Politics

Red-Handed

Will Republicans return the money donated by the Wyly brothers?

Charles Wyly and Sam Wyly. Click image to expand.
Charles Wyly and Sam Wyly

It’s the first rule of politics: Don’t take dirty money.

Just kidding, of course. You’d think that would be the rule. But politicians take dirty money all the time. So when a big political donor gets in trouble—as the Texas billionaires Samuel and Charles Wyly did Thursday, when the SEC charged them with $550 million worth of securities fraud—every politician they ever gave money to has to make a calculation: keep the cash or give it away?

Over the past 20 years, the Wylys gave nearly $2.5 million to 192 top Republicans, including both Presidents Bush, Kay Bailey Hutchison, Phil Gramm, Dick Armey, John Cornyn, John McCain, Sam Brownback, Judd Gregg, John Thune, and Kit Bond, plus various GOP committees, according to the Center for Responsive Politics. So far, the only person to publicly return the money was John McCain, who gave back $20,000 in 2006 when he learned the Wylys were under investigation. The rest have yet to make a decision.

Which is understandable! It’s tough to decide if you should return—or, in many cases, give to charity—money that might be tainted. Here are a few factors politicians must consider.

Are you running for re-election? If dirty money falls into your bank account and no one notices, is it unethical? Good question. But it’s purely theoretical. If you’re trying to get re-elected—and unless you’ve announced your retirement, you are—someone will notice. That’s why candidates offload tainted funds as fast as possible. “You have to ask what’s worth more to you, the $2,000 or the freedom of your opponent to attack you?” says Dave Levinthal of the CRP. That explains McCain’s decision to offload the Wyly money in 2006, as he was mulling a presidential run. Obama, too, returned at least $85,000 raised by Chicago developer Tony Rezko.

Are you vulnerable? When California billionaire Henry Samueli pled guilty to stock fraud in 2008, two members of Congress refused to give back the money he’d donated to them. Those two members—Rep. Jim Moran of Virginia and Sen. Joseph Lieberman—also happen to occupy some of the safest Democratic seats in the country. (Moran, who has served since 1991, won 68 percent of the vote in 2008; despite a tough primary, Lieberman won the general election handily in 2006.) Moran said at the time that it was a question of standing by his supporter: “Frankly, I’m proud that he saw fit to contribute to me, and I don’t intend to try to embarrass him by sending him back the money.”

How much money did you take? The more you took, the more likely you are to return it. (Even though it might be harder to part with big money.) When Democratic donor Norman Hsu was charged with fraud and went on the lam, Hillary Clinton gave the $23,000 she had received to charity and returned to donors the $850,000 Hsu had “bundled” for her. But she declined to return the $5,000 donated by Houston oilman Oscar Wyatt after he was charged with fraud and conspiracy in connection to the United Nations “oil-for-food” scandal.

Was the donor actually convicted? How painful would it be to return the money, only to have the person be acquitted? That’s why politicians often wait to see how bad the damage is. In 2007, John Edwards gave away $4,600 donated by trial lawyer William Lerach, but only after he pleaded guilty to a federal conspiracy charge.

Have you already spent the money? If the money’s just not there, it’s hard to return it. At least that’s the argument many politicians make. (Yes, money is fungible, etc.—enough with the reasonable counterarguments!) For example, the Wylys gave money to Rep. Dick Armey’s PAC in 2001 and 2002. But after Armey left Congress, the fund shut down. “That’s so far gone, it’s almost a decade ago,” said Adam Brandon, a spokesman for Armey’s group FreedomWorks. Same goes for the money donated by embattled Democratic titan Hassan Nemazee to two New York institutions, the Spence School and the Asia Society, both of which refused to return the cash after Nemazee pleaded guilty to fraud. A lawyer for Spence said that “the funds were spent long ago.”

What’s the other side saying? When Nemazee was charged with lying about his assets to secure a $74 million loan, the National Republican Senatorial Committee called on Senate Democrats to “return any and all contributions that they received from this disgraced financier to preserve the integrity of fundraising efforts in 2010.” (Many did.) But now that Republicans are in the same position with the Wylys, they might not have to give anything back. Why? Because Democrats are in no position to attack them for shady ethics—at least not until Rep. Charlie Rangel’s woes recede from the front pages. Until then, if Democrats threaten to make the Wyly money an issue, Republicans can say, go for it. We dare you.

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