A Project of The Annenberg Public Policy Center

Corzine on Christie: Contracts for Cronies?

Democrat attacks GOP challenger's anti-corruption creds by suggesting he's ... corrupt.


Summary

New Jersey Gov. Jon Corzine’s latest ad claims former prosecutor Chris Christie, Corzine’s Republican challenger, rewarded “three pals” with no-bid government contracts worth millions.

It’s true that the firms of former U.S. Attorney General John Ashcroft, Christie’s former boss; attorney John Inglesino, a friend, adviser and campaign donor; and former U.S. Attorney David Kelley, a former colleague, all received lucrative government contracts during Christie’s tenure as U.S. attorney from 2002 to 2008. But did Christie improperly give out the contracts to cronies, or reward allies for favors done or hoped for, as the ad implies?

We know of no hard evidence that Christie broke any laws or violated any guidelines in awarding the contracts, or that he was doing any favor-trading. However, the Justice Department issued new guidelines for selecting recipients of these kinds of contracts after criticism of Christie’s awards reached a high decibel level last year.

Christie has said he chose the best people for the jobs at issue.

We take a look at the available facts.

Analysis

Some Democrats have claimed outright that the contracts awarded by Christie’s office when he was U.S. attorney for the state of New Jersey represent a direct conflict of interest for him because of his close connections to the men who stood to profit from the awards: his former boss, a former colleague and a political ally. Others have suggested that, at the very least, the circumstances look suspicious. The Corzine campaign, in this 30-second ad, zeroes in on the criticism to counter Christie’s reputation as a corruption-busting prosecutor, a central theme of the challenger’s election bid. The ad says: "A million lawyers to choose from, but it’s Christie’s three pals who got millions."

The contracts issued by Christie’s office were part of deferred prosecution agreements, which are out-of-court settlements with the government that allow companies suspected of criminal misconduct to avoid indictment. In return, the companies agree to pay penalties and hire independent law firms, at their own expense, to monitor their business operations for a period of time to make sure they are adhering to the terms of the settlement. The agreements have been used since the early 1990s, but became more common under President George W. Bush’s administration. Christie, a 2001 Bush appointee, approved a total of seven deferred prosecution agreements in seven years as New Jersey’s U.S. attorney. This ad focuses on three of the most controversial.

Jon Corzine ’09 Ad:

"Happenstance"

[TET ]

Announcer: A million lawyers in America. So who did Chris Christie give contracts to? 

The Bush attorney general who was Christie’s boss. He got a $52 million no-bid contact.

The political pal got a $10 million no-bid contract.

The prosecutor, who let Christie’s brother suspected of stock fraud of the hook, a multi-million dollar no-bid contract.

A million lawyers to choose from, but it’s Christie’s three pals who got millions. [/TET]

"The Bush Attorney General"

In the fall of 2007, Christie awarded the Ashcroft Group LLC, a lobbying and consulting firm formed and headed by John Ashcroft, with a no-bid government contract monitoring Zimmer Holdings. Zimmer, which makes artificial hip and knee replacements, was one of five companies to reach either deferred prosecution or non-prosecution agreements with the Department of Justice. DOJ had been investigating claims that the companies paid doctors to promote and use their products. Zimmer reportedly paid Ashcroft’s firm between $28 million and more than $52 million for 18 months’ work.

The news that Christie gave the lucrative government contract to Ashcroft, his former boss at the Justice Department, without competitive bidding, caused a stir among Democrats who suspected foul play. U.S. Rep. Frank Pallone of New Jersey, a Democrat and one of Christie’s most vocal critics on the subject, wrote a letter to the prosecutor in 2007 saying that the contract awarded to Ashcroft "invites the very sort of favoritism, political interference, and back-room dealing that your office has been so successful in combating throughout New Jersey." Pallone also called on Congress to investigate the contracts doled out by Christie. That led to a 2008 hearing before the Commercial and Administrative Law Subcommittee of the House Judiciary Committee, at which Ashcroft testified. When asked by Rep. Linda Sánchez of California, a Democrat, whether his firm’s selection represented a conflict of interest, Ashcroft said: “There is not a conflict. There is not an appearance of a conflict. The ability to hire individuals who have the qualifications to conduct monitorship should not be impeded by the fact that someone has at some time or another served in public life or public office.” Sánchez told Ashcroft that she was "troubled to learn of what appeared to be a back room sweetheart deal."

Christie did not testify at that hearing, but he defended Ashcroft’s selection by saying that he was simply the right person for the job. The Star Ledger of Newark, N.J., reported that Christie responded to the criticism by saying:

Christie, Nov. 2007, as quoted in Star Ledger: I certainly don’t think it’s a problem to hire somebody who used to be your boss but no longer is. … What am I getting out of this exactly? I can tell you, I’m getting nothing, except the comfort in hiring people I know I can trust to do the job.

Christie did testify before the same House subcommittee last month at a hearing on deferred prosecution and non-prosecution agreements. He continued to defend awarding the contract to Ashcroft. Zimmer representatives could have rejected Ashcroft’s firm if they wanted, Christie said, but agreed to hire Ashcroft after interviewing him. According to Christie, Zimmer executives were “thrilled” with the recommendation of Ashcroft and told him that “[w]e think we got the best monitor.” There was at least one aspect of the selection that Zimmer wasn’t happy about, however: It objected to the Ashcroft Group’s plans to charge $1.5 million to $2.9 million a month. E-mail messages released at the acrimonious hearing indicated that Christie declined to intervene in the dispute.

And Rep. Steve Cohen of Tennessee, a Democrat, didn’t buy Christie’s explanation, saying: “You made them an offer they couldn’t refuse," making the point that companies entering these agreements have little leverage and simply accept the recommendations made by the prosecutors. "The fact is none of them turned them down because they couldn’t afford to because otherwise they’d be prosecuted," Cohen said. Christie said Cohen was wrong about that.

“The Political Pal”

Two years before Ashcroft’s firm received its no-bid government contact, Christie awarded one to the law firm of Stern & Kilcullen of Roseland, N.J. The firm, headed by partners Herbert Stern and Kevin Kilcullen, was selected to monitor the University of Medicine and Dentistry of New Jersey. The university had been accused of financial fraud involving Medicare payments. John Inglesino, a close political adviser to Christie and his friend for 15 years, served as the firm’s chief counsel for the monitorship, reportedly charging $325 per hour for his work. According to the New York Times article cited in the ad, Stern & Kilcullen billed the university for $10 million. But the firm said it actually received just $3 million and that reports of greater amounts included additional money paid by the university to consultants not affiliated with the firm.

Whatever the exact amount of the contract, Democrats’ cries of outrage escalated this year following reports that the principals of Stern & Kilcullen and their spouses all contributed to Christie’s gubernatorial campaign. According to New Jersey’s Election Law Enforcement Commission records, Stern, Kilcullen, Inglesino and their wives, have contributed nearly $24,000 to Christie’s 2009 bid for governor. Christie has agreed to participate in the state’s public financing system, which matches $2 for every $1 donated, tripling the amount donated from the firm’s principals. According to The Times of Trenton, N.J., Democratic state Sen. Lorreta Weinberg of Bergen County, who has called on Christie to return the money, said Christie should "look up the definition of pay-to-play," recognized by the state as the exchange of government contracts for campaign donations. And the Associated Press reported that Pallone, who was critical of Ashcroft’s contract, said: "This was the concern we’ve had all along. … He chooses his friends to be the monitors with the idea he would run for governor and go back to his political friends to raise money for his campaign."

Inglesino has defended his firm, reportedly telling a weekly paper in Morris County, the Observer-Tribune, that there was no "quid pro quo" in connection with his firm’s selection as a monitor because Christie wasn’t running for governor at the time the contract was issued.

Christie has said that there was nothing wrong with accepting the campaign donations, and despite calls to do so, he has not given back the money he received from the firm’s principals. But he has said that he will no longer accept campaign donations from individuals whom he approved as monitors.

"The Prosecutor"

The third no-bid contract featured in the Corzine ad went to David Kelley, a former U.S. attorney for the Southern District of New York. Kelley was picked in 2007 to monitor Biomet Orthopedics Inc., another of the five medical supply companies accused of giving kickbacks to doctors for using their products. The exact amount of Kelley’s government contract has not been revealed, but it has been reported to be worth millions as well.

Kelley’s contract has been questioned because, two years earlier, he investigated Christie’s younger brother, Todd, on stock fraud charges but ultimately did not prosecute him. New Jersey Democratic State Committee Chairman Joseph Cryan said of the contract a few months ago: "Chris Christie wants us to believe that in a country with more than one million lawyers, the one most qualified to receive this no-bid work is the same one who let his brother off the hook for stock fraud. I think the people of New Jersey are smarter than that."

Todd Christie was one of 20 stock traders accused by the Security and Exchange Commission of cheating customers for financial gain and charged with civil fraud. Fifteen of them – but not Todd Christie – were also indicted on criminal fraud charges by Kelley’s office. Todd Christie and the SEC later reached a settlement in 2008 in which he agreed not to conduct improper trading, but admitted no wrongdoing.

Kelley has maintained that his involvement in Chris Christie’s brother’s case had nothing to do with his selection as a monitor in 2007. According to an Associated Press report, Kelley has said that the “stock trading case was prosecuted on its merits”; he “denied any conflict of interest in his later work as a monitor.” And the Republican challenger for governor has vehemently denied that Kelley’s decision not to prosecute his brother further had anything to do with awarding the monitoring contract to Kelley. At a press conference in April 2009, Christie lashed out at critics for "impugning" his reputation and dragging his family into the campaign. Christie said he chose Kelley for no other reason than his prior record as a U.S. attorney and added that he and Kelley had never discussed his brother’s case.

What Say You?

Christie has defended all of the contracts he awarded by saying that he chose people who could get the job done. And he has stressed that the monitoring fees were negotiated between the companies and the firms selected as monitors, with no cost to taxpayers. Some Republicans have come to Christie’s defense, saying there was nothing improper about the way the contracts were awarded and that Democrats are simply trying to sully Christie’s strong reputation on ethics. But many Democrats strongly disagree, saying that Christie’s decisions raise serious questions about how the contracts were awarded, and about the use of such agreements in general.

In testimony last month at the same House hearing at which Christie testified, the director of homeland security and justice issues for the nonpartisan Government Accountability Office testified on the agency’s preliminary observations about the Justice Department’s use of deferred prosecution and non-prosecution agreements; a report was released by the GAO simultaneously. The report, however, does not speak specifically to cases involving Christie, nor did the GAO official, Eileen Larence, do so when she testified. Larence said that the report doesn’t discuss specific individuals, or companies, because of a confidentiality agreement made with participants in the agency’s investigation. However, Larence did testify that DOJ "typically chose" the monitor in each case "but gave companies the opportunity for input, although to varying degrees." She also said that DOJ and the companies "generally relied on personal knowledge and colleagues’ recommendations to identify potential monitors with expertise," and that they "did check for conflicts of interests, used an in-house committee to make a final decision."

Concern over the way the monitoring contracts were handled under Christie, though, prompted the DOJ to issue new guidelines prohibiting federal prosecutors from directly selecting monitors. The Justice Department’s Morford Memo, issued before the congressional hearing in March 2008, states that monitors are to be chosen by a selection committee and that the deputy attorney general must approve of the selection.

GAO’s report acknowledged DOJ’s new guidelines, but found that "more could be done to avoid the appearance of favoritism," such as "[r]equiriing that the process and reasons for selecting a specific monitor be documented." Pallone, too, has called the department’s new guidelines "far too weak." He and fellow New Jersey Rep. Bill Pascrell Jr., a Democrat who has also been critical of Christie, have introduced the "Accountability In Deferred Prosecution Act of 2009," which would require the attorney general to provide public written guidelines for corporate agreements, allow district court judges to select monitors from a pool of nominees, post text of the agreements on the DOJ’s Web site, and require prosecutors to file such agreements with a district court for approval. The bill is similar to one they first introduced last year.

In the press release announcing the reintroduction of the bill, Pascrell said the legislation would provide a "comprehensive and balanced approach that will ensure deferred prosecution agreements are entered into with the oversight, accountability and public disclosure that are the hallmarks of our justice system." But U.S. Deputy Assistant Attorney General Gary Grindler testified that he doesn’t support the bill and that DOJ "does have some serious concerns with a number of the provisions of the bill." In prepared testimony, Grindler said: "The legislation constitutes an intrusion upon the powers of the Executive Branch, specifically, it encroaches on the judgment and discretion of Federal prosecutors, a core prerogative of the Executive Branch."

As for Christie, to date no independent panel has investigated and publicly reported on whether his selection of monitors for deferred prosecution agreements was inappropriate or not. Most of the evidence is circumstantial, and most of the commentary on the deals can be said to be colored by partisan considerations. Thus, when all is said and done, we must leave it to you, a jury of our readers, to draw your own conclusions based on the available facts.

– by D’Angelo Gore

Sources

United States Congress. Commercial and Administrative Law Subcommittee. Hearing on Accountability, Transparency, and Uniformity in Corporate Deferred and Non-Prosecution Agreements. 25 Jun 2009.

United States Congress. Commercial and Administrative Law Subcommittee. Hearing on Corporate Settlement Agreements. 11 Mar 2008.

U.S. Government Accountability Office. "Preliminary Observations on DOJ’s Use and Oversight of Deferred Prosecution and Non-Prosecution Agreements." 25 Jun 2009.

Grindler, Gary. Written Testimony before the Commercial and Administrative Law Subcommitteee of the U.S. House Judiciary Committee. 25 Jun 2009.

Christie, Chris. Written Testimony before the Commercial and Administrative Law Subcommitteee of the U.S. House Judiciary Committee. 25 Jun 2009.

Ashcroft, John. Written Testimony before the Commercial and Administrative Law Subcommittee of the U.S. House Judiciary Committee. 11 Mar 2008.

Shenon, Philip. "Ashcroft Deal Brings Scrutiny in Justice Dept." New York Times. 11 Jan 2008.

"N.J. GOP gubernatorial candidate Chris Christie’s deferred prosecution agreements." Associated Press. 25 Jun 2009.

Kocieniewski, David."In Testy Exchange in Congress, Christie Defends His Record as a Prosecutor." New York Times. 26 Jun 2009.

Lichtblau, Eric. "Leniency for big corporations in the U.S." New York Times. 9 Apr 2008.

Martin, John P. and Jeff Whelan. "$52M-plus payday for Christie’s old boss." The Star-Ledger (Newark, N.J.). 20 Nov 2007.

Kocieniewski, David. "Usually on Attack, U.S. Attorney in Newark Finds Himself on the Defensive." New York Times. 13 Feb 2008.

Martin, John P. "Congressman criticizes monitoring deal for Ashcroft." NJ.com. 21 Nov 2007. Accessed 10 Jul 2009.

Santi, Angela Delli. "NJ governor candidate took donation from monitor." Associated Press. 26 Mar 2009.

Heininger, Claire. "Christie says monitors chosen by merit, not favoritism." Times of Trenton (New Jersey). 7 Apr 2009.