Campaign spending on foreign companies

Foreign trade and buying American were hot topics in the 2016 U.S. Presidential election, but surprisingly no one appears to have reviewed the candidates’ spending to see who favored U.S. companies when making their own campaign expenditures.  We therefore reviewed the expense records that two dozen Presidential campaigns filed with the Federal Election Commission (FEC), determined which expenses were with foreign companies, and answered the following questions:

  • What foreign companies were used by the largest number of campaigns?
  • What percentage of each campaign’s spending went to foreign companies?
  • How much campaign money went to companies in countries that are not considered friendly to the United States?

As mentioned in a previous article, the FEC has expenditure records filed by 25 campaigns:  every major Republican and Democratic candidate except Lincoln Chafee, as well as three independent or third-party candidates (Gary Johnson, Evan McMullin, and Jill Stein).  We excluded Jim Gilmore because he had far fewer expense records than any other candidate, showing only 24 distinct payees.  The FEC records reflected more than 287,000 transactions, more than 5600 of which we identified as being foreign expenditures.

For this article, we define a foreign company as one that is based in a country other than the United States, is a subsidiary of a company based in a country other than the United States, or is wholly or majority owned by a company based in a country other than United States.  The Bernie Sanders campaign was unique in filing FEC reports upon returning eight contributions from donors who were found to be living outside the United States; those records technically reflect outflows of money, but we do not count them as foreign expenditures because the Sanders campaign was merely returning money it would have been illegal to keep, nor do we count them toward his campaign’s total expenditures.1

First, we examined which foreign companies were most widely used.  The following table shows every foreign company that was used by at least four of the 24 campaigns:Foreign companies ranked by number of campaigns

First place went to Holiday Inn, one of several brands belonging to InterContinental Hotels Group (IHG) in the United Kingdom.  Consistent with the FEC records and with the method used in our previous article, we show different brands separately even if they share a corporate parent; if instead we grouped all IHG brands together, including those not used often enough to appear in the above table (such as Hotel Indigo), their total would be $1,652,250.89.

Although the founder of IKEA was Swedish, the company itself is based in the Netherlands.  Readers might likewise be surprised by seemingly all-American brands such as 7-Eleven, Burger King, and Trader Joe’s.  7-Eleven originated in Texas but is now a global chain based in Japan, while Trader Joe’s began in California but is now fully owned by Germany’s Albrecht family.  Burger King, founded in Florida, is now a subsidiary of Restaurant Brands International,2 which is headquartered in Canada but is majority owned by 3G Capital, a Brazilian investment company.  On the other hand, Virgin America is now a U.S. company because it was acquired by Alaska Airlines, but this acquisition was not completed until December 14, 2016; throughout the 2016 campaign, Virgin America was still part of the UK’s Virgin Group.

Most of these businesses are household names, but the exceptions are Shopify.com, a Canadian e-commerce company and donation acceptance platform; Sixt, a German car rental company; Hannaford, a regional supermarket chain whose Belgian parent company merged with a Dutch company in mid-2016; and CT Corporation, a registered agent and legal compliance services company that is a subsidiary of the Dutch company Wolters Kluwer.  Surprisingly, some of the foreign companies that received the most spending were lesser-known companies used only by single campaigns.  For example, the largest foreign vendor for Hillary Clinton’s campaign was Air Partner Inc., which coordinates charter air travel, while for Donald Trump’s campaign, the largest foreign vendor was Aon Risk Services Northeast, an insurance company; each is the subsidiary of a UK parent company.

Next we determine how much money each campaign spent on foreign companies, and we convert this to a percentage of each campaign’s total spending:Campaigns by percentage of foreign spending

Jim Webb’s campaign spent the highest percentage (2.503%) on foreign companies, followed by the Clinton campaign (2.378%), with the Stein campaign (1.115%) as a distant third.  At the other end, George Pataki deserves recognition as the only candidate whose campaign spent all his money on U.S. companies, though Johnson’s campaign (0.005%) came close.  By dollar amount, the Clinton campaign spent 3.83 times as much money on foreign companies as all other campaigns combined.  All told, the 24 campaigns paid $17,275,220.97 to foreign vendors, representing 1.166% of total campaign spending.

Aside from an appeal to patriotism and supporting the U.S. economy, there is arguably nothing wrong with political candidates spending money on companies from friendly countries such as Canada and the United Kingdom.  It is more likely to raise eyebrows if a candidate spends contributors’ money on companies in countries that have adversarial relationships with the United States.  Among the countries represented in FEC records, only two would generally be classified as hostile to U.S. interests in recent years:  China and Venezuela.

We therefore tabulate the campaigns’ spending on companies from these two countries.  Most campaigns had no Chinese or Venezuelan spending and therefore do not appear below.  Each table is alphabetized by campaign, and the number of decimal places shown in the final column has been increased because most of the percentages are small.

Chinese spending

Venezuelan spending

The Venezuelan table is not very interesting because the amounts are small and pertain to only one company, Citgo.  The Chinese table is more interesting, not only because of the larger amounts and more diverse companies, but also because it illustrates a recent trend.  Air China, Lenovo, and The Peninsula have always been based in China, but the other businesses are hotels purchased by Chinese interests within the past six years.  For example, the Montage Hotel in Laguna Beach was acquired by China’s Anbang Insurance Group in mid-2016, so although it was Chinese-owned by the time the Clinton campaign used it in September 2016, it was still owned by a U.S. company, Strategic Hotels and Resorts, when Marco Rubio’s campaign used it in August 2015 and March 2016.  (By coincidence, Anbang’s bid to buy the hotel was announced just nine days after Rubio’s campaign used it for the last time.)

Jeb Bush had the dubious distinction of being the only candidate whose campaign had expenditures with both Chinese and Venezuelan companies.  By dollar amount, Clinton’s campaign had the most spending on Chinese companies—nearly five times as much as all other campaigns combined—while by percentage, her campaign (0.0286%) ranked second in Chinese spending behind Rubio’s campaign (0.0429%).  On a positive note, 16 of the 24 campaigns had no expenditures with Chinese or Venezuelan companies.

During the general election, Clinton and her surrogates frequently attacked Trump for having purchased Chinese-made goods during his business career.  (Some people also claimed that Trump’s “Make America Great Again” hats were made in China, but Snopes exposed this as a hoax; all of Trump’s campaign merchandise was manufactured in the United States.)  It is therefore ironic that Clinton’s campaign spent 9.2 times as much money on foreign companies as Trump’s campaign did; foreign businesses made up a far larger share of her campaign’s spending (2.378%) than they did for Trump’s campaign (0.428%); and Trump’s campaign had no Chinese spending, whereas Clinton’s campaign spent more money on Chinese companies than all other campaigns combined.  As far as we can tell, no media outlet noted this irony during the campaign, even though all campaigns were continually filing publicly available reports with the FEC, and media outlets wrote ongoing articles about other aspects of these filings.

Having reviewed campaigns’ spending on foreign companies, we must also place this information in context:

1. These expenditures were made by the campaigns, not necessarily by the candidates themselves.  The candidates were presumably aware of the larger purchases, and they were certainly aware of their own hotel, airline, and restaurant expenses, but it would be unreasonable to think they were aware of small expenses incurred by staffers, such as buying food for volunteers.

2.  It is not always obvious that a company is foreign-owned, in part because companies have a disincentive to advertise this fact to U.S. consumers.  Some businesses also choose to downplay the fact that they have corporate parents at all, regardless of nationality:  for example, an IHG subsidiary called Kimpton Hotels & Restaurants operates boutique hotels and restaurants that downplay or omit the Kimpton name, such as Bistro Bis, a Washington DC restaurant where three campaigns had expenditures.

3.  The information is derived from FEC filings, which do not capture all ways that money might have been spent on foreign purchases.  For example, 19 of the 24 campaigns reported expenses at Walmart, which is a U.S. company, but there is no way to tell whether their purchases at Walmart included foreign brands.  The same caveat applies to purchases at other retailers, such as convenience stores and supermarkets.  We must therefore treat the FEC records as establishing a lower bound on foreign spending.

4.  In three cases, foreign expenses were unavoidable3 because a foreign company had exclusive publication rights to a candidate’s intellectual property.  The Sanders campaign purchased thousands of copies of his memoir, Outsider in the House, which was printed by a London-based publishing house, Verso Books.  Likewise, the Rand Paul campaign purchased hundreds of copies of his book, Taking a Stand, which was published by Hachette Book Group, a subsidiary of France’s Lagardère Group.  The Ben Carson campaign did the same for his books, published by Penguin Random House, which is jointly owned by Germany’s Bertelsmann and the UK’s Pearson.

Conclusions:

1.  Approximately 1.166% of all campaign spending went to foreign companies.  Almost all of the foreign companies were located in countries friendly to the United States.

2.  Among the foreign companies used by the largest number of campaigns, hotel chains were the most common type of business, with Holiday Inn in first place.

3.  By dollar amount, the Clinton campaign was by far the largest user of foreign vendors, spending 3.83 times as much on foreign companies as all other campaigns combined.  By percentage, the Clinton campaign ranked second behind the Webb campaign.  The Pataki campaign was the only one that had no foreign expenditures.

4.  Eight campaigns spent money on companies based in countries that are generally considered adversarial to the United States.  The only two such countries were China and Venezuela; the Clinton campaign spent the most money on Chinese businesses, while the Bush campaign spent the most money on the sole Venezuelan business.

Footnotes:

1. It is unclear whether this situation never arose for other campaigns, whether other campaigns were less vigilant in checking donors’ home countries, or whether other campaigns returned contributions but did not file FEC reports because these were not really expenditures.  A campaign has no way of checking the citizenship status of a donor, so a donor’s self-provided country of residence is a reasonable but imperfect proxy for this.

2. In February 2017, Restaurant Brands International launched a bid to acquire Popeyes, but this bid began after the 2016 election and has not yet been completed.  The $31.31 that the Carson and Cruz campaigns collectively spent at Popeyes was therefore not considered foreign spending.

3. Arguably, even two of these cases were avoidable because Sanders and Paul had voluntarily chosen publishers that were foreign-based or subsidiaries of foreign parents.  The sole exception was Carson’s purchase of his own books because he began publishing with Random House when it was still a U.S. company.

Sources:

All data for this article came from the Federal Election Commission’s website for the 2016 Presidential election.  As with our previous article, we used a cut-off date of November 28, 2016, three weeks after the last full day of campaigning.  Companies’ nationalities were determined using various online sources; Bloomberg’s company profiles and companies’ official websites were the principal sources, but additional information was obtained from news articles, especially to determine the exact dates when foreign acquisitions were completed.  The complete table of foreign expenditures can be found here.

Of all the companies reviewed, only one was split exactly 50/50 between U.S. and foreign ownership:  CityCenter Holdings LLC, which owns Las Vegas properties such as Aria Resort & Casino and Vdara Hotel & Spa, is owned 50% by a U.S. company (MGM Resorts International) and 50% by a company in the United Arab Emirates (Infinity World Development Corp., which is wholly owned by Dubai World).  Campaign expenses at these Las Vegas properties were therefore counted as 50% foreign.

China Press, a Malaysian-based newspaper, was counted as Malaysian despite a 2001 Jamestown Foundation report describing it as directly controlled by the Chinese government.  Although its history is Chinese and its headquarters are located in Hong Kong, Mandarin Oriental was counted as a UK company because it is incorporated in the UK overseas territory of Bermuda, it is listed on the London Stock Exchange, and its executives are British rather than Chinese.  If China Press and Mandarin Oriental were classified as Chinese, this would have increased the Chinese spending totals for the Bush, Clinton, and Webb campaigns.

One of the largest foreign expenses for the Sanders campaign was Marathon Enterprises, a Toronto-based event production company.  This should not be confused with a much larger U.S. company of the same name:  Marathon Enterprises Inc., a New York-based distributor of hot dogs and related foods, better known under the brand name Sabrett.

For this article, “company” also includes a few individuals paid for services, such as a Toronto-based video producer paid by the Sanders campaign and an Israel-based media consultant paid by the Mike Huckabee campaign.  These few individuals were identified as foreign-based according to their location information as given in the FEC filings.  If a foreign location was not specifically given, all paid individuals were presumed to be U.S. “companies.”

Lastly, as an exhaustive example of full disclosure, one of the foreign companies used by the Bush campaign was Hover, an Internet domain management company in Canada; this is the same company through which the Quiznox.com domain was purchased.

© 2017 by Quiznox.com

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