Hawaii’s Campaign Spending Commission claims that its “mission is to maintain the integrity and transparency of the campaign finance process by enforcing the law,” including “making sure everyone has the opportunity to ‘follow the money,’” especially for “ballot issue committees.” Unfortunately, in the leadup to last November’s state constitutional convention referendum, this language proved to be mere feel-good political pablum.

The Violation

On November 5, 2018, one day before the election, convention opponents ran an ad on the front page of the Honolulu Star-Advertiser, the most valuable print real estate in the State of Hawaii, as the Star-Advertiser is Hawaii’s dominant daily newspaper.

Missing from the ad was the legally required disclosure of who paid for it. This disclosure requirement is important because without it voters cannot “follow the money,” which, as noted above, is the reason the Campaign Spending Commission exists. If Hawaii’s most powerful special interests found it in their self-interest to voluntary disclose their campaign spending, Hawaii wouldn’t need a Campaign Spending Commission.

The Campaign Spending Commission’s Response

On the morning of Nov. 5, immediately after I spotted the violation, I called the Commission after first notifying the Board of Elections. Given that it was only one day before the election, time was of the essence. After the election, people wouldn’t care, as breaking the campaign disclosure law would make no practical difference. So, after calling, I emailed and then called again. My hope was that the Commission would issue a press release—or at least send out one of its innumerable tweets—notifying the public of the violation. 

The day after the election, General Counsel Gary Kam finally got back to me. He immediately acknowledged that the ad violated the law, but he said he couldn’t do anything until the Star-Advertiser, which ran the ad, confirmed that Preserve Our Hawaii had bought it. The penalty to Preserve Our Hawaii for the violation would be $25; the penalty to the Star-Advertiser would be nothing, as newspapers are not penalized for running illegal political ads even if they know they are illegal.

Two days later I received an email from the Commission claiming that for them to pursue the $25 fine against Preserve Our Hawaii, I would have to fill out, sign, and notarize their formal complaint form alleging the violation the Commission had already acknowledged was an obvious violation.

I explained to General Counsel Kam that such a request would make “a mockery of the Campaign Spending Commission, and the trust the public has placed in it.” He apparently agreed. On November 13, he withdrew the request and notified me that both the Star-Advertiser and Preserve Our Hawaii were being asked for information regarding the violation and that he would notify me when he heard back.

The complete correspondence can be found on the Hawai`i State Constitutional Convention Clearinghouse.

The Bystander Effect

Perhaps the most remarkable feature of the front page political ad violation was that no one else reported it to the Commission despite the fact that thousands of people, including most Star-Advertiser staff, anyone who has ever run as a political candidate in Hawaii, and every Commission staff member, presumably both saw the front page ad and immediately knew it was illegal.

Such behavior reminded me of the “bystander effect,” often taught to social psychology students by means of the Kitty Genovese story. While Ms. Genovese was murdered in front of her New York City apartment building, dozens of the apartment dwellers heard the drawn-out and very loud murder as it was taking place. But no one alerted the police, reasoning that they had more to lose than gain by doing so.

In the ad disclaimer case, the bystanders could have reasonably worried about needlessly getting on the bad side of some of Hawaii’s most feared political players, including the Star-Advertiser, the government unions who paid for the ad, the Campaign Spending Commission, and the politicians who created Hawaii’s dark money ballot issues system while pretending to do otherwise. To alleviate such fears of retribution, inspectors general and other government watchdogs (but not the Campaign Spending Commission) institute systems allowing citizens to report waste, fraud, and abuse through anonymous “hotlines.”

The Violators’ Responses

After eight weeks had passed and I hadn’t heard back from the Commission, I requested an update on the case. General Counsel Kam replied that on December 4, more than a month earlier, Preserve Our Hawaii had paid the $25 fine. Although December 4 was before the Commission’s final December 6 deadline for reporting campaign expenditures, the $25 penalty was apparently not disclosed because only expenses prior to the election needed to be reported. Thus, any reporter looking at the Commission’s final report on Preserve Our Hawaii, let alone its November 5 report deadline (more than 12 hours after the violation occurred), would have had no knowledge of either the violation or the penalty.

After the Star-Advertiser was asked who had paid for its front-page ad violating the campaign finance law, it presumably didn’t think the violation newsworthy, as it didn’t report on it, even to bury it in a short notice on its rarely read back pages.

The Deterrence Effect of the $25 Fine

The deterrence of the $25 fine on Preserve Our Hawaii was obviously negligible. As of the Nov. 6 election, Preserve Our Hawaii had raised $740,000.00 and spent $662,529.5 to defeat the referendum. Virtually all that reported sum went to advertising, including the design and distribution of the ads.  Note that most non-media expenditures were exempt from disclosure, including in-house staff used for conducting polls, focus groups, and other research on the referendum; organizing the no coalition; and hiring and then managing the various outside contractors.

Preserve Our Hawaii’s last payment to the Star-Advertiser was $23,283.01 on Oct. 30, presumably for its Nov. 5 front page ad. Adding the disclaimer to the ad covering the most expensive print advertising real estate in Hawaii would have taken up far more than $25 worth of space. My guess, then, is that the payback for violating the law and thus saving on extraordinarily precious ad space was more than 100:1. 

Obeying the law would also have significantly reduced the effectiveness of the ad. All of Preserve Our Hawaii’s contributions came from government unions, including four-fifths from two of Hawaii’s most powerful unions, the Hawaii Government Employees Association and the Hawaii State Teachers Association (most of the latter’s contribution came from its parent union’s $60+ million ballot campaign fund). Disclosing this information would have undercut Preserve Our Hawaii’s message about powerful special interests supporting but not opposing a convention.

Some readers would also have reasonably assumed that the front-page message was the Star-Advertiser’s own editorial position. After all, not only was the message its editorial position, but the law required that if it wasn’t the ad would have to include a disclaimer. Trusting readers would presumably have expected the Star-Advertiser to comply with Hawaii’s campaign finance disclosure laws, given that it has often editorialized in favor of the principle behind those laws.

In short, on strictly economic grounds, the deterrence effect of the $25 penalty, the equivalent of about a .1% tax, was negligible. It was like having the government offer a blatant lawbreaker the following two options: pay a $25 fine to earn a $1,000 profit or don’t break the law and earn nothing.

The Court of Public Opinion Rationale

Politicians and the media often argue that small penalties for campaign finance violations are all that is necessary because the most practical deterrent for such violations is the court of public opinion, not the court of law. But Preserve Our Hawaii, unlike candidates who will be up for election in the future, had no reputation to lose after the election because it ceased to exist. 

If the public had been widely informed of the violation on Nov. 5, this argument would have been credible.  But the Campaign Spending Commission refused to issue a press release or other communications alerting the public of the violation. And the Star-Advertiser not only had no incentive to alert the public to the violation but had a significant economic incentive to turn a blind eye.

To be fair, it’s very hard to enforce conventional campaign finance disclaimer laws in the court of public opinion shortly before an election, as there isn’t enough time to correct the record. But it should never have been necessary to correct the record, as the Star-Advertiser should simply have refused to run an ad that its political advertising staff and senior editors undoubtedly knew was illegal.

Recommendations

The conventional villains in campaign finance disclosure stories, as told by news media, are politicians and special interests. But I’d suggest the greatest villain in this story is the Star-Advertiser, which has more monopoly power over its state’s news than any other newspaper in any other state in the United States. For example, the Star-Advertiser ranks 12th in total daily circulation, even though Hawaii is only the 40th largest state in the United States.

Why did the Star-Advertiser’s editorial and advertising staff choose to run an ad that they must have known was illegal? From a short-term business perspective, the answer is clear. There is no financial penalty in Hawaii when a media outlet publishes a political ad that fails to include a disclaimer. The penalty only applies to the entity placing the ad, not the entity that runs it.  In this case, the financial reward was great (ads running the day before an election often cost the most) and the reputational risk the least (which helps explain why negative ads predominate just before an election).   

But if Hawaii had a competitive media system the Star-Advertiser would have had to think twice about not only abetting the violation of a law but violating the type of law it claims it supports as the people’s tribune. When you have substantial monopoly power over information—whether you’re a politician or media outlet—you have much less reputational risk to fear from bad behavior.

A good starting point to break the Star-Advertiser’s monopoly power in Hawaii would be to end its highly profitable monopoly over government mandated legal advertising, which the state legislature granted it. No government should grant one competitor in a marketplace a 15% revenue advantage, which results in a 50% profitability advantage (due to the very high profitability of the legal ads), over potential competitors. (These amounts are only estimates, as the actual amounts and profits the Star-Advertiser receives from legal ads is a closely guarded secret.) The subsidy also makes the Star-Advertiser beholden to legislative leaders, which is bad for press independence.

Government mandated legal ads once fulfilled an important information function, just as newspaper classified ads provided a valuable information service before the advent of the Internet and the emergence of more efficient and effective services such as Craigslist. But they now hinder the public’s right to know, just as would a government mandate to continue using the horse-and-buggy after the automobile had been invented. Many Hawaii politicians are aware of the problem.  But they are terrified of getting on the Star-Advertiser’s bad side.  As the famous political adage goes, “Never pick a fight with someone who buys ink by the barrel.”  (The same adage also applies to reporters who want to preserve their option open of one day working at the Star-Advertiser.)

Hawaii deserves an honest and open discussion about the Star-Advertiser’s role in subverting Hawaii’s campaign finance disclosure laws, just as it deserves an open and honest discussion about the merits of government mandated legal ads. Alas, neither the Star-Advertiser nor Hawaii’s politicians are likely to engage in such a discussion.

Fixing the perverse incentives in Hawaii for last minute violations of its campaign finance disclosure law regarding Hawaii’s periodic state constitutional convention referendum could arguably require a state constitutional convention, as Hawaii’s dominant media outlet and most powerful politicians benefit from such violations. If so, the incentives constitute a Catch-22.

LINK: Articles by J H Snider PhD

Source: Snider, J.H., Hawaii’s Failed Campaign Finance Law: The Case of the Star-Advertiser’s Missing Front Page Ad Disclaimer, Hawaii Press Press, January 19, 2019.