WHAT OTHERS SAY: How a Columbia developer makes a nice living backing tax credits

Tuesday, January 21, 2014 | 6:00 a.m. CST

A cursory look at the January filing of Speaker of the House Tim Jones’ Missouri Ethics Commission report would indicate that his top campaign donors gave him $10,000 each.

Three donors — Blue Cross and Blue Shield, retired McDonnell-Douglas scion James McDonnell III and a corporate front group called the Lewis and Clark Leadership Forum — each gave 10K to one of the most powerful lawmakers in the Missouri Capitol.

In fact, the largest single donor to Mr. Jones in the last quarter doesn’t actually show up on his campaign finance report.

His name is Jeffrey E. Smith. He is a Columbia developer who is the individual most responsible for Missouri spending more money on low-income and historic tax credits than any other state in the nation. Mr. Smith has made a very nice living from the tax credit programs.

How Mr. Smith funnels his money to Mr. Jones, whose House regularly kills any reform to the programs that have helped build Mr. Smith’s fortune, is Exhibit A in the drive for ethics and campaign finance reform in Missouri.

No coalition, just Smith

On Dec. 12 last year, one of Mr. Smith’s companies, Capital Health Management Inc., wrote 10 checks for $2,500. Each of those checks went to political action committees managed by Mr. Smith’s lobbyist, Harry Gallagher. The committees have high-minded sounding names like Advocacy for Special Needs, Coalition for Advanced Learning, Citizens for New Health Care Concepts, or Coalition for Disability Rights.

In fact, there are no citizens except Mr. Smith. There is no coalition. This is simply how one of the Capitol’s most powerful special interests launders his money.

On the same day Mr. Smith’s company wrote its checks to his political action committees (all of them sharing an address at 101 East High Street in Jefferson City), the PACs wrote checks in the identical amount to Mr. Jones.

The result is that the speaker of the House wound up with $25,000, more than twice the largest donation actually shown on his records, from a man whose name never shows up in the ethics commission’s donor database.

This is not a new scheme. The Post-Dispatch has been calling attention to it since 2009. This form of money laundering was part of the impetus for the ethics reform that passed in 2010, but was later thrown out in court. It would have banned committee-to-committee transfers of campaign donations.

The reason is simple. Voters have the right to follow the money. If the trail is hidden, they can’t tell which special interests are trying to buy whose influence.

For years, Gov. Jay Nixon, a Democrat, and a group of conservative Republican senators have been trying to rein in the state’s two most expensive tax credit programs. In part that’s because state audits show them to be inefficient. In part it’s because they have grown so large that they are choking off other budget needs, including education.

He's first in line

When the state parcels out tax dollars, folks like Mr. Smith get their take before schoolchildren. Before college students. Before the mentally ill. That’s just wrong.

Reasonable efforts to reform the two tax credit programs always get bottled up in the House.

Why? Jeffrey E. Smith. It’s that simple. The dollars, if you take the time to track them, tell the tale.

Mr. Smith is very good at what he does. He regularly gives his largest donations to the Republican speaker, but he also spreads the goodies to plenty of St. Louis-area Democrats. One of them is Sen. Jamilah Nasheed, who recently stood by the side of Lt. Gov. Peter Kinder, a Republican, urging Mr. Nixon to back down from his attempt to slow down the issuance of the credits.

Whether one supports the low-income housing program or not is hardly the point: There is no doubt the housing that Mr. Smith builds serves a population that needs it. But the credits are grossly inefficient. In 2007, the Post-Dispatch’s Virginia Young reported that only 35 cents of every dollar actually goes into building housing. The rest of it is shared by the tax-credit industry.

Mr. Smith is using Missouri’s opaque campaign finance laws to hide his outsized influence that allows him to pad his profits.

Secretary of State Jason Kander, a Democrat who was one of the forces behind the last ethics bill when he was in the House in 2010, unveiled his ethics bill last week, a 217-page proposal sponsored by Rep. Kevin McManus, D-Kansas City. The bill would close the committee-to-committee laundromat. It would reinstate campaign finance limits. It would limit the revolving door that allows lawmakers to cozy up to lobbyists to line up their next job even as they’re allegedly doing the people’s business. It would ban lobbyists’ gifts and create the crime of obstructing an ethics investigation.

In short, it would go a long way toward cleaning up the dirty business that is the passing (or blocking) of laws in the Missouri Legislature by any sneaky method imaginable.

You almost have to take your hat off to Mr. Smith. He makes more money by spending less than some other big donors. He gets nonprofits, and senior citizens and the disabled to fight his battles for him. He’s a smart man who has surely hidden more donations than we’ll ever be able to track.

And he wins. Every year, he wins.

Missouri lawmakers can even the playing field. They can open the books. They can create the transparency that they falsely claimed to have created when they decided to turn Missouri politics into the free-spending free-for-all it has become.

Or they can sit back and keep taking checks from outfits like the Coalition for Disability Rights, and pretend they don’t know the man in the private jet who is buying their silence.

Copyright St. Louis Post-Dispatch. Reprinted with permission.

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John Schultz January 21, 2014 | 9:32 a.m.

If the system is so opaque, how was the Post-Dispatch able to discern that Smith was the donator? And how many voters will actually check out who donates to candidates? I think transparency is good, but it's better for the media to enable investigation to inform the public, not for the public to do its own research.

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