Regulatory Power Leads to Corruption

September 10, 2018

A Maryland story in the Washington Post last week presents a classic case of local political corruption. The broader message of the story is that when we give government the power to regulate an activity—in this case liquor sales—we open the door to corruption.

Even if you believe that regulatory regimes are created with good intentions, the politicians and officials in charge inevitably get swarmed by lobbyists and some of them will focus on lining their own pockets. With respect to the public interest, the resulting policy outcomes are a crapshoot.

Former Maryland state delegate Michael L. Vaughn (D) was sentenced to 48 months in federal prison Tuesday after he was convicted of accepting cash in exchange for votes that would expand liquor sales in Prince George’s County.

A jury found Vaughn guilty of conspiracy and bribery in March. During his six-day trial in U.S. District Court in Maryland, Vaughn and his attorneys argued that the bundles of cash he received from liquor store owners and a lobbyist in 2015 and 2016 were campaign contributions that he failed to report because he had personal financial problems.

But prosecutors for the government argued that the more than $15,000 that changed hands in a coffee shop bathroom, a dark restaurant and other locations throughout the county were bribes.

… Sentencing Judge Paula Xinis called Vaughn’s misconduct ‘exceptionally serious’ and ‘grievous bribery.’

Vaughn was one of seven arrested last year in a federal corruption case that investigators called “Operation Dry Saloon.” Liquor store owners, lobbyists, former liquor board commissioners and former Prince George’s County Council member William A. Campos (D) conspired to pass laws that would allow for Sunday liquor sales in the county in exchange for cash.

… Prosecutors, however, argued that Vaughn and former chief liquor inspector David Son hashed out a scheme in which local liquor store owners Young Paig and Shin Ja Lee would pay Vaughn $20,000 over two years to clear the way for Sunday sales.

… ‘He fully embraced the pay-to-play culture that has been a repeat phrase in this court for a decade,’ Windom said, alluding to the 87-month sentence former Prince George’s County executive Jack Johnson received for bribery and corruption.

Local governments have large and excessive power over private land development, and that power has long been a source of corruption. Here’s what the Washington Post said about Jack Johnson’s crimes in a 2011 story:

Jack Johnson, a Democrat who was county executive from 2002 until December 2010, came to the attention of federal authorities in 2006, when the FBI began investigating allegations of corruption, campaign finance violations and tax fraud. Authorities found massive corruption centered around a “pay-to-play culture” that began months after Johnson took office.

‘Under Jack Johnson’s leadership, government in Prince George’s County literally was for sale,’ the [sentencing] memo said.

The pay-to-play scheme involved several developers, including Laurel physician and developer Mirza H. Baig … In his plea agreement, Jack Johnson acknowledged accepting up to $400,000 from the scheme.

Johnson, 62, was charged last November with evidence tampering and destruction of evidence after federal agents arrested him and his wife, 59, at their Mitchellville home. They were overheard on a wiretap scheming to stash $79,600 in cash in Leslie Johnson’s underwear and flush a $100,000 check that Jack Johnson received as a bribe from a developer.

… On the day of their arrests, Johnson was at Baig’s office picking up a cash bribe and talking about how he would continue the corruption ‘through his wife’s new position on the county council,’ the memorandum said.

‘He proudly bragged about how he was going to orchestrate approval of various funding and approvals by the County Council for Baig’s projects,’ according to the memo.

Federal officials valued the benefits that Baig received in exchange for illegal payments to Johnson at more than $10 million on two development projects.


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