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The lawyers who helped tech tycoon Elon Musk secure a controversial rollback of far-reaching shareholder protections are now bankrolling Democratic Delaware lawmakers who voted for the legislation as they face progressive primary challenges over the so-called “billionaires bill.”
Five major law firms behind the deregulatory measure have funneled hundreds of thousands of dollars into a newly registered political action committee called First State Future PAC, which is supporting Democratic incumbents being attacked for their support of the legislation. Those financial backers include Richards, Layton & Finger, the Delaware firm that represented Musk in his years-long dispute with Tesla shareholders to preserve his $56 billion pay package in 2018 and helped draft Delaware’s corporate governance overhaul last year.
After a massive corporate lobbying campaign, the Democratic-controlled state legislature passed Senate Bill 21 to placate Musk and other Silicon Valley leaders who were threatening to leave Delaware, a historically business-friendly state, unless it shielded them from shareholder scrutiny. With two-thirds of all Fortune 500 companies incorporated in the state, the corporate handout limits the ability of company stakeholders and pensioners nationwide to hold corporations accountable for misconduct.
Among other measures, the new law makes it more difficult for a company’s shareholders to obtain records to hold company executives accountable for mismanagement and relaxes rules for conflicts of interest on a company’s independent board of directors.
In May, the progressive Working Families Party of Delaware, which has become an increasingly prominent player in the state’s politics, endorsed six Democratic candidates primarying state lawmakers who voted for the Musk bill and are up for reelection this year. Delaware’s primary election will be held on September 15.
The Working Families Party-endorsed candidates include software engineer Rae Krantz, who is running against Rep. Debra Heffernan; Wilmington City Councilwoman Shané Darby, who is running against Rep. Nnamdi Chukwuocha; teacher Will Imbrie-Moore, who is challenging Rep. Kim Williams; and community advocate Pamela Salaam, who is facing off against Rep. Frank Cooke. In the race for the state Senate, the progressive organization has endorsed professor Adriana Bohm to take on Sen. Dan Cruce and social services supervisor Shay Frisby in her challenge against Sen. Ray Seigfried.
“We want to make sure that people know the effects that this bill has had and is going to have on hurting accountability for corporations and basically handing Elon Musk $55 billion,” said Karl Stomberg, Delaware state director for the Working Families Party, in an interview with CNBC.
A week after those endorsements were announced, the newly registered First State Future PAC raised nearly a million dollars and began spending to defend the incumbents against their primary opponents.
The First State Future PAC’s entire war chest comes from five powerful law firms that all supported and lobbied for the Musk-backed “billionaires bill,” as opponents called it. In addition to Richards, Layton & Finger, Delaware-based firms Morris, Nichols, Arsht & Tunnell; Potter Anderson & Corroon; and Young Conaway Stargatt & Taylor each contributed $190,000 in May, as did the Silicon Valley legal powerhouse Wilson Sonsini Goodrich & Rosati.
In May, the political action committee began spending to back those lawmakers locked in contested primaries against candidates endorsed by the Working Families Party. So far, the organization has dropped nearly $500,000 so far this cycle, primarily on digital advertising to boost incumbent candidates’ campaigns.
On July 7, the political action committee also doled out $190,000 to a dark money nonprofit called Alliance to Protect Delaware’s Future.
As a registered 501(c)(4) nonprofit rather than a political action committee, the pro-business group doesn’t have to disclose its donors. But Google’s ad market listings show the organization is behind 10 separate digital ad spots boosting many of the same lawmakers supported by First State Future.
While the nonprofit’s connections to the political action committee remain opaque, John Ferko, the chief operating officer of Richards, Layton & Finger, promoted the group on LinkedIn as a vehicle for informing the public about “how SB 21 can benefit Delaware’s economy and maintain its status as a premier corporate domicile.”
This article was originally published by The Lever, an investigative newsroom. If you like this story, sign up for The Lever’s free newsletter.
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