Campaign donations, contracts intermingle

By Kevin Woster, Journal staff | Tuesday, December 30, 2008

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Lawrence & Schiller has received million of dollars in no-bid state contracts during Gov. Mike Round’s time in office, while also donating thousands to the governor’s campaign.

But the Sioux Falls advertising agency isn’t alone in a system that the governor calls simply good business and critics label as a hazy pay-to-play process likely to benefit the politically connected.

A Rapid City Journal review turned up numerous South Dakota companies that receive contracts, often without competitive bids, and also make donations to the governor. The contracts are for a variety of services, but some of the most prominent are with private law firms that provide legal services to state agencies through no-bid contracts that are, in some cases, for hundreds of thousands of dollars.

Principal partners in the Pierre law firm May, Adam, Gerdes & Thompson, who currently have a $350,000 no-bid contract to provide legal services in tort cases against the state, donated $18,500 to the Rounds campaign for his 2006 re-election. A former partner, Neil Fulton, donated an additional $3,000. In 2007, Fulton was named the governor’s chief of staff.

Rounds argues that what some might try to label “pay-to-play” contracts are really solid business deals that operate separately from political contributions.

“There are no connections, and I have absolutely made that clear that we do not in any way, shape or form suggest that contracts have any connection with donations,” Rounds said, adding that most people and businesses involved with state contracts are “not politically active.”

But those who are politically active still have a right to provide services through state contracts, the governor said. He said that should include  executives from Lawrence & Schiller, who have donated $12,000 to the Rounds campaign since 2003, along with $6,000 to Lt. Gov. Dennis Daugaard.

 “They’re very active. And I just happen to be one of those candidates they support,” Rounds said. “I don’t think that means they are excluded from participating in providing service. If we started doing that, there’d be a whole lot of attorneys out there that couldn’t make donations.”

One of those attorneys would be Rapid City lawyer Mike DeMersseman, who doesn’t apologize for the system or his involvement and rejects the pay-to-play categorization.

“We’ve given to a lot of governors,” said DeMersseman, whose firm has donated $19,000 to the governor’s campaign since 2002. “Politics is my favorite sport. It beats football, basketball, everything else. But if it was pay to play, I ought to be getting more than I am.”

DeMersseman, Jensen, Christianson, Stanton & Huffman has a contract of $75,000 through next June to provide legal services for the Public Entity Pool for Liability, or PEPL, fund. That’s the same fund that May, Adams, Gerdes & Thompson represents. The PEPL fund, which is overseen by Dennis Rounds, the governor’s brother, provides money to pay tort claims against the state that are determined to be valid. The firm also has a $99,544 contract good through May with the state Social Services Department. The firm only gets paid out of the contract when there are legal actions, DeMersseman said.

And it isn’t just law firms that have state contracts and make campaign contributions to the governor.

The Black Hills Special Services Cooperative has donated $14,000 to Rounds since 2002, and currently holds 13 active service contracts with the South Dakota Department of Education worth more than $2.3 million. It also has two contracts with the state Corrections Department for about $415,000 and four with the Health Department for more than $700,000.

The Sturgis-based cooperative operates residential and group homes and training-counseling programs for people with disabilities in the Northern and Southern Hills. It also offers alternative schooling and a variety of training programs for teachers and students at regular schools to help meet requirement from the No Child Left Behind act.

Executive director Ron Rosenboom, who has donated $3,000 to the Rounds campaign, said he supports those candidates who understand the mission of the educational cooperative.

“I like to support the process and individuals who I believe have similar interests and are going to assist us and are not going to be diametrically opposed to the things we do,” he said. “In terms of a tit-for-tat kind of thing, no, I don’t believe that’s appropriate, and I don’t believe that’s the case. I give of my own free will.”

Pierre lawyer Paul Bachand said that’s the only way he gives, regardless of the state contracts he happens to hold. Bachand, a partner in Schmidt, Schroyer, Moreno, Lee & Bachand, has a $50,000 contract with the PEPL fund. And through the firm, he also has a contract with the South Dakota attorney general worth about $115,000. That’s mostly federal grant money that comes through the state office for reducing drunk driving.

Bachand and the firm also have a $65,000 contract with the state Game, Fish & Parks Department.

But Bachand said he didn’t have the contracts in mind when he and his wife gave a  total of $4,000 to the Rounds reelection campaign between 2005 and 2007.

“In my mind, I don’t think they’re linked at all,” Bachand said. “I’ve known him (Rounds) since we moved to town in the 1990s. I go to the same church. When my kids were babies, I’m sure they were screaming in his ears.”

Lawrence & Schiller president Scott Lawrence said he gladly made contributions to Rounds even though he believes that “a thousand dollars here and there has zero impact” on whether his company gets state contracts.

“I don’t know how much a contribution gets you. But we certainly believe in the system,” he said.

Lawrence & Schiller worked for Sioux Falls Republican Steve Kirby, not Rounds, during the 2002 GOP primary. Rounds won that race and went on to win the election that fall. Lawrence & Schiller did some work for the Rounds campaign at the end of the year, and picked up the tourism contract the next.

That’s when the agency upped its contributions to the governor in a system that is legal and common under South Dakota law. But some critics say that should change.

“Things have just gotten very lax,” said Sam Kephart of Spearfish, a marketing specialist who campaigned to break any link between donations and contracts.

Kephart was a leader in support of Initiated Measure 10, which South Dakota voters rejected in November by almost a two-to-one margin.

Among other things, the measure would have banned government officials with control over state contracts from accepting campaign contributions from recipients of those contracts. It also would have banned those who hold no-bid contracts from making contribution to state political candidates.

Under that law, Lawrence & Schiller executives couldn’t have kicked in $12,000 during the past few years in campaign donations to Rounds, who hires the directors of the state Department of Tourism and State Development. That’s where Lawrence & Schiller currently has active no-bid contracts worth $7 million, along with smaller contracts in other agencies.

Since Rounds took office in 2003, Lawrence & Schiller had more than $23 million in state contracts, most with tourism on a non-bid basis.

Lee Breard of the Conservative Action Council in Pierre, which spearheaded the Initiative 10 campaign, said Rounds’ campaign-spending reports show a pretty clear connection between contributions and contracts.

“My comment would simply be the facts,” Breard wrote in an e-mail to the Journal. “L&S donated less than $500 to Rounds for governor in the 2002 election cycle. After L&S got the tourism contract back, they donated $12,000 plus for the 2006 election cycle and another $6,000 to the lieutenant governor.”

Both the governor and South Dakota Tourism and State Development Director Rich Benda reject the pay-to-play inference by Breard.

“I’ve never spoken to the governor about political contributions for these guys, and he’s never asked me to do anything with these contracts other than what they’re doing,” Benda said. “I’ve been in a lot of chairs where those suggestions could have been made. And I’ve never had anybody try to guide me that way.”

Rounds rejects that assertion and others like it, saying that Lawrence & Schiller is tourism’s ad agency because “they’re very, very good at what they do,” not because of donations.

“I don’t worry about the political accusations like that,” Rounds said. “They’re bogus as far as I’m concerned.”

Lawrence & Schiller vice president John Pohlman said the firm won the contract because of its skills and services and keeps it for the same reason, producing higher returns for the state in visitor spending.

“The insinuation that this contract was somehow given to us couldn’t be further from the truth,” Pohlman said. “We pitched and pitched and pitched over six months to be able to get the business. It was anything but a given contract.”

Lawrence & Schiller has begun preliminary campaign work for Lt. Gov. Dennis Daugaard, an expected Republican candidate for governor when Rounds concludes his second term in 2010. Neither Lawrence nor Pohlman hesitate when asked about hiring Daugaard’s daughter, Laura. People who bring that up “must be jealous they don’t have her working for them,” Lawrence said. “She impressed us enough as an intern that we hired her.”

Rapid City advertising executive Robert Sharp isn’t much interested in the debate over political influence, perceived or real. Sharp voted for Rounds but doesn’t make donations, and his agency, Robert Sharp & Associates, has managed to win state contracts anyway.

Sharp has a $125,000 service contract with the South Dakota State Fair that runs through October 2010. The agency also won contracts with the state Health Department worth up to $150,000.

But they weren’t no-bids, he said. Even within the professional services contracts, some are offered on bids, or after multiple proposals are considered.

“That was all done under the bid process,” Sharp said of his contracts. “There are no favors paid to us. We work hard for everything we’ve gotten.”

Sharp would like a chance at the no-bid contracts Lawrence & Schiller have. But he is not among those who believe such contracts are bought through political contributions that he doesn’t make.

“I don’t believe that, and I’d hate to think that I’d have to pay to play. I just won’t do it,” Sharp said. “I would hate to think that’s the way it is. In Illinois, maybe, but not here in South Dakota. I don’t think it’s true.”

Contact Kevin Woster at 394-8413 or kevin.woster@rapidcityjournal.com

Title: No Bid Contracts Date: December 26th, 2008 Every year, businesses throughout South Dakota are given no-bid contracts by Gov. Mike Rounds and state government. The openness of those contracts helped launched a ballot issue to open up the process. The ballot measure failed, but the issue remains. VIEW PRESENTATION »