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Why voters should care about Booker’s start-up problem

Cory Booker has been pretty open about his multi-million dollar start-up, Waywire, a potentially huge conflict of interest for one of the Democrats’ rising stars.
/ Source: The Cycle

Cory Booker has been pretty open about his multi-million dollar start-up, Waywire, a potentially huge conflict of interest for one of the Democrats’ rising stars.

If Aaron Sorkin were to make a movie about Newark Mayor Cory Booker, you can bet that Waywire, Booker’s controversial technology start-up, would provide a cautionary tale for the mayor’s voracious ambition.

The company is an allegory for Booker’s style—audacious, well-connected and promising “revolutionary” change; yet prone to a certain vagueness and affinity for what we might call the politics of the donor class.

The New York Times renewed the spotlight on Waywire this week, questioning how a full-time mayor managed to launch an online video company, raise investments from the Oprahs and Googles of the world, and amass a potentially multi-million dollar stake. Booker’s opponents, in both parties, are seizing on the story to attack him, and it could persist through the general election.

There are two substantive charges here: Booker should be more transparent about the company, and the arrangement creates unavoidable conflicts of interest.

Digital disclosure

On count one, a Times editorial urges Booker to “give a full and personal accounting of his involvement” in the company, and knocks him for failing to list the company in city filings until “hours before” its story went to press. (Booker was also late to reveal his considerable stake in the company, as the Huffington Post reported.)

Booker’s campaign protests that the mayor has already discussed Waywire in forums that are far more visible than election filings, including with reporters and on Twitter, where he has 1.4 million followers.

“More than 100 stories [have] been written about it,” says Kevin Griffs, the campaign spokesman. “Everybody knows that Mayor Booker is fascinated with technology,” Griffs told me this week, “he invested in an idea and helped get a business off the ground, and he’s never had any day-to-day responsibilities with the firm.”

They may be on to something there – in terms of promotion, Booker has actually gone above some legal requirements in publicizing his role at the company.

While federal election filings are key for transparency, some federal agencies are already counting social media statements to satisfy certain disclosure requirements. Voters could use more information on Waywire, like how many hours Booker spends on the company and details on every investor, but Booker’s transparency record here is not really below average, or violating the current rules.

More friends, more problems

As for count two, Booker has a real problem.

Let’s start with why we have rules for campaigns. Donations to campaigns have a huge impact on politicians’ careers, so they are legally limited to reduce the risk of corruption.

It’s illegal to give a candidate $100,000 for his campaign, for example, because that much direct cash could make the candidate overly indebted to one person – or risk appearing too indebted. (The legal standard for this line is “appearance of impropriety,” the idea that politicians and institutions lose legitimacy if a conflict looks shady to the public, even if it’s only an appearance.)

Likewise, it’s illegal to give most politicians large gifts.  You can buy a U.S. senator a T-shirt, if you’re not a lobbyist or foreign agent, but not a suit. (The gift cap is $50.)

But what about “giving” a candidate a large “investment” in his company?

The same concerns apply – the large amount of money can corrupt the candidate, with far more personal impact than campaign cash, or it could simply feed a public perception of corruption.

Depending on the company, the politician might garner “investments” because of his power in government, not actual interest in the company. Those “investments” might look more like gifts – a backdoor for people who want to get around rules on gifts and campaign donations.  And those investor/donors could wield special influence over the candidate.

Booker’s bottom line

Do any of these concerns apply to Booker?

That partly depends what you think of Waywire. After reviewing its business model, reporter Tim Fernholz concludes that it probably didn’t “attract investments from Silicon Valley’s brightest on its own merits,” raising the prospect that Booker used his power “to raise money for himself.”

Plenty of financiers would object, however, that few ventures raise money on a pure “merit” test, sans rolodex. Especially for start-ups, investments can represent a bet on the people launching an idea as much as a bet on the idea itself.  (That’s how Jay-Z explains his profitable brand: “I’m not a businessman – I’m a business, man!)

Still, that defense is less available to Booker, who stresses that he doesn’t run the company. In political terms, Booker was never Waywire’s campaign manager — he was its fundraising director.

That’s not illegal in New Jersey – but it probably should be. (Booker will be bound by extra restrictions if he’s elected to the Senate.) These kind of arrangements clearly need a lot more scrutiny. In most states, the fact is that campaign finance laws have not caught up with the investment options, and temptations, for entrepreneurial pols in an era of frictionless start-ups and flowing private equity.

And that raises a final wrinkle in this subplot. Cory Booker is on track to be one of the most famous senators thanks to many positive qualities – he took on a corrupt Democratic establishment in Newark; focused on poverty, public housing and urban crime in office; and often deployed his fame and wealthy contacts to bring funding to Newark. Almost all politicians seek attention and donors; Booker has found innovative ways to actually work those skills on behalf of his constituents, not just his campaigns. (Very few politicians would even think to ask a campaign donor to fund local schools, let alone prevail in the plan.)

His political instincts are also ahead of the curve – he endorsed Obama very early, in May 2007, when the new senator was trailing Hillary Clinton, and carved out a large role with the campaign. He was also quick to appreciate how a self-reinforcing wave of social and national media could trump the more conventional credentials of his Democratic rivals. (A recent article on Booker’s commanding lead notes that in a “typical campaign,” a 26-year veteran of Congress and the first female state assembly speaker would beat the mayor of Newark.)

Yet if you look at Booker’s largest break with President Obama – a dramatic, off-message clash that sided with Mitt Romney in the heat of the 2012 campaign – it was not about domestic policy. It was not about New Jersey. It was about private equity.

As political readers will remember, because it was a huge deal at the time, Booker went on Meet The Press and defended private equity investors against criticism from the Obama campaign. Many politicos were mystified at why a top Obama surrogate would pick that moment to strongly defend Bain Capital. Booker said the president’s attack on private equity was “nauseating,” and equated criticism of its business practices on the Left to conservative attacks on Jeremiah Wright.  The White House was livid, as was the Democratic base.

No one can read Booker’s mind, and to be fair, he’s not exactly the first politician who can be challenged for prioritizing the priorities of the donor class. But it’s fair to ask whether, faced with a democracy that already gives huge influence to political donors, we want politicians to dream up new ways to connect with elite investors, especially if it’s unclear what exactly they want to invest in.

UPDATE:  In an interview with NBC News, Newark Mayor Cory Booker on Monday defended his role in an Internet video startup company and insisted he’s set the standard for transparency during his campaign to become New Jersey’s next senator.