“Wink and a nod” contract consideration – part 1

One of the foundational concepts of the university Business Law course, a staple of every business curriculum, is that of contracts, the agreement between two parties to do something (or sometimes, not do something). Most often, that “something” is an exchange of goods or services. And we were long taught that fundamentally, you have no contract unless you have this thing called consideration. Consideration is the exchange of something valuable, often an agreed-to sum of money, that binds the contract. I give you some dollars and you give me some gasoline. If I don’t give you the cash, or you don’t deliver the gasoline, then we have no enforceable contract.

In this post, and in a subsequent one soon to publish, I want to explore the problem of this concept of “consideration” becoming increasingly obsolete, where the distance between the two parties’ contractual interests can be separated by many layers of obfuscation. The result is too often an illegal, but also unprosecutable, agreement to do something nefarious.

The “wink and nod”

What they didn’t teach us about in Business School is what I have come to call “wink and nod consideration.” In some contract-like agreements, neither side wants money, goods or services to visibly change hands for various reasons, usually shady. So instead, the “binder” on the contract is characterized by “a wink and a nod,” an implicit form of consideration hidden from public view, a private agreement that “we will settle up later, if you know what I mean.” The exchange of goods or services takes place, but the consideration piece is separated by several “degrees of separation” in order to mask the cause-effect relationship.

I have two examples of “wink and a nod consideration” to present here, one from politics in this post, and the second, the subject of a subsequent post, from more conventional business exchange on the edge (or over the edge) of legality, and not coincidentally at the heart of the business model of a certain American president.

Just call it a bribe

In June of 2016, the Supreme Court vacated the conviction for bribery of former Virginia Governor Bob McDonnell, a Republican, because the “consideration” he received from a big donor went directly to pay for things like his daughter’s wedding reception rather than a caught-on-camera exchange of “official acts” for money. [1] The intent of the “donations,” that “eye wink consideration,” was amazingly transparent, but the more conservative Supreme Court under John Roberts decided that only “caught in the act” evidence (which is almost never going to be there) is the only evidence of bribery sufficient for a conviction.

This vacating of McDonnell’s conviction caused the dropping of an equally transparent bribery case against Democratic Senator Robert Menendez from New Jersey in January of 2018 (political “grifting” is one of the few bipartisan actions in the U.S. Congress). Prosecutors have realized that only really stupid, bragging politicians like former Illinois Governor Rod Blagojevich can ever be convicted of bribery (and he may be pardoned by President Trump soon). [3] The savvy politician just needs to create one, and preferably two or more, “degrees of separation” between the “deliverable” (political favor) and the “consideration” to keep the politician out of prison.

And the most recent example is the blatant grifting of the most amazingly petty kind by EPA Secretary Scott Pruitt, ranging from very expensive pens to a “Maxwell Smart cone of silence” security system to an attempted acquisition of a Chick-fil-A franchise for his wife. If you tried to write a novel about it, your editor would laugh you out of his office.

The rise of the political action committee (PAC) and the poorly-reasoned Citizens United Supreme Court decision have created the template for this separation of the political bribe from its deliverable. These cause-effect political decisions are now hidden beneath several layers of hard-to-penetrate corporate and “non-profit” legal structures.

My biggest gripe with the McDonnell Supreme Court opinion is that it flies in the face of a reality that every conservative economist (but apparently not Supreme Court justice) knows – that money is “fungible.” [5] The dollar that pays for a daughter’s wedding reception may not be the exact physical dollar that pays for a down-the-road political favor, but economically that doesn’t matter. Governor McDonnell’s benefactor spent money at one end of a “wink and a nod consideration” chain, and he got his desired result at the other end. The contract between the benefactor and the Governor has been “consummated,” but it is the taxpayer that got screwed.

I do recognize the problem here is in the legal bar of proof of “cause and effect,” but at some point, jurors need to be given the right to say, “Well, DUH!” when weighing the threshold of the political stink. If not, then there becomes no such thing as “political bribery” any longer, as the “layering of obfuscation” has become far too easy to create.

My longstanding position is that all campaign contributions are, in a way, “wink and a nod” bribes. Some are just more effective than others. In this spirit, I will freely admit that I “bribed” Barack Obama during the 2008 election to the tune of about $100, and I will say that I got more than my money’s worth. My subsequent “political bribes,” however, seem to have proved insufficient. At some point, however, the “will of the people,” as expressed through a million small campaign donations becomes “the will of a very rich person.” At that point, we have moved from a principle of “one person, one vote” to instead “one dollar, one vote.”

And we may, realistically, already be there, if there is no legislation on the horizon to change how we deal with money in politics. This is why I think the media should just begin calling all campaign contributions “bribes.” The small donations can amass to indicate the will of a large number of people, but that is a more defendable “bribe” than a few very rich people giving millions of dollars to a candidate via opaque PACs and other creative accounting maneuvers.

Next up in Part 2: Exchanging dirty money consideration for clean in real estate transactions with several layers of “winks and nods.”

Part Two of this series, looking at corporate “wink and nod” consideration, has now been posted.


Notes:

  1. Kopan, Tal, and Ariane de Vogue. “Supreme Court Vacates Former Virginia Gov. Bob McDonnell’s Conviction.” CNN, 27 June 2016.
  2. Barrett, Devlin. “Judge Dismisses All Charges against Sen. Menendez Following Request from Prosecutors.” The Washington Post, 31 Jan. 2018,
  3. The alleged quote from Blagojevich was, “I’ve got this thing and it’s f***ing golden, and, uh, uh, I’m just not giving it up for f***in’ nothing. I’m not gonna do it. And I can always use it. I can parachute me there.” Ross, Brian. “FBI: Illinois Governor Sought To ‘Sell’ Obama’s Senate Seat.” ABC News, 9 Dec. 2008.
  4. I wrote a post recently on the fallacy of corporate personhood that was central to the bad reasoning of the Citizens United decision.
  5. For my take on the fungibility of money, and basic impact of that reality on international trade, click here.

1 thought on ““Wink and a nod” contract consideration – part 1

  1. Pingback: “Wink and a nod” contract consideration – part 2 – When God Plays Dice

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