Civil Trial Counsel of Wisconsin - Political Tidbits October 18, 2002

October 18, 2002

The predicted political perfect storm has finally hit land. While long expected, the timing and serious nature of yesterday’s charges against Sen. Chvala still astonished many of us. The Majority Leader is charged with 20 felony violations, including three counts of extortion. While less serious, the charges filed earlier today against Assembly Republican leadership, including Speaker Jensen, added to the turmoil in Madison.

The Wisconsin political landscape will be immediately impacted upon the pending resignations from leadership of the two most powerful legislators in recent times. Both Speaker Jensen and Majority Leader Chvala released statements that they are prepared to turn over their leadership reins in the near future. We also expect a press feeding frenzy as 17 months of sealed testimony and documents become public.

While it’s easy to become preoccupied with the caucus investigations, the business of the government continues. For our part, we’re turning our attention to the upcoming budget debate. On this point, Pat Osborne has written a thorough overview of the budget process and an update on progress to date. (Yes, the Governor’s proposed budget is being developed, and it’s time to watch these developments in earnest.) Go to the following link for Pat’s update:
http://www.hamilton-consulting.com/updates/budget2_osborne.html

Wisconsin Politics
Sen. Chvala Faces 20 Felony Charges; Agrees to Step Down
In a defining moment for Wisconsin politics, Milwaukee County District Attorney E. Michael McCann filled a 20-count criminal complaint against Sen. Chvala. The felony charges included allegations that Majority Leader Chvala extorted political contributions in return for favorable action on legislation pending in the Senate. McCann, acting as special prosecutor for Dane County, focused his investigation on activities of the Senate Democratic Caucus. (Earlier today, Dane County District Attorney Brian Blanchard filed complaints relating to his investigation of Assembly Republican activities. See article, below.)

The most damning aspects of the 69-page complaint against Chvala are the extortion allegations. The complaint sets forth the following as probable cause for what has become known as “pay-to-play:”

A Chicago couple wanted to donate their Lake Geneva property to the State for, among other reasons, certain tax benefits. In 1997, they retained a Wisconsin lobbyist to push for provisions in the budget for the State to establish an endowment fund to support the operation of the site. After a 15-1 vote in Joint Finance, Sen. Chvala supposedly told the lobbyist that his client needed to contribute money for targeted Senate seats. After the contributions were made, the provisions stayed in the budget.

In 1998, the Wisconsin Realtors Association was working on legislation relating to regulation of home inspectors. The bill passed the Assembly with 91 votes, but was stalled in the Senate toward the end of the session. The association was allegedly directed by Chvala to contribute $6,000 in order to assure a Senate vote. After only $3,000 was contributed, Chvala raised the ante and demanded $4,500 more. After those contributions were made to the Senate Democratic Campaign Committee the bill was scheduled and passed the Senate.

Members of the Wisconsin Wholesale Beer Distributors Association contributed to the 2000 Senate campaign of Chvala’s Republican opponent. Chvala purportedly demanded an equal contribution to his campaign. When the contribution didn’t materialize, Chvala took steps to have its executive director discredited and ultimately fired, and had provisions of interest to the group removed from the budget.

The complaint outlines other allegations of linkage between Senate legislative action and campaign contributions.

Observers of the 17-month investigation were attentive to the pay-to-play issue, but it was unclear what charges could be tied to such activities considering there is no statutory provision directly on point. The extortion accusations took most by surprise. The prosecutors cite violations of Wis. Stats. §943.30(1), which in part makes it a Class D felony for someone to threaten any injury to a person, business, or trade, including financial harm, with intent to extort money or any pecuniary advantage. A Class D felony is punishable by imprisonment up to 10 years or a maximum $10,000 fine or both.

The prosecutors also linked the pay-to-play allegations to three charges of misconduct in public office (Wis. Stats. §946.12(2)). This provision makes it a Class E felony (5 years/$10,000) for public officials to undertake illegal acts in their official capacity.

The prosecutors set forth expansive allegations relating to Chvala coordinating both Senate campaigns and “independent” issue groups. Under Wisconsin law, independent expenditure groups cannot coordinate with campaigns. The most compelling details on these charges came from long-time Chvala staffer, Doug Burnett, who entered into a plea bargain (2 misdemeanors for unlawful campaign coordination) in return for his testimony against Chvala. According to the complaint, the scheme was that Chvala secretly ran the “independent” groups, which spent large sums on Senate races, (with Burnett as the front) while at the same time Chvala, not so secretly through the Senate Democratic Caucus, directed the campaigns.

Like the pay-to-play issue, political observers knew the coordination allegations were out there, and similarly, couldn’t quite see much legal traction. Unlike the surprisingly serious extortion charges, however, the prosecutors could only muster five charges of filing a false report with the Elections Board. Additional election law charges include one charge for unlawful political contribution (having someone else make a contribution on your behalf) and the three charges of exceeding the $1,000 contribution limits.

Least surprising were the four counts of misconduct in public office relating to the use of state employees within the Senate Democratic Caucus on campaigns. The statute cited, Wis. Stats. §946.12(3), makes it a Class E felony for a public official to misuse his or her position “to obtain a dishonest advantage” over someone. This was the initial focus of the overall caucus investigation.

Assembly Republican Leaders also Charged in Caucus Investigation
Earlier today, Assembly Speaker Scott Jensen, Assembly Majority Leader Mickey Foti, Assistant Majority Leader Bonnie Ladwig and former state employee Sherry Schultz were charged in connection with the 17- month-old caucus investigation. Jensen faces three felony and one misdemeanor counts, with both Foti and Schultz facing one felony charge each, and Ladwig facing one misdemeanor charge.

In contrast to the sweeping charges in the Chvala case, the entire focus of Dane County DA Brian Blanchard’s complaint was the use of state resources for campaign purposes. Jensen, Foti, and Schultz were accused of violating Wis. Stats. §946.12(3), which makes it a Class E felony for a public official to misuse his or her position “to obtain a dishonest advantage” over another. The charges primarily related to using resources at the Assembly Republican Caucus on Assembly campaign races, and primarily focused on the hiring of Sherry Schultz, who is alleged to have engaged in full time work as a campaign fundraiser from 1998 to 2001. A Class E felony is punishable by imprisonment up to five years or a maximum $10,000 fine or both.

Speaker Jensen and Assistant Majority Leader Ladwig were also charged with violation of Wis. Stats. §946.12(3), which makes it an unclassified misdemeanor to intentional misuse public positions for private benefit of an organization with which they were associated, namely the Republican Assembly Campaign Committee. A conviction of this violation may result in a fine not les than $100 nor more than $5,000 or imprisonment of not more than one year or both.

All defendants are scheduled to appear in court on Thursday Oct. 24 for their initial appearances.

Change in Legislative Leadership First Impact of Charges
The immediate impact of the charges is the void created by the resignation of two of the most powerful legislative leaders in recent time. Both Speaker Jensen and Majority Leader Chvala released statements that they are prepared to turn over their leadership reins in the near future.

In a statement released after the charges were filed, Sen. Chvala indicated that he would step down from his leadership post "as soon as a new leader is selected." In response to the charges being filed against the Majority Leader, the Senate Democrats have scheduled a caucus to vote for a new leader on Monday, Oct. 21 at 2:00 p.m. Many speculate that Sen. Russ Decker (D-Weston) has the votes to succeed Chvala, although Sen. Rod Moen (D-Whitehall), the current Assistant Majority Leader, may also seek the position. Decker, who is currently Co-Chair of the Joint Finance Committee, has been responsible for negotiating the most recent budget documents and, although he is seen as being close with Chvala (Chvala’s wife also works for Decker), he is perceived as able to work with both sides of the aisle.

Speaker Jensen’s statement notes that on Nov. 12th, a week after the election, the Assembly will select a new Speaker for the upcoming legislative session. Possible successors include Rep. John Gard (R-Peshtigo), who currently serves as the Assembly Chair of the Joint Finance Committee. Gard is well respected among his colleagues on both sides of the aisle and has negotiated the last few budget documents. Another potential candidate is Rep. Scott Gunderson (R-Waterford) who is currently the Chair of the Speaker's Task Force on Government Spending.

Second Gubernatorial Debate Focuses on Clean Campaigns
Republican Governor Scott McCallum, Democrat Jim Doyle, Libertarian Ed Thompson and Green Party candidate Jim Young were all together for the first time in the second gubernatorial debate, which was held on Wednesday night in Eau Claire.

Much of the debate focused on the negative ads being aired by both major party candidates and in the end, Doyle and McCallum indicated that they would sign a "clean campaign pledge," but only if the other did so. McCallum also told the audience "If he (Doyle) takes his negative ads off, I’ll do the same thing." Ed Thompson thanked Doyle and McCallum for running the negative ads saying that it’s actually making him more popular with the voters because of their anger over the negative ads.

The debate also focused on taxes and the budget deficit. Both major party candidates said they do not agree with the Fiscal Crisis paper that was unveiled by a bipartisan panel earlier this week at the Economic Summit III in Milwaukee. Both McCallum and Doyle have repeatedly stated that they will not increase taxes to fix the state’s budget deficit.

Policy Developments
The Biennial Budget Process Moving Forward
While the major gubernatorial candidates continue to debate how they might respectively deal with the state’s looming $2.87 billion budget deficit, the formal process of developing the Governor’s 2003-05 biennial budget bill is well underway. For an overview of the State Budget Process and discussion of the current fiscal situation and budget solutions, go to Pat Osborne's Budget Update (Oct. 18, 2002).

Economic Summit III Addresses Fiscal Crisis; Commits to Economic Development
The 3rd Economic Summit of educators, government officials and businesspeople spent three days discussing Wisconsin’s budget deficit and future economic outlook. The newly created Economic Collaboration Council was announced. The Council, which has already begun meeting, is planning to bring together public, private and non-profit agencies and organizations to identify and publicize successful economic development strategies in a collaborative fashion. Planning for the Council was done by Wisconsin Manufacturers and Commerce, Department of Commerce, Forward Wisconsin and the Wisconsin Economic Development Association (WEDA). WEDA will facilitate the activities of the Council.

The summit also spent much time talking about the state’s fiscal crisis and the need for business leaders to work with government officials to solve the budget deficit. A proposal to close the state budget gap was presented by former government officials and drew much attention from Summit attendees. That proposal is summarized by Jim Hough.

Federal Terrorism Reinsurance Bill Advances
Negotiators on terrorism reinsurance legislation reached agreement Thursday. The federal reinsurance program would run for three years from the date of enactment.
The measure covers property and casualty lines but does not extend coverage to group life insurers. However, the bill mandates a study on the impact a lack of reinsurance might have on group life coverage, and enables the Treasury secretary to extend coverage to those lines if deemed necessary. On legal reform, the negotiators agreed to consolidate terror-related lawsuits in federal court at both the pre-trial and trial phases. However, they avoided an agreement on setting a federal standard for the awarding of punitive damages in terror-related suits brought against property owners, instead allowing state laws on punitive damages to prevail. The conference report will be posted in the near future. Go to the following link for status and bill summary: http://thomas.loc.gov/cgi-bin/query/D?c107:1:./temp/~c1078iw25T
FERC Chairman Defends his Electric Market Plan
Federal Energy Regulatory Commission Chairman Pat Wood defended his agency's sweeping plan Thursday to move the nation's electric power sector to standardized regional markets. At a forum arranged by a free-market think tank, the Progress and Freedom Foundation, Wood indicated that successfully changing the nation's power industry could take 10 years, and the FERC proposal is a good start. For more information and review of comments go to: http://www.ferc.fed.us/electric/rto/Mrkt-Strct-comments/smd.htm

Political News
Jensen, Foti charged with felony misconduct: Milwaukee Journal Sentinel, Oct. 18, 2002. With the felony charges against Jensen, the two most powerful lawmakers in the Capitol now are under criminal indictment.

Chvala complaint includes work done for Hansen: Green Bay Press-Gazette, Oct. 18, 2002. Details extensive work by legislative caucus employees to get Sen. Dave Hansen, D-Green Bay, elected in 2000.

Republican leaders Jensen, Foti accused of felonies: Madison Capital Times, Oct. 18, 2002. Jensen resigns as speaker.

Chvala charged with extortion: Milwaukee Journal Sentinel, Oct. 18, 2002. State senator faces 20 felony counts, says he'll quit majority leader post.

Severity of Chvala charges stuns many: Wisconsin State Journal, Oct. 18, 2002. Felony charges slapped on the most powerful Democrat in state government made jaws drop around the Capitol.

Senators eye Decker for Chvala's post: Wisconsin State Journal, Oct. 18, 2002. Democrats plan to pick a leader to replace Chvala at 2 p.m. Monday at the Capitol.

Chvala accused of illegally helping Meyer's 2000 campaign for Senate: La Crosse Tribune, Oct. 18, 2002. Complaint: Illegally helped funnel money through an "independent" political committee.

Lawmakers call for reforms: Appleton Post-Crescent, Oct. 18, 2002. Area legislators said the scandal has harmed Wisconsin’s reputation for ethical, honest government.

Negativity abounds at debate: Manitowoc Herald Times, Oct. 17, 2002. McCallum, Doyle exchange bitter banter over issues.

Democrats' support for Chvala fading: Milwaukee Journal Sentinel, Oct. 17, 2002. Several senators want him to quit leadership if he's indicted in scandal.

Budget debate: This just in (opinion): Milwaukee Journal Sentinel, Oct. 16, 2002. Sets forth a plan for dealing with the deficit without resorting to gimmicks.

Specifics the key to debate (opinion): Eau Claire Leader-Telegram, Oct. 15, 2002. It's up to the candidates and the audience to make the most of it.

For more complete coverage of breaking Wisconsin news, consider subscribing to News Clips, a free email newsletter that provides headlines and links to Wisconsin news articles from leading newspapers across the state. To order your free subscription now, go to: http://www.hamilton-consulting.com/subscribe-newsclips.html.

Upcoming Fundraisers
Sunday, Oct. 20:

Sen. Kim Plache (D-Racine), Racine, 4:00 p.m.

Monday, Oct. 21:

Rep. Frank Lasee (R-Ledgeview), Green Bay, 5:30 p.m.
Debi Towns (R) 43rd AD candidate, Janesville, 5:30 p.m.
Rep. Glenn Grothman (R-West Bend), West Bend, 6:30 p.m.

Tuesday, Oct. 22:

Gary Meyer (R) 70th AD candidate, Marshfield, 7:15 a.m.
Jack Voight, State Treasurer, Appleton, 4:30 p.m.
Sen. Dave Zien (R-Cadott), Rep. Scott Suder (R-Abbotsford), Marshfield, 5:00 p.m.
Vince Biskupic (R) AG candidate, Brookfield, 5:00 p.m.
Gov. Scott McCallum (R), Milwaukee, 5:30 p.m.
Rep. Frank Lasee (R-Ledgeview), Two Rivers, 5:30 p.m.
Peg Lautenschlager (D) AG candidate, Milwaukee, 5:30 p.m.

Wednesday, Oct. 23:

Sen. Mary Panzer (R-West Bend), Madison, 11:00 a.m.
Jack Voight, State Treasurer, Milwaukee, 4:30 p.m.
Sen. Dave Zien (R-Cadott), Milwaukee, 5:00 p.m.
Debi Towns (R) 43rd AD candidate, Whitewater, 5:30 p.m.

Thursday, Oct. 24:

Debi Towns (R) 43rd AD candidate, Beloit, 12:00 p.m.
Rep. Dean Kaufert (R-Neenah), Neenah, 5:00 p.m.
Rep. Gabe Loeffelholz (R-Platteville), Fennimore, 5:00 p.m.
Jim Doyle/Barbara Lawton (D), Milwaukee, 5:00 p.m.

Friday, Oct. 25:

Rep. Mark Gundrum (R-New Berlin), New Berlin, 5:00 p.m.

Details and a monthly calendar of upcoming fundraisers can be found on The Hamilton Consulting Group’s Web site.