Crony Capitalism 101: Want To Avoid The SEC? Bribe You Friendly, Neighborhood Politician

Forget conjecture – Crony Capitalism is alive and well at The SEC and a new study proves it statistically. As The LA Times reports (via IBT), Maria Correia’s research finds that – perhaps not surprisingly – the more a company spends on political donations, the more lenient the treatment it gets from the SEC. For all the cheaters out there, the math is clear – a $1-million contribution to a political action committee can reduce the probability of an enforcement action from the SEC by more than half (from 8.58% to 3.43%).

As The LA Times reports, the working assumption of business executives and ordinary taxpayers alike is that political donations can buy big favors from Congress… now that has been quantified statistically…

The value of political grease… A $1-million increase in contributions by a corporation to a political action committee in the five years before a violation of SEC rules, she finds, can reduce the probability of an enforcement action from the SEC by more than half (from 8.58% to 3.43% in her sample). Her conclusion is that “long-term PAC contributions are effective at deterring SEC enforcement.”

Furthermore, she finds that higher PAC contributions are associated with lower enforcement penalties and a lower chance that the SEC will cite officers or directors. An increase of $100,000 in PAC money in the five pre-violation years is linked to an 11% decrease in monetary penalties and a 12.9% decrease in the probability that the SEC will bar an officer or director from the business.

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As for where companies should put their money to get the biggest bang for the buck, Correia says contributions to “high ranking politicians from the majority party” and to those “sitting on committees involved in setting the SEC’s budget or overseeing the agency” have the greatest effect.