CORRUPT MANAGEMENT OF PRESCRIPTION DRUG INSURANCE

The Federal Trade Commission is suing the three dominant prescription drug insurance managers for practices that it alleges have spiked the price of insulin in the U.S. The suit claims these drug insurance managers have been “engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs and impaired patients’ access to lower” cost alternatives. Drug insurance management was originally a cost-control effort that morphed into a profit center by getting rebates (i.e., kickbacks) from drug makers.

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The Federal Trade Commission (FTC) is suing the three largest pharmacy benefit managers (PBMs) for practices that it alleges have spiked the price of insulin in the U.S. to over 12 times what it was 20 years ago. PBMs are middlemen that manage the costs of prescription drug coverage for health insurers. They determine which drugs an insurance plan will pay for, what the co-pay for patients will be, and how much pharmaceutical manufacturers will be paid for their drugs. [1]

The FTC is suing Caremark Rx, Express Scripts, and Optum Rx, which process 80% of all prescription drug purchases in the U.S., for “engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs and impaired patients’ access to lower” cost alternatives. Each of these PBMs has roughly $100 billion in annual revenue and is tied to a large insurance corporation: Caremark Rx to CVS, Express Scripts to Cigna, and Optum Rx to UnitedHealth.

The FTC’s suit does not come as a surprise. Last year, numerous local governments sued these three PBMs and the three large insulin manufacturers alleging they had conspired to increase the price of insulin. [2]

PBMs were originally created by insurance corporations to manage the growing costs of prescription drugs. The initial intent was to save insurance corporations and patients money by negotiating lower prices with the drug makers and incentivizing patients to use lower cost drugs, particularly generic drugs as opposed to brand name drugs. A key part of these efforts was the creation of lists of drugs the PBM and insurer would pay for along with a tiered set of co-pays for patients to incentivize the use of lower cost drugs. These lists are known as “formularies.” [3]

The PBMs discovered they could turn this cost-control effort into a profit center by getting rebates (i.e., kickbacks) from the pharmaceutical manufacturers by paying them well for their drugs and incentivizing patients to use those drugs.

This created all sorts of perverse incentives. The PBMs could increase their profits by steering patients to brand name drugs with higher prices and co-pays (as opposed to cheaper generic drugs) because the PBMs got bigger rebates on the higher priced drugs. The PBMs could also increase their profits and rebates by paying the drug makers inflated prices for their drugs, because that allowed the drug makers to give them bigger rebates (also sometimes referred to as discounts). However, this drove up the “list prices” of these drugs so that people without health insurance (or with health insurers other than those linked to these PBMs) paid more.

The FTC suit focuses on insulin, although the illegal practices it charges the PBMs with apply to all prescription drugs. In the case of insulin, the PBMs’ formularies (i.e., list of approved drugs) include only certain types or brands of insulin. These are typically NOT the lowest price insulin products but the ones that give the PBMs the highest rebates and profits. Their collusion with the insulin product makers to maximize their rebates and profits, drives up the price of these insulin products for all users. The FTC has warned drug manufacturers that their complicity in the PBMs’ practices raises serious concerns and that they may be named as defendants in future FTC actions.

As background, insulin was invented in the 1920s and the inventors refused to patent it to make it as readily and cheaply available as possible. Today, three pharmaceutical corporations control the market for insulin: Eli Lilly, Novo Nordisk, and Sanofi. They’ve used their market power to unjustifiably increase the price of insulin. For example, Eli Lilly’s leading insulin product, Humalog, costs 13 times more now, $274 a dose, than it did in 1999 when it was $21.

Two interesting notes: First, Express Scripts has sued the FTC for defamation over the findings of its study of the PBMs’ behaviors. These findings were a precursor to the FTC’s lawsuit. Second, the FTC is also looking at the PBMs’ practices that favor certain, often affiliated pharmacy chains (such as CVS in the case of Caremark) and harm other pharmacies, particularly independent (i.e., non-chain) pharmacies. These, probably illegal, practices reduce competition in the pharmacy business.

As noted, these practices of the PBMs and the pharmaceutical corporations are by no means limited to insulin. The City of Baltimore is suing drug maker Biogen alleging illegal collusion with the three big PBMs to block competition for its brand name multiple sclerosis (MS) drug, Tecfidera. Biogen has regularly increased the price of the drug from $52,500 for a year’s supply in 2013 to $90,000 in 2019, so the drug now provides almost half of Biogen’s revenue. [4] Biogen’s patent on the drug was expiring and it was desperate to maintain the revenue stream and its profits. The suit alleges that Biogen paid the three PBMs to structure their drug formularies to promote the use of its drug rather than lower-cost generic drugs. Biogen calls the payments “rebates” or “fees,” but, in reality, they are good, old-fashioned kickbacks.

Kentucky is suing Express Scripts alleging that it colluded with opioid makers to increase opioid sales through deceptive marketing and other strategies. The result was a deadly, on-going opioid addiction crisis that was linked to roughly 75,000 deaths nationwide in the last year. [5]

There are bills in Congress and in state legislatures that would tackle various elements of PBMs’ corrupt practices. I’ll keep you posted if any of the bills in Congress look like they may move forward. In the meantime, you might want to raise this issue with your state representative or senator, or your state’s public health agency, to learn if they are taking steps to stop the anti-competitive practices of PBMs.

[1] Dayen, D., 9/20/24, “FTC sues PBMs for jacking up insulin prices,” The American Prospect (https://prospect.org/health/2024-09-20-ftc-sues-pbms-jacking-up-insulin-prices/)

[2] Silverman, E. 9/26/24, “Baltimore sues Biogen, accusing it of blocking generic MS drugs,” The Boston Globe from Stat News

[3] Editorial, 7/30/24, “Reining in pharmacy benefit managers,” The Boston Globe

[4] Silverman, E. 9/26/24, see above

[5] Schreiner, B., 9/28/24, “Kentucky sues Express Scripts,” The Boston Globe from the Associated Press

SHORT TAKES #14: MORE EXAMPLES OF CORPORATE BAD BEHAVIOR

Here are short takes on three important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. They range from irresponsible and dangerous behavior by the owners and operators of a cargo ship to corrupt behavior by a student loan servicer to illegal behavior by Apple and Goggle in Europe.

STORY #1: The cargo ship that crashed into and collapsed the bridge in Baltimore (killing six people who were working on the bridge) has asked a court to limit its liability to $44 million! The U.S. Justice Department, the U.S. attorney in Maryland, the State of Maryland, the City of Baltimore, business owners in the area, and the families of those who died are all opposing this effort. More realistically and fairly, the liability for this incident could be billions of dollars. [1]

Justice Department lawyers have asserted in court documents that the owners and operators of the ship prioritized profits over safety and knowingly allowed a dangerous, unseaworthy ship to set sail. Their court filing identified mechanical problems on the ship and described the owners’ “Band-Aid approach” to fixing some of them. It described the crew as “ill-prepared” and the owners as “cutting corners in ways that risked lives and infrastructure so that they could save time and money.”

Due to the “negligence” and “egregious facts” of the case, the Justice Department is seeking $100 million in economic damages and unspecified punitive damages. The economic damages could escalate as the cost of rebuilding the bridge is factored in and, along with the claims of other entities, including the families of those who died, the liability is likely to be in the billions. Unfortunately, the litigation to settle all this will likely drag on for years.

The FBI has opened an investigation into whether the ship’s owners’ and crew’s actions, in allowing the ship to sail with known problems, rise to the level of a crime. No criminal charges have yet been filed.

STORY #2: Navient Corp. has been banned from servicing federal student loans and will pay $100 million to harmed borrowers, as well as a $20 million penalty. This settlement with the Consumer Financial Protection Bureau (CFPB) comes after an investigation found that Navient had denied borrowers access to more affordable, income-based repayment plans, while channeling them into more expensive (and profitable) repayment plans. [2]

Navient is a repeat offender. In 2022, it paid $1.85 billion and canceled 66,000 student loans in a settlement with 39 states over its use of predatory lending practices. It has failed to report borrower complaints as is required by the U.S. Department of Education and has ranked dead last in borrower satisfaction according to surveys by the department. It has made it difficult for students who attended fraudulent for-profit schools to get debt relief.

Navient still services non-federal student loans for more than 12 million borrowers totaling nearly $300 billion in debt. If you or someone you know has a loan serviced by Navient, keep a close eye on the payment plan and options.

STORY #3: The European Union’s top court has ruled that Apple must pay over $14 billion in back taxes to Ireland. It concluded that two Apple subsidiaries got illegal, selective tax breaks from Ireland between 1991 and 2014 and that these tax breaks were illegal state aid that harmed competition. Apple’s taxes in Ireland, the base of its European operations since 1980, have been as low as 0.005% of profits. Ireland hosts the headquarters of many multinational corporations because of its special tax breaks. [3]

The current system for taxing multinational corporations is complex and unfair. Coordination and reform of tax policies across countries is badly needed. The United Nations is working to establish a global tax standard that fairly taxes a multinational corporation’s economic activity and appropriately distributes taxes among the countries where the corporation does business.

The European Union court also ruled that Google had illegally used its search engine dominance to favor its own shopping service. Google was fined $2.65 billion.

[1] Mettler, K., 9/19/24, “US: Ship that hit bridge deficient,” The Boston Globe from the Washington Post

[2] Bloomberg, 9/13/24, “Navient banned from servicing federal student loans, to pay $120 million,” Business Talking Points, The Boston Globe

[3] Carver, E., 9/10/24, “ ‘Long-overdue justice: EU court rules Ireland let Apple avoid $14.4 billion in taxes,” Common Dreams (https://www.commondreams.org/news/ireland-apple-tax)

HOW EXECUTIVES USE CORPORATE PROFITS

Executives at large, low-wage corporations are using profits and cash for exorbitant CEO compensation and stock buybacks, rather than increasing workers’ pay, contributing to workers’ retirement accounts, or investing in their corporations’ futures.

The 30^th annual report on how executives at large, low-wage corporations use the company’s profits has just been issued. It examines the 100 big U.S. corporations with the lowest median worker pay out of the 500 largest corporations in the U.S. (aka, the S&P 500). (Median pay is the middle of the distribution of the pay of all the workers at the corporation.) The corporations are referred to in the report as the “Low-Wage 100.” Note that women and people of color make up a disproportionately large share of the workers at these low-wage corporations. [1]

The report documents how profits were used among the following categories of spending:

Chief Executive Officer (CEO) pay ($14.7 million on average or 538 times the average of median worker’s pay),
Workers’ median pay ($34,522 or $17 per hour on average for a full-time worker),
Buying back the corporation’s own stock (over $1 billion per year per company on average for a total of $522 billion from 2019 – 2023),
Contributing to workers’ retirement savings, and
Investing in the future of the corporation.

For example, Ross Stores had the lowest median worker wage at $8,618 and a CEO making 2,100 times worker pay ($18.1 million in 2023), the highest ratio of CEO pay to worker pay among the Low-Wage 100. Nike’s CEO had the highest compensation among the Low-Wage 100 in 2023 at $32.8 million. This was 975 times the median worker’s pay at Nike.

From 2019 to 2023, 93 of the Low-Wage 100 corporations bought back their own stock. These buybacks artificially inflate the corporation’s stock price. This uses the corporation’s profits and cash to reward shareholders, including executives (who typically get a big chunk of their compensation in stock options), rather than compensating workers or investing in the business. For example, from 2019 to 2023, Lowe’s spent the most among the Low-Wage 100 on stock buybacks at $42.6 billion. This money could instead have been used to give an annual bonus for each of these five years of almost $30,000 to each of Lowe’s 285,000 workers, whose median pay is $32,626. Home Depot was second in buyback spending at $37.2 billion, which could have given its 463,100 workers five bonuses of $16,071 each year to augment their median pay of $35,131. Walmart spent $30.8 billion on buybacks, which could have given its 2.1 million workers five annual bonuses of almost $3,000 each to augment their median pay of just $27,642.

Another perspective on the stock buyback versus worker tradeoff is to compare the amount these corporations spent on buybacks versus contributions to workers’ retirement plans. Autozone had the largest imbalance, spending 92 times as much on buybacks as it contributed to workers’ retirement savings. Chipotle was second, spending 48 times as much on buybacks as on workers’ retirement benefits.

Another alternative to using profits and cash for stock buybacks would be to use them for internal capital investments that could, for example, improve efficiency, expand capacity, or upgrade equipment and technology. One might think that executives would prioritize such investments in the longer-term success of their corporations. However, from 2019 to 2023, 47 of the Low-Wage 100 spent more on buybacks than capital investments. Lowe’s led the way spending $33.6 billion more on buybacks than capital investments. Surprisingly, even hi-tech corporations like semiconductor maker Analog Devices spent $6.2 billion more on buybacks than capital investments and Johnson Controls, a maker of smart building technologies, spent $8.8 billion more on buybacks than investments.

Here are some highlights from the report (see the report for a list of all 100 corporations and related statistics):

Corporation	CEO pay	Median worker pay	CEO pay as multiple of worker pay	Stock buybacks	Investments in business
Bath & Body	$11.7 million	$ 9,834	1,189	$ 3.4 billion	$ 1.6 billion
Coca-Cola	$24.7 million	$13,752	1,799	$ 5.0 billion	$ 7.9 billion
Hilton	$26.6 million	$48,435	549	$ 5.8 billion	$ 0.7 billion
Lululemon	$16.5 million	$19,518	845	$ 2.1 billion	$ 2.2 billion
McDonald’s	$19.2 million	$15,802	1,212	$13.7 billion	$10.3 billion
Nike	$32.8 million	$33,646	975	$17.5 billion	$ 4.6 billion
Starbucks	$14.6 million	$14,209	1,028	$16.9 billion	$ 8.9 billion
Target	$19.2 million	$26,696	719	$12.5 billion	$19.6 billion
TJX Cos.	$22.2 million	$14,857	1,496	$ 8.7 billion	$ 6.0 billion
Yum! Brands	$21.2 million	$17,628	1,205	$ 3.9 billion	$ 1.2 billion

There are policies that would incentivize corporations and their executives to cut exorbitant CEO pay, to reduce stock buybacks (which used to be illegal manipulation of stock prices [see this previous post for more detail]), and to invest in workers and the future of their businesses. For example:

Higher tax rates on corporations with large gaps between CEO and worker pay,
Limits on the inclusion of extremely high compensation as a business expense and cost that reduces profits and, therefore, taxes owed,
Allowing recoupment of executive compensation from previous years when a corporation files for bankruptcy or gets a bailout,
Increasing taxes and/or restrictions on stock buybacks,
Closing tax loopholes, such as for “carried interest” income of investment managers and unlimited tax-deferred retirement contributions, and
Putting restrictions on CEO-worker pay gaps and stock buybacks in federal government contracts.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to reduce exorbitant CEO pay and stock buybacks, while encouraging investments in workers and a business’s future. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1] Anderson, S., 8/29/24, “Executive excess 2024: The ‘Low-Wage 100’ large corporations are enriching CEOs at the expense of workers and long-term investment,” Institute for Policy Studies (https://ips-dc.org/report-executive-excess-2024/) This post is a summary of this report.

SHORT TAKES #13: STOPPING CORPORATE CORRUPTION: GUNS AND MONEY

Short takes on two important stories: Updates on 1) holding gun manufacturers accountable for illegal gun sales and 2) efforts to stop multi-billion-dollar, international, corrupt money laundering via the U.S. financial system.

Here are short takes on two important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. The first is an update on an effort to hold gun manufacturers accountable for illegal gun sales. The second is an update on efforts to stop international, corrupt money laundering via the U.S. financial system, which is a multi-billion-dollar issue.

STORY #1: You may remember that earlier this year the Indiana legislature passed a bill that retroactively banned Gary Indiana’s 1999 lawsuit against gun manufacturers for illegal gun sales. Good news! In August, an Indiana Superior Court judge ruled that the retroactive ban was unconstitutional!

The judge ruled that banning lawsuits by cities against gun manufacturers was legal. However, he ruled that the retroactive ban on Gary Indiana’s suit would “violate years of vested rights and constitutional guarantees” and that the city’s rights should be protected and upheld. The gun manufacturers have announced they will appeal, but for now the suit will go forward. The discovery phase of the trial was nearing completion earlier this year before the legislature attempted to block the suit. The gun manufacturers want to stop the suit from moving forward now so the thousands of documents they have had to share as part of the suit’s pre-trial discovery process won’t be made public. The documents will presumably reveal embarrassing, if not illegal, decisions, actions, and polices of the gun makers. [1]

STORY #2: The U.S. financial system is probably the largest vehicle for money laundering in the world. Hundreds of billions of dollars flow through the U.S. financial system each year from terrorists, international criminals and gangs, corrupt government and business officials, and drug and human traffickers. [2]

A major step to crack down on money laundering and the corruption it enables was taken recently by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). New regulations were issued that will stop money laundering via residential real estate and private investment firms, such as private equity firms and hedge funds. [3]

Currently, money is laundered through cash purchases of expensive residential real estate and large cash investments with private investment firms. These transactions receive little, if any scrutiny. The new regulations will require reporting and scrutiny of these large cash transactions. For example, since the collapse of the Soviet Union in 1991, Russian oligarchs have moved billions of dollars of their ill-gotten wealth into the U.S., where they knew it could be laundered through the U.S.’s deregulated financial system and would be protected by the U.S. legal system.

After the September 11, 2001, terrorist attacks on the World Trade Centers in New York, the U.S. did crack down on money laundering and funding for terrorists by requiring financial institutions to report and scrutinize large cash transactions. However, most real estate transactions and investments in private, largely unregulated, investment firms were exempted.

In 2011, then-FBI Director Mueller noted that organized crime had changed with globalization and technology. It had become a multi-national, multi-billion-dollar enterprise involving cooperation among criminals, corrupt government officials, and corrupt business leaders. It was a significant national security threat and engaged in widely diverse activities including computer hacking, copyright infringement, human trafficking, health care fraud, and manipulation of prices for commodities such as oil, natural gas, and precious metals. The perpetrators also work to corrupt officials at the highest levels of governments and businesses to aid and abet their illegal activities.

In 2021, President Biden declared that the fight against such criminal and corrupt activity was a core national security priority. As a first step, Congress passed and Biden signed the Corporate Transparency Act. It requires shell companies (i.e., business entities that have no real business activities and are used as passthroughs for financial transactions) to provide detailed identification of all persons who own 25% of more of the company or exercise substantial control of it. The Act also increases penalties for money laundering and enhances cooperation between U.S. and foreign financial and law enforcement authorities. (For more detail see this previous post.)

In 2023, the U.S. Treasury Department announced that money laundering by Russian entities, including the government, state-owned enterprises, organized crime, and oligarchs posed a significant threat to our national security and to the international financial system. This concern was an important factor driving the new anti-money laundering and anti-corruption regulations.

[1] Coleman, V., 8/13/24, “Historic gun suit survives serious legal threat engineered by Indiana Republicans,” (https://www.propublica.org/article/gary-indiana-lawsuit-guns-gunmakers-gop-glock-smith-wesson)

[2] Richardson, H. C., 8/29/24, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/august-29-2024)

[3] U.S. Treasury Department, 8/28/24, “FinCEN issues final rules to safeguard residential real estate, investment advisor sectors from illicit finance,” (https://www.fincen.gov/news/news-releases/fincen-issues-final-rules-safeguard-residential-real-estate-investment-adviser)

TRUMP’S APPARENT WITNESS TAMPERING AND ILLEGAL FUNDING OF HIS LEGAL EXPENSES

Witnesses in multiple Trump cases have gotten financial benefits or promises of pardons, which appears to be illegal witness tampering. Five campaign entities have funded Trump’s legal expenses; some of this appears to be illegal.

Witnesses in multiple civil and criminal cases involving former president Trump have gotten financial benefits or promises of pardons at key points in time during the cases’ proceedings. Witness tampering is a crime. Five campaign entities have shared the funding of Trump’s legal expenses, estimated to be over $100 million as-of early 2024. Some of their spending and transfers of funds appear to be illegal.

Trump, his campaign committee, and three Political Action Committees (PACs) organized to support his campaign all appear to have violated the law in activities related to the criminal and civil cases where Trump is a defendant.

First, at least a dozen witnesses in Trump’s civil or criminal cases have received significant financial benefits either from the Trump campaign (such as large pay raises, increased consulting fees, severance pay, or new jobs for themselves or family members), from Trump’s social media company, or other Trump businesses (such as positions, shares, or severance pay). These benefits often were provided right around the time of their actual or potential testimony. Trump has also made, both explicitly and implicitly, promises of pardons for witnesses. If any of these actions were intended to influence a person’s testimony or their willingness to testify, that would be a crime. [1]

Cases of witness tampering are difficult to prove in court because prosecutors must show that benefits or punishments were intended to influence testimony. However, both a former Trump campaign manager and a former campaign adviser were convicted of witness tampering in 2018 and 2019. Trump pardoned both men in the final days of his presidency, but notably did not pardon a co-defendant who had cooperated with prosecutors.

Apparent attempts to influence witnesses have been a recurring theme in civil and criminal cases involving Trump. In 2023, Trump publicly encouraged a witness not to testify in the Georgia election interference case. During the congressional January 6 hearings, White House staffer Cassidy Hutchinson reported multiple efforts to influence her testimony. Trump aides Boris Epshteyn and Susie Wiles, both potential witnesses in Trump cases, saw their consulting companies receive large increases in payments from the Trump campaign while their testimony was being sought by prosecutors. In the same time period, Wiles’ daughter got a $222,000 a year job at the Trump campaign. Allen Weisselberg, former chief financial officer of the Trump Organization businesses, got a $2 million severance package in January 2023, four months after the New York State Attorney General sued Trump for financial fraud. The severance agreement prohibits him from voluntarily cooperating with investigators.

Dan Scavino, a longtime Trump communications staffer, had the power to post to Trump’s social media accounts and was with Trump on January 6. In August 2021, a month after the congressional January 6 hearings began, Scavino got a $240,000 a year consulting job from Trump’s social media company. He refused to testify or turn over documents to the committee and was held in contempt of Congress. In September 2022, he was subpoenaed by the federal grand jury investigating election interference. After this subpoena but before his testimony in May 2023, he was given a seat on the board of Trump’s social media company. Securities and Exchange Commission (SEC) reports from the company show that he was given a $600,000 bonus and $4 million in shares, although it isn’t specific about when these benefits were granted. And the list of apparent witness tampering goes on and on.

Second, five campaign entities have shared the funding of Trump’s legal expenses, estimated to be over $100 million as-of early 2024. The five entities are: [2]

Trump’s 2020 presidential campaign committee,
The Make America Great Again (MAGA) PAC,
The Save America PAC, ostensibly a “leadership PAC” meant for supporting other candidates,
The MAGA Inc. PAC, a Trump-supporting Super PAC that can take unlimited contributions because it operates independently of the candidate and his campaign committee (supposedly), and
The Republican National Committee (RNC).

An important legal question is which of Trump’s legal expenses are (or should be) personal expenses versus appropriate campaign expenses. Campaign finance laws prohibit campaign committee funds from being used for personal expenses, but allow personal use of PAC funds. Trump has used donations to his campaign, his affiliated PACs, and the RNC to pay essentially all his lawyers’ bills in all of the two dozen cases he has faced since 2020. A lot of the spending falls into legal gray areas due to loopholes in campaign finance laws and weak enforcement, especially by the Federal Elections Commission (FEC). Further complicating the situation, several of his lawyers work both on cases that are personal (e.g., the civil and fraud cases involving his businesses) and on ones that are related to his role as President (e.g., the classified documents case).

Between election day in 2020 and the January 6, 2021, attack on the U.S. Capitol, Trump raised $255.4 million for an “election defense fund,” supposedly to stop the election from being stolen. This money was split between his campaign committee (and was later moved to his MAGA PAC) and his Save America PAC. The Save America PAC has paid roughly $70 million for Trump’s legal expenses, the bulk of those expenses to-date. Trump campaign staff set up a joint fundraising agreement between the Save America PAC and the RNC, which had the RNC prioritize sending money to the Save America PAC rather than to its own coffers.

The Save America PAC made a $60 million donation to the MAGA Inc. PAC but then got that money back through a series of unusual monthly payments. MAGA Inc. is a Super PAC that can receive unlimited donations and is required to operate independently of the Trump campaign. However, this unusual arrangement makes it appear that it is paying for Trump’s legal expense, although FEC disclosure requirements don’t make this explicitly clear. Furthermore, it is illegal for MAGA Inc. to donate more than $5,000 to the Save America PAC, so their arrangement appears to be illegal but there has been no enforcement action.

Federal elected officials and candidates are allowed to establish a personal legal defense fund to pay for any legal matter related to the individual’s reputation and fitness for office. These legal defense funds are subject to strict contribution and disclosure requirements. There is no evidence that Trump has set up a legal defense fund.

The three PACs are prohibited, at least in theory, from coordinating their spending with the Trump campaign committee and Trump, as well as with each other. However, the FEC, which has three Republican and three Democratic members, has repeatedly been deadlocked on key decisions and enforcement actions. As the Brennan Center for Justice reports, “In the 14 years since Citizens United, during which super PAC coordination with candidates … has been rampant, the FEC has almost never even investigated coordination restrictions, let alone sought to enforce them, despite the commission’s own nonpartisan staff recommending investigations dozens of times.” [3]

All of this highlights the need to reform campaign finance laws and strengthen FEC enforcement. Passing the Freedom to Vote Act in Congress would do a lot to address these issues.

I urge you to contact your U.S. Representative and Senators to ask them to push for passage of the Freedom to Vote Act. You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1] Faturechi, R., Elliott, J., & Mierjeski, A., 6/3/24, “Multiple Trump witnesses have received significant financial benefits from his businesses, campaign,” ProPublica (https://www.propublica.org/article/donald-trump-criminal-cases-witnesses-financial-benefits)

[2] Weiner, D. I., & Bacskai, O., 5/10/24, “Trump’s use of campaign funds to pay legal bills,” Brennan Center for Justice (https://www.brennancenter.org/our-work/research-reports/trumps-use-campaign-funds-pay-legal-bills)

[3] Weiner, D. I., & Bacskai, O., 5/10/24, see above