Investigative Journalist David Sirota Reports on “Pay to Play” in Chicago: Mayor Rahm Emanuel Accepted Campaign Contributions from Financial Firms Managing City Pension Money

Rahm Emanuel Mayor of Chicago

Rahm Emanuel
Mayor of Chicago

By Elaine Magliaro

Investigative journalist David Sirota reported earlier this week that Chicago Mayor Rahm Emanuel, a former chief of staff to President Obama, has accepted campaign contributions from financial firms that manage the city’s pension money. Sirota said that, according to documents that were reviewed by the International Business Times, executives who work at the investment firms have, since 2011, “poured more than $600,000 in contributions into Mayor Rahm Emanuel’s campaign operation and political action committees (PACs) that support him…” Sirota added that legal experts have claimed that these “contributions appear to flout federal rules banning companies that manage pension funds from financing the campaigns of officials with authority over pension systems…”

Sirota also noted that the contributions may “potentially conflict with an executive order Emanuel himself signed in 2011 prohibiting city contractors and subcontractors from making campaign donations to city officials.”

According to Sirota, at least 31 executives at firms “that harvest fees by managing city pension funds have contributed to his campaign and associated PACs.” He said that the “list of donors includes Kelly Welsh, a Northern Trust executive who was recently appointed by President Obama to the top legal position in the U.S. Commerce Department.”

Sirota said that Welsh “handed over $5,000 in December 2012” to Emanuel’s campaign war chest. He added that “additional details place Welsh at the center of a simmering controversy over potentially improper relationships influencing the investment of American public pension funds: The day he wrote that check, Welsh was a senior executive at Northern Trust, an enormous financial services firm that had contracts to invest money for the Chicago pension system. That appeared to conflict with the objectives of federal rules barring campaign contributions to municipal officials from executives at companies that manage municipal retirement funds.”

Sirota said that in his new job as chief counsel at the United States Department of Commerce, Welsh will presumably be “expected to take special heed of federal laws.”


Former prosecutors, corporate compliance attorneys and erstwhile officials at the Securities and Exchange Commission describe the donations as a clear breach of the spirit — and perhaps the letter — of the SEC’s so-called pay-to-play rule, which seeks to prevent pension investments from being doled out as a form of patronage to those who contribute to campaigns.

After the Chicago campaign contributions were described to him, former SEC chairman Arthur Levitt told IBTimes, “The management of municipal pensions should be totally transparent and free of political influence. The acceptance of contributions by city officials from advisers managing city funds, in my book, smells like bribery.”

Sirota reported that former prosecutors and SEC lawyers have said that “the Chicago situation exemplifies a troubling national trend: Mayors and governors are taking office through, in part, the largesse of financial services companies that bankroll their campaigns, then using their newfound authority over pension systems to put public money into the hands of their donors.” Melanie Sloan, a former federal prosecutor in the Clinton administration who now runs the group Citizens for Responsibility and Ethics in Washington, said, “It looks like these contributions to Rahm Emanuel violate the pay-to-play prohibitions. This is looking like a more significant problem throughout the country. Politicians are treating these rules as if they are meaningless and it is time for regulators to take action against all the violators. The SEC needs to step in and shut this down.”


The contributions to Emanuel from financial firms that manage municipal pension funds — the retirement savings for city teachers, police, firefighters and other municipal employees — appear to conflict with the objectives of the SEC’s pay-to-play rule, which the commission enacted three years ago after a major pension corruption scandal in New York.

“Elected officials who allow political contributions to play a role in the management of these assets and who use these assets to reward contributors violate the public trust,” the agency declared in announcing the rule. “They undermine the fairness of the process by which public contracts are awarded… They can harm pension plans that may subsequently receive inferior advisory services and pay higher fees. Ultimately, these violations of trust can harm the millions of retirees that rely on the plan.”

The rule specifically prohibits financial firms from earning fees from public pension funds if their executives make campaign donations to the public officials who can exert influence over pension investments.

Sirota said that legal experts told IBTimes that “Emanuel qualifies as such an official… because he and his administration appoint trustees to the boards that manage the $23 billion in Chicago’s six municipal pension funds.”

Jay DuBow, a former attorney in the SEC’s division of enforcement, said that the SEC rule means, “You can either influence elections, or you can run funds that manage money for public entities. You cannot do both.”

William J. Kelly (Chicago Now) reported that “Chicago aldermen are now calling for an SEC probe into Emanuel’s contributions.”


Chicago Mayor Rahm Emanuel Accepted Campaign Contributions From Financial Firms Managing City Pension Money (International Business Times)

Top Obama Official Gave Cash To Chicago Mayor Rahm Emanuel Despite Federal Pay-to-Play Rule (International Business Times)

Did Rahm Emanuel, Bruce Rauner violate SEC pay-to-play rules with pension-tainted cash? (Chicago Now)

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11 Responses to Investigative Journalist David Sirota Reports on “Pay to Play” in Chicago: Mayor Rahm Emanuel Accepted Campaign Contributions from Financial Firms Managing City Pension Money

  1. Color me completely not surprised.

    Campaign finance reform anyone?

  2. Mike Spindell says:

    A quintessential politician. It’s never the issues, but always the money and the power. Hope he is brought low since I didn’t like him when he was Obama’s Chief of Staff. He helped that administration retreat from its platform commitments.

  3. Pingback: On the Subject of Rahm Emanuel, the City of Chicago, and Risky Interest-Rate Swaps | Flowers For Socrates

  4. blouise17 says:

    From Gene’s link:

    That list of donors includes Kelly Welsh, a Northern Trust executive who was recently appointed by President Obama to the top legal position in the U.S. Commerce Department.

    Pay to Play

  5. Elaine M. says:

    Gene and Blouise,

    That’s one of the articles that I used as a source for my post.

  6. blouise17 says:

    I’m getting old and you guys are posting far too many interesting articles. I can’t keep up.

  7. I have no other excuse than I didn’t read all the source material and I came across the IBT article on my own this morning over coffee. I can certainly see why you included that one though, Elaine. Distressing stuff.

  8. Elaine M. says:

    Chicago Lawmakers Call for SEC Investigation of Mayor Rahm Emanuel
    By David Sirota
    November 18 2014 2:14 PM

    Chicago lawmakers are planning to send a formal request to the Securities and Exchange Commission for an investigation into donations to Mayor Rahm Emanuel from executives at financial firms that manage city pension money. The donations were first documented by International Business Times in a report quoting former SEC and federal prosecutors saying the contributions may run afoul of the agency’s pay-to-play rules.

    The aldermen scheduled a City Hall news conference Tuesday to announce the action.

    In a letter to Andrew Ceresney, who directs the SEC’s division of enforcement, Aldermen Bob Fioretti, Scott Waguespack and John Arena write the donations constitute “pay-to-play actions” that “have violated the public trust and are a breach of the fiduciary duty” by the Emanuel administration officials who oversee the city pension systems. They say “Chicago has a deep history of pay-to-play” and that their “goal is to end these tactics and protect the citizens of Chicago and employees’ investments.”

    In a speech last week, Ceresney vowed increased enforcement of the SEC’s pay-to-play rule, which was passed in 2011 after an influence-peddling scandal at the New York State pension system.

  9. Elaine M. says:

    Fees Paid To Rahm Emanuel Donor Firm Increased After Emanuel Became Mayor
    By David Sirota

    The John Buck Co., a real-estate investment firm whose executives contributed substantially to the campaign of Chicago Mayor Rahm Emanuel, has earned more than $1 million in fees for managing city pension money. The details of the company’s fees emerged amid scrutiny over the propriety of the campaign contributions from company executives.

    According to a newly released document from the Chicago pension system, the taxpayer fees paid to the John Buck Co. from one Chicago pension fund increased when Emanuel took office. In the year before he took office, the John Buck Co. was paid $161,141 in fees by the Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicago (LABF). The next year — when Emanuel assumed office — those fees jumped to $262,500. In 2012 and 2013, the fees increased to $300,000 per year. Public documents from LABF say the decisions to move pension money into the system’s current John Buck investments were initiated in 2006 and 2009.

    The document was obtained by International Business Times through a Freedom of Information Act request to one of the five Chicago pension funds in the city’s $23 billion retirement system.

    When combined with the more than $334,000 in fees paid to the company by the Municipal Employees Annuity and Benefit Fund (MEABF) since 2011, Chicago taxpayers have delivered more than $1.1 million in fees to the John Buck Co. since Emanuel took office. Emanuel appoints officials to the boards that oversee the pension investments.

  10. Elaine M. says:

    Emanuel Campaign Haul Draws Notice for Reliance on Finance Firms

    Chicago Mayor Rahm Emanuel built his political career raising money for Democratic candidates, with connections to Wall Street that helped finance his own election victories and drew an unwanted moniker: “Mayor 1%.”

    Three months before the former investment banker and one-time chief of staff to President Barack Obama asks Chicago voters for a second four-year term, more than $600,000 in contributions from financial firms that deal with city pension plans are drawing fresh scrutiny.

    Executives at Madison Dearborn Partners LLC contributed $194,900 to Emanuel’s campaign from October 2010 to June 2013, with individual donations ranging from $1,000 to $50,000, according to data from the Illinois State Board of Elections. The Chicago-based private-equity investment firm was among the donors highlighted in a Nov. 13 article in the International Business Times that questioned whether such donations violate the spirit and possibly the letter of the U.S. Securities and Exchange Commission’s so-called pay-to-play restrictions.

    “All you’re doing is reinforcing the cynicism that says there are a different set of rules for people that are connected and wealthy and have clout,” said Kent Redfield, a political science professor at University of Illinois Springfield and a former consultant to the Illinois Campaign for Political Reform.

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