Arrow-right Camera

Nation/World

Gop Donor Admits Campaign Violations Thomas Stewart Agrees To Pay $5 Million Fine

Thu., March 19, 1998

Thomas Stewart, Washington state’s biggest campaign contributor to Republican causes, pleaded guilty to federal election-law violations Wednesday and agreed to pay a $5 million fine.

“There was significant corruption of the political process,” U.S. Attorney Kate Pflaumer said at a news conference.

Stewart resolved state violations in a separate civil action.

At issue in both the state and federal cases was the laundering of campaign contributions through employees of Food Services of America, a subsidiary of Stewart’s Seattle-based holding company, Services Group of America, Pflaumer said.

She called the practice “a perversion of corporate culture.”

The $5 million penalty is the third-largest on record for federal election-law violations, federal prosecutors said. The largest was an $8 million fine against Empire Sanitary Landfill of Pennsylvania, said Stewart’s attorney, Cyrus Vance Jr.

Under the agreement, $570,000 will go to pay state penalties and cover investigative costs - the largest penalty for campaign violations in state history, said Washington Attorney General Christine Gregoire.

Under the agreement approved by U.S. Magistrate John Weinberg, Stewart and SGA executive Dennis Specht - president of the company’s political action committee - pleaded guilty to one count of funneling contributions to the company PAC and congressional campaigns through FSA employees between 1990 and 1996. The subsidiary company pleaded guilty to 24 counts of federal election-law violations.

Federal prosecutors contend that in 1990-92 and 1996, Stewart, Specht and FSA made about $100,000 in illegal campaign contributions.

In response to questions from Weinberg, the two men said they had been aware that their practices violated federal law.

Stewart said he regretted his actions.

“It won’t happen again,” he said.

In addition to the fine, Stewart and Specht will serve 60 days of home detention with electronic monitoring - they are allowed to go to work from 6 a.m. to 8 p.m. Monday to Friday - and one year of probation. They also will each perform 160 hours of community service work at soup kitchens and homeless shelters.

They asked to delay the beginning of their home confinement until March 25, citing a March 24 meeting in Washington, D.C., with Defense Department officials to discuss the impact of the case on future federal contracts.

Since the federal violation is a misdemeanor, they will not serve jail time or lose their voting rights.

Even when jail time is recommended by the Justice Department for such violations, it is not imposed, Pflaumer said. And she said it is important not to interfere with legitimate participation in the election process.

“We wouldn’t want to be overzealous,” Gregoire said, though she noted that investigators had characterized the violations as “the most egregious they have seen.”

“I accept complete responsibility for the actions that brought us to the plea agreement today,” Stewart told reporters on the courthouse steps.

“I apologize to the community for those actions,” he said.

“I love this country and the values for which it stands. In the future our company will comply in every respect with the laws governing election campaigns and contributions.”

Paul Berendt, chairman of the state Democratic Party, said Stewart may be humbled but that the fine is peanuts to a man of his wealth. SGA, which has interests in food distribution, insurance and real estate, has 3,000 employees and annual revenues estimated at over $1 billion.

“I’d like to see him banned from politics,” Berendt said.

Republican officials said they will continue to welcome Stewart’s largesse. In addition to contributing more than $600,000 to the state party last year, Stewart hosts the state GOP’s annual picnic at his Vashon Island farm.

“The Democrats would love for us to return his money, of course,” said Frank Bickford, director of the state Republican Party. “But these are misdemeanors we are talking about. He has paid the price and we will not take away his First Amendment rights, his freedom of expression.”

An investigation found that FSA employees received “extra” performance bonuses with the understanding the additional money would go to Stewart’s political action committee, SGAPAC, or specific campaigns.

No employees were charged, partly because of “implied coercion,” Pflaumer said.

A federal grand jury in Seattle examined whether Stewart gave employees bonuses to be contributed to King County Councilman Peter von Reichbauer’s 1992 congressional campaign. One employee said in a sworn deposition that he was required to return $1,000 of a 1990 bonus to SGAPAC.

The grand-jury probe is made moot by the settlement. Investigators found no evidence von Reichbauer was aware of the practices engaged in by his benefactors, Pflaumer and Gregoire said.

In the state case, Stewart and Lawrence Riggs, president of SGA, agreed they had made $60,000 in illegally cloaked contributions of corporate funds to a 1995 charteramendment campaign seeking to require members of the Seattle City Council to be elected by district, rather than at large.

The donations enabled the campaign to hire signature gatherers, without which it is unlikely the measure would have made it to the ballot, Gregoire said.

She commended the Seattle Ethics and Elections Commission for spotting a consistent technical error in paperwork for contributions by FSA employees - a minor error in the name of the charter-campaign group - as well as a one-day flurry of $35,000 in such offerings.

Stewart already has paid a $62,000 fine to the city.

Stewart and Riggs also violated a state ban on contributions exceeding $5,000 in the last three weeks of a campaign by giving $25,000 through five individuals, who each contributed $5,000 to the charter campaign.

Gregoire, noting that the state addressed the matter through civil action, reiterated her call for campaign-finance reform. She questioned whether her office has the authority to bring criminal charges for such violations.

In an independent action, state Insurance Commissioner Deborah Senn levied a $120,000 regulatory fine against FSA, parent company of Eagle Pacific Insurance Co. at the time, citing state law allowing sanction of insurers convicted of “fraud, dishonesty or like moral turpitude.”

MEMO: Two sidebars appeared with the story: 1. Who got what? Thomas Stewart, his companies - Services Group of America and Food Services Inc. - their executives and the corporations’ political action committee are among the top donors to state and federal candidates from Washington state. Here’s a list of candidates, all Republicans, on Inland Northwest ballots who have received campaign money from those sources since 1994: U.S. Sen. Slade Gorton, $15,950 U.S. Rep. George Nethercutt: $19,000 U.S. Rep. Doc Hastings: $17,500 State Sen. Jim West: $550 (during 1996 campaign for lieutenant governor) State Rep. Larry Crouse: $400 State Rep. Larry Sheahan: $400 State Rep. Cathy McMorris: $350 State Rep. Mark Schoesler: $350 State Rep. Brad Benson: $250 Source: Public Disclosure Commission, Federal Election Commission, staff research

2. Defense Department to scrutinize firm Seattle Post-Intelligencer Even though Republican leaders in Washington state have said they will continue to embrace Thomas Stewart, their biggest financial benefactor, the first test of his new status will come next week. Stewart and his attorneys are scheduled to meet Monday with Defense Department officials in Washington, D.C., to discuss whether one of his companies, Food Services of America, will be allowed to continue to supply U.S. military installations. Those contracts represent a “significant dollar amount” to Food Services, said Seattle attorney Cyrus Vance Jr., Stewart’s lead attorney in the case. Vance declined to give a specific sum, but said Stewart wants to assure government officials that Food Services, which also pleaded guilty to campaign-donation violations Wednesday, is a responsible contractor that has dealt with its legal problems.

Two sidebars appeared with the story: 1. Who got what? Thomas Stewart, his companies - Services Group of America and Food Services Inc. - their executives and the corporations’ political action committee are among the top donors to state and federal candidates from Washington state. Here’s a list of candidates, all Republicans, on Inland Northwest ballots who have received campaign money from those sources since 1994: U.S. Sen. Slade Gorton, $15,950 U.S. Rep. George Nethercutt: $19,000 U.S. Rep. Doc Hastings: $17,500 State Sen. Jim West: $550 (during 1996 campaign for lieutenant governor) State Rep. Larry Crouse: $400 State Rep. Larry Sheahan: $400 State Rep. Cathy McMorris: $350 State Rep. Mark Schoesler: $350 State Rep. Brad Benson: $250 Source: Public Disclosure Commission, Federal Election Commission, staff research

2. Defense Department to scrutinize firm Seattle Post-Intelligencer Even though Republican leaders in Washington state have said they will continue to embrace Thomas Stewart, their biggest financial benefactor, the first test of his new status will come next week. Stewart and his attorneys are scheduled to meet Monday with Defense Department officials in Washington, D.C., to discuss whether one of his companies, Food Services of America, will be allowed to continue to supply U.S. military installations. Those contracts represent a “significant dollar amount” to Food Services, said Seattle attorney Cyrus Vance Jr., Stewart’s lead attorney in the case. Vance declined to give a specific sum, but said Stewart wants to assure government officials that Food Services, which also pleaded guilty to campaign-donation violations Wednesday, is a responsible contractor that has dealt with its legal problems.



Click here to comment on this story »