Several different activities fall under this category. First, there are genuine business activities, including sales of party literature, badges, and other political objects; second, there are schemes that may be seen to involve an element of pressure or extortion; third, 'business activity' may be bogus and a method of escaping regulations relating to foreign political donations or to the disclosure of domestic donations, see Broadcasting Time.
In the past, Left Wing parties that were short of the company donations that benefited their political rivals frequently ran party-owned businesses.
Sales of Literature and Other Business Activities
There are solid political reasons for parties to sell their literature and posters at a loss. After all, campaigning requires that they should be distributed as widely as possible, which requires low sales prices or free distributions. Nevertheless, party organisations may decide to take a tougher line on pricing of campaign literature and materials, aiming to cover their costs and even to make a profit. They may also market political paraphernalia such as badges, ties, tee shirts, ribbons, tea or beer mugs, and even Christmas greetings cards.
Modern business schemes adopted by some political parties include 'affinity' credit cards. By arrangement with a bank, party supporters may use a special version of a major credit card. This will usually carry a special party logo and the bank administering the card will remit a small percentage of all purchases made with the card - typically 0.25 percent - to party funds.
Business activities that may be regarded as 'genuine' also include bookshops run by a party headquarters and even ventures with no apparent political connection, such as the travel agency that was run for some time by the British Labour Party or the retail stores run by the British Co-operative movement, also affiliated to the Labour Party. In Austria, even the breakdown services for motor vehicles are affiliated to the main parties.
Schemes Which Involve Pressure on Major Donors
It has become customary for the main British political parties to organise 'exhibition' stands at their annual party conferences. Corporations are charged a considerable sum for hiring space at these exhibitions. The clear motive provided for enterprises is that they will have the opportunity during the several days of the party conference to obtain access to delegates. These delegates are a carefully screened audience with an unusually weighty political influence. Party organisers typically promise that the party leaders will visit the exhibition during the conference. The exhibition stands thereby provide an excellent opportunity for lobbying and image-building. Delegates, who include members of Parliament, are sometimes tempted to visit the exhibition stands by small gifts or free beverages.
Another form of commercial venture is the system of charging of journalists hefty fees for seats on the campaign aircraft or bus taking the party leader on his travels during an election campaign.
The reason why these schemes may be regarded as involving pressure is that newspapers are, in effect, being charged for access to the party leaders on their tours; corporations are being told that if they wish to obtain privileged access to senior party figures during the annual party conference, they will be required to pay for it. One defence of the system is that the charges that are being levied are a matter of public knowledge and that the sale of access during conferences is relatively innocent compared with other methods of influence peddling. A further defence is that national conferences and conventions are expensive for parties to run and that they need to find means of recouping some of their outlays.
Bogus Business Schemes
Where corporations or individuals are subject to onerous legal restrictions on political donations, or where there is a possible stigma attached to contributions, one way of evading the limits on amounts that may be donating or of evading disclosure rules is to disguise a contribution as a business transaction.
One technique involves the exchange of money for some service provided by the party. A second technique involves the provision of services or goods to a party or to a candidate in return for some payment, but at a below market rate.
The listing of a donation as a 'payment for service' is a time-honoured device. For example, some party organisations for many years produced annual year-books or political directories. These included advertisements from companies. Whether these were genuine advertisements or disguised donations depended upon the rates charged. Clearly, companies frequently paid fees so far above market rates that they could hardly be justified as bona fide advertising costs.
More modern schemes of 'payment for service' include so-called 'consultancy services'. A party organisation may produce a series of private political briefs containing information of such accuracy and political value that they justify a high fee for the banks and other corporations which take out subscriptions. Since it is almost impossible to put a defined market value on advice or information, even high subscription fees may be justified. Common sense suggests that such briefing services are thinly-disguised methods of permitting corporations to subscribe to a party without declaring the fact to their shareholders or to the regulatory authorities.
Wewer has detailed some of the ingenious ways in which German political parties and occasionally the party foundations provided commercial cover for contributions. 41
Examples of Party Business Enterprises
(a) Israel.In a classic, though dated, account published in 1981, Khayyam Paltiel gave several examples of party business enterprises. He cited Israel as a country with probably the broadest range of party-linked enterprises:
'Most Israeli parties began as settlement movements and were by necessity driven to enter into almost all facets of social and economic life even before the proclamation of the state in 1948. Parties publish daily newspapers, own their own publishing firms, have their own recreation movements and sports teams, own banks, housing projects, wholesale and retail co-operatives, control the largest sick funds including hospitals, and are the largest employers in the field of heavy industry through the trade-union-controlled industries.'42
(b) Western Europe.Paltiel also gave examples from Italy, France, Germany, Austria, and Scandinavia:
'Beside recreational facilities, the Italian Communists run chains of stores, garment-manufacturing firms, travel agencies, and import-export agencies which handle a large part of the country's trade with Eastern Europe. The French Communist party ... owns no fewer than 310 enterprises ... The Bank Gemeinschaft in Germany and the Sparkasse in Austria are closely linked with those countries' Social Democrats. And the Scandinavian socialist and communist parties own travel agencies and quasi-commercial enterprises in the import-export area.'43
(c) India.An example of an allegedly bogus business scheme in which donations seemed to be disguised as 'advertisements' or as purchases of goods was outlined in a study by V.B.Rao:
'Advertisements in party newspapers by big businesses, which are willing to pay an exorbitant price for them, is another mode of collections [sic] ... Sales of party souvenirs by the Indira Gandhi Congress Party yielded a big amount for that party in 1972. It is believed that the Congress collected nearly 100 million rupees (then about U.S. $10 million) through advertisements for a souvenir which never saw the light of day. 44
(d) Spain.The details of a allegedly bogus 'consultancy service' are given in the same Library of Congress study:
'Prime Minister Gonzalez called for a general election on June 6, 1993 ... The move ... postponed the internal problems of the PSOE (Socialist Party) that was recently hit by a scandal concerning illegal financing of its 1989 campaign through a consultancy agency (FILESA). News of the FILESA affair broke in autumn 1991 ... The case was under investigation for 15 months but the Audit Tribunal, a body which monitors the accounts of Spain's political parties and whose make-up reflects the balance of power in parliament. The Tribunal exonerated the PSOE, due to the casting vote, cast by the PSOE-nominated chairman ...
'The case would probably have died down had it not been for the actions of a judge, who began a judicial investigation into the matter... On April 4, 1993, an official report, ordered by a judge in the Supreme Court, revealed that two senior Socialist party officials were involved with two companies known as FILESA and TIME EXPORT, which received payments for non-existent consultancy services for 8.5 million [U.S.] dollars. Some of the money, it was alleged, had been used to pay the party's election expenses... Tax inspectors working for the court, compiled a reportedly that itemised a list of payments, totaling 8.4 million dollars, that the FILESA group received from leading domestic banks and companies in return for consultancy reports and also a list of subsequent payments that the group made to the Socialist party to cover its electoral expenses ...
'The report also claims that FILESA directly paid service companies supplying the Socialist campaign headquarters, and that in order to disguise the payments it took receipts for them from a group of companies called 2020, which is controlled by a former national coordinator of the Socialist party's finances.
'The FILESA case was viewed by some as the mere tip of an iceberg of corruption. The 2020 group itself has been linked in press reports to large consultancy payments made by Germany's Siemens group at the time it was negotiating the contract to supply the Madrid-Seville high speed train.' 45
(e) France. According to Professor Pierre Avril, some of the true sources of political financing include 'less innocent' sources utilising research organisations similar to those of the consultancy services used in Spanish politics. Party-controlled municipal authorities typically use these services.
'The municipality may pay for research services at rates higher than their true value (the difference being used to finance the expenses of the Party), as happened in 1982 town-planning operations in Paris. The municipality also may force the companies applying for contracts to hire these research organizations, which then levies a 'research fee' of 2 to 2.5 percent of the value of the contract ... The company Urbatechnic, which supports the Socialist party, contends that it supplies a service equal to the commissions it receives. It also reports that three-fourths of its commission is paid back to the national treasury of the Party after its functioning expenses are deducted.'46
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