. "Mr. O'Neal's choice to support a particular candidate is his personal choice," Herr says. "While many Merrill Lynch people share his political philosophy, many others do not, and decline to participate. In fact, they actively support other candidates and parties."

Perhaps in spirit, but not with their wallets. A whopping 84% of the $713,725 Merrill employees contributed to the 2004 election as of Nov. 3 has gone to Republicans. In fact, Merrill employees have given Bush $368,200. Howard Dean, until recently the frontrunner and who so far has raised more than any other Democratic candidate, received only $3,250 from Merrill staffers.

Other firms are more evenly divided. Of the $1.6 million that traditionally-Democratic Goldman Sachs had given to political candidates as of November, 50% has gone to Democrats while 50% went to Republicans, according to the Center for Responsive Politics. In fact, Goldman was Howard Dean's ninth biggest contributor, giving $16,000.

Citigroup has given a total of $891,505, 58% of it to Republicans and 42% to Democrats. Morgan Stanley gave a total of $698,682, with 59% going to Republicans. Morgan Stanley was also among Dean's top 20 contributors, having given $11,450.

Like Merrill, CSFB and Bear Stearns leaned heavily to the Republican party, with CSFB employees giving 63% of its $555,750 in donations to the GOP, while Bear Stearns handed 71% of its $427,083 to the Republicans.

Lehman Brothers leans to the Democrats, with that party getting 55% of the firm's $610,172 in donations, and Republicans getting 45%.

Playing the game

Senior Wall Street executives know that their best and most accessible source of individual contributions is employees. And that raises the question whether employees are giving willingly or because they feel compelled to give because their boss asks them to.

In the past, some companies have been rumored to be reimbursing their employees for writing checks. In fact, a handful of those charged in the campaign finance scandal that ensnared former Sen. Robert Torricelli (D-N.J.) in 1999 pleaded guilty to reimbursing employees who had made political contributions.

However, the more common practice, campaign finance observers say, is a gray area in which executives pay their employees lucrative bonuses with the implicit understanding that the employee will step up to the plate if the chairman then asks for donations to political or charitable causes.

Most employees either give and say nothing, or they don't give, and take their chances. Few raise the issue publicly, with the exception of Duncan Goldie-Morrison, a former Bank of America executive who had already been fired and perhaps believes he has nothing to lose. Goldie-Morrison claims bank officials pressured him into donating to charities and political campaigns in Charlotte, N.C., where the bank is based. The outspoken banker, who once headed BofA's global markets group, says the bank's chief executive, Ken Lewis, forced him to contribute to political campaigns, and tried to put the arm on him to donate $250,000 over five years to the Children's Theater of Charlotte. Goldie-Morrison says he donated only $100,000 to the theater.

Goldie-Morrison makes his claims in a complaint filed in November with the National Association of Securities Dealers. In that complaint, Goldie-Morrison claims he was fired in February 2003 for being increasingly critical of the bank's accounting practices and management's behavior. He now seeks $7.3 million in lost stock options and bonuses as well as reimbursement for his donations. Bank of America spokesman Jeff Hershberger strongly denies any wrongdoing on the part of the bank.

"We believe his allegations are completely without merit," Hershberger says. Neither Goldie-Morrison nor his attorney returned calls for comment.

William Beaver, a sociology professor at Robert Morris University in Pennsylvania who has studied political fund raising in Corporate America, says such practices are common. Indeed, they're not unlike what goes on at colleges across the country.

"Administrators get so much money, and they're expected to kick back a percentage to the school in the form of a gift," Beaver says. "It's informal. It's not written. But if you don't do it, it's a strike against you. You have to play the game."

Certainly, Wall Street employees have been asked to write checks for their bosses' pet causes over the years. An employee of Neuberger Berman, which is now owned by Lehman, says officials there are pressured to give to the United Jewish Appeal. Neuberger, through Lehman, declined to comment.

And a former employee of what was then Shearson Lehman Brothers, when it was owned by American Express & Co., recalls being pressured to give to United Way. James Robinson was chairman of American Express at the time, as well as chairman of United Way of America between 1985 and 1988.

"All departments at Shearson Lehman American Express were pressured to have 100% participation in certain charities," the former Lehman employee says. "We could give what we wanted, but each department was pressured to have everyone participate. No department head wanted to show that their department did not have 100% participation."

However, Philip Jones, a spokesman for United Way of America, says his charity discourages coercion and does not want employers to seek 100% participation in the charity. Moreover, it encourages peer solicitation rather than manager solicitation of employees.

"For years, the United Way has been concerned about the use of undue pressure in fund raising and is opposed to any type of coercion. Any semblance of pressure-whether real, implied or perceived-is contradictory to the operating standards of United Way," Jones says.


To be sure, no firm has been accused of threatening its employees who fail to contribute to a political campaign. That would be illegal. Election laws say employers can solicit their employees for political contributions, on company time, using company paper and ink. But the law explicitly states corporations cannot use threats or financial reprisals in conjunction with that solicitation, says George Smaragdis, a spokesman for the FEC.

Smaragdis says he has not seen any complaints of coercion that have been adjudicated in the last several years. And while pending cases are confidential, complainants must disclose their names and testify against the company-a proposition that would deter most from bringing the issue to the election authorities.

Regardless, any pressure is believed to be implicit and would be hard-if not impossible-to prove in court. It would be like a juror in a mob trial saying the defendant threatened him with his eyes. The defendant hasn't made a formal threat. But then he doesn't necessarily have to. The International Association of Machinists and Aerospace Workers tried to make such a point in federal court in 1982.

The union claimed the FEC was allowing companies like General Motors Corp. to pressure its employees into giving money to political action committees, or PACs. The union claimed the solicitations were "inherently coercive" because immediate supervisors were approaching employees for contributions at work.

The union argued that executive and administrative employees gave more to their companies' PACs than employees who were not directly solicited. The U.S. Court of Appeals for the District of Columbia Circuit threw out the union's claim, saying one could easily argue that employees give to the PAC not because they are coerced or intimidated but rather because they perceive it to be in their own best interest or in the best interest of their corporation, and because they have the wherewithal to do so.

Several Wall Street employees interviewed for this story acknowledge they have felt pressured to give to various political campaigns, though none would speak on the record. One former Morgan Stanley employee says his bosses used to send around memos asking employees to donate to the company's PACs. Employees who didn't give the first time around were sent a follow-up memo-a clear sign managers were keeping a list of who had been naughty and who had been nice.

"I distinctly remember feeling pressured to donate to both the United Way and PACs that were aligned with the firm's interests. And it was done before bonus time," says the former Morgan Stanley employee. "You definitely felt like it was in your best interest to donate, even if you didn't believe in it."

Dan Clawson, professor of sociology at the University of Massachusetts in Amherst, says he conducted a study on just this topic back in 1992, and it was clear that employees felt pressure to contribute to political campaigns.

"We called people at Bear Stearns, and you could see that all people who held a particular rank contributed $500. Another rank contributed $1,000. And so on," Clawson says. "One person said, A memo goes around, and it tells you what to give. I just give whatever the chairman tells me to give.'"

Clawson says corporations are in a position to "coerce" their employees, though he uses the word coerce loosely. If an employee's supervisor-who will be evaluating that employee's performance and influencing his earning power-asks the employee to make a donation, the employee may feel he has no choice if he wants to maintain or increase his salary, says the professor.

"I use the word coerce, but it doesn't have to be blatant. It may simply be a matter of your superior saying, I hope all team players will contribute.' Do you want your boss to think you're not a team player?" Clawson asks. "But no one is going to say they felt pressured, because if they did, their job might be at risk. And these are very highly paid employees. Why would they risk it all over a minor $2,000 contribution?"

He adds that during his study, a PAC committee chairman told him about an employee who complained of "having his arm twisted" for a donation. The PAC chairman says he returned the employee's contribution.

"He insisted there's no pressure. But he admits his employees may feel differently," Clawson says.

Trevor Potter, a former chairman of the FEC who now heads the Campaign Legal Center, a campaign finance group, says Wall Street firms may not be doing anything untoward by asking their employees for money. It depends on the way the question is put, he says.

"I have seen plenty of requests that were not inherently coercive," Potter says. "I know many Wall Street executives are raising money for Bush and soliciting contributions from their executives. But any pressure is usually perceived rather than expressed."

Potter says the FEC investigates allegations of coercion from time to time, and in some cases, it has found instances of violations. But he has not heard of any from this Presidential campaign. To avoid even the appearance of coercion, Potter says that some companies have instituted policies stating that direct superiors cannot ask for donations, or that all "asks" have to be in writing, or that superiors who set compensation cannot solicit.

None of the firms contacted for this article acknowledged having such a policy.

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