July 23, 2014 SIGN IN | REGISTER

The State of K Street: Work in the Shadows

Lobbying Rules That Were Meant to Regulate the Industry Have Spawned the Emergence of the Unlobbyist

If Tom Daschle, Newt Gingrich and Howard Marlowe sat around a table in a downtown Washington, D.C., conference room strategizing policy for a client, only one of the three would exist. At least according to the public record.

That might sound like the lead-up to a punch line. But it’s no joke.

Marlowe, who runs his own firm and serves as president of the American League of Lobbyists, registers with Congress as a lobbyist and, as such, discloses the organizations he advocates for and provides the public a glimpse of what he gets paid to influence federal policy and legislation.

Daschle, who left the Senate in 2004 after a decade as the Democratic leader, advises clients from his perch at the lobbying and law firm DLA Piper but leaves no public trail of who those clients are because he does not register as a lobbyist. And Gingrich, the Republican who was Speaker for four years ending in 1998, also represented clients through his private business, though he elicited derisive chuckles and raised eyebrows during his presidential campaign this year when he explained that his past work was all about historical analysis, not lobbying.

Washington’s big business of lobbying has long been shrouded in an aura of mystery and intrigue. That’s largely because so much of it takes place in the shadows. The work by “unlobbyists” such as Daschle and Gingrich — although within the boundaries of the laws that govern K Street — leaves a significant amount to the imagination. There is little to refute the perception that policies take shape in closed-door meetings between such advocates and powerful government figures — and are then sealed with a wink over a single-malt whiskey.

And they’re hardly the only ones who engage in lobbying or help clients sort out their problems with the federal government without actually crossing the threshold of becoming a registered lobbyist. There is a long roster of other high-profile former lawmakers heading top-flight trade associations — including former Sen. Chris Dodd, who runs the Motion Picture Association of America — as well as complete unknowns who specialize in grass-roots advocacy, public-affairs spin and behind-the-scenes strategy. They operate stealthily because the Lobbying Disclosure Act does not require people who spend less than 20 percent of their time for a client on lobbying activities to file a registration. The law also gives a pass to those who simply do not make at least two lobbying contacts with Members of Congress, their aides or other covered government officials.

“It’s what we don’t know that we always fear the most,” said Marlowe, who has been in the business for 28 years. “And what people don’t know is how much money is being spent on lobbying.”

Even without the revenue generated by this shadow army of big guns and little players operating outside the bounds of disclosure, the lobbying industry is worth at least $3.5 billion annually, according to a compilation of LDA fees by Political MoneyLine. That’s roughly equal to the gross domestic product of Swaziland. And that figure doesn’t include most of the money that interest groups spend on advertising, get-out-the-vote efforts and campaign donations.

In addition, the tough economy, which has put pressure on K Street firms trying to meet their revenue targets, has pushed lobbyists into new areas of political intelligence gathering and advising global businesses on regulations at home and abroad — all of which are outside the LDA’s scope. Online activism and grass-roots organizing are mostly exempt, too.

A Loss of Transparency

Murky rules and the link between money and politics make the lobbying industry an easy and frequent target of politicians looking to put distance between themselves and business as usual in the nation’s capital. President Barack Obama has banned registered federal lobbyists from donating to his campaign and frequently rails against K Street. Congressional candidates on both sides of the aisle similarly portray special interests as a symptom of what’s wrong with Washington, D.C.

Gerry Cassidy, whose 37-year-old Cassidy & Associates was a pioneer in the modern lobbying business, says the anti-K Street rhetoric from politicians who, unlike Obama, call on lobbyists for campaign cash while bashing the profession amounts to hypocrisy. It’s as if a Member is saying, “The little devils really have to be watched carefully because you’ll never know what they’ll make me do,” Cassidy said during a recent interview in his corner office in Chinatown.

Cassidy, like Marlowe and most other registered lobbyists, favors new standards that would close the 20 percent reporting threshold. The lobbyists’ league this year unveiled a set of proposals to revamp the LDA. And before that, a task force of the American Bar Association endorsed its own lobby overhaul. Both groups want to at least tighten the requirement.

But changes, including those pushed by Obama, don’t always have their intended result. The president has barred, with a few exceptions, recent former lobbyists from serving in his administration. And he has made a clear distinction between those who are registered and subject to public disclosures and those such as Daschle who aren’t. Administration officials aren’t keen to meet with the registered variety.

American University professor James Thurber, who studies lobbying and ethics, said the president’s attack on K Street, coupled with stronger gift bans and tighter lobbying disclosure rules enacted in a 2007 law, have had a bizarre consequence. “We have less transparency now,” said Thurber, who is director of the university’s Center for Congressional and Presidential Studies. “You have more people trying to figure out how they don’t have to register, so therefore you don’t really know what’s going on in terms of advocacy activities.”

Thurber, who was part of the bar association task force that called for greater disclosure, said the public needs more information to evaluate potential conflicts of interest. “If you have the perception that a lot of undue influence is occurring behind the scenes because people have money and resources, then it undermines the legitimacy of our democracy,” he said.

Limits on Interactions

Yet another unintended result of the 5-year-old update of the law, lobbyists say, is that it has limited much of the interaction between them and Members of Congress to the realm of fundraisers. Lobbyists may not buy a Senator lunch or ferry a House Member away on private trips, but they can still write checks to their campaigns and get face time (or at least a cocktail party handshake) that way. The result, Marlowe said, is that more lobbyists discuss policy issues at fundraisers, something he said previously was frowned upon. “Sleaze becomes suddenly acceptable,” he said. “It’s very uncomfortable for me.” The amount of money a lobbyist donates to a Member is public information tracked by the Federal Election Commission. But the records don’t note how much time, if any, someone actually spends with the candidate or his staffers.

Congress passed the 2007 law in reaction to lobbying and corruption scandals, including one that put lobbyist Jack Abramoff and GOP Rep. Bob Ney (Ohio) in prison. Another scandal saw the downfall of a once powerful House Republican, Duke Cunningham of California, who pleaded guilty to bribery and other charges.

Lobbyists say Abramoff — a caricature by the standards of most people on K Street — continues to personify the public’s image of lobbyists.

“The public perception is that of a guy or gal walking around with pockets full of money in order to bribe politicians to do things for you,” said Don Masch, director of government relations for the aerospace and defense company Alliant Techsystems Inc. In reality, he said, lobbyists are sources of information on complicated policy matters. They help novice or overworked Hill aides understand the potential repercussions of proposed legislation, albeit with a bias for their clients’ wishes.

Masch registers and said the consultants his company relies on also register. That puts them in the camp branded with what amounts to a scarlet letter L. Many of these advocates complain that they are unfairly marked when they are following the law, while peers who sit in the same strategy sessions, discuss the same issues and try to move Members on specific bills don’t register, citing the 20 percent rule or other carve-outs in the law. K Streeters also are quick to point out that there is virtually no policing of unregistered advocates or investigating how the legions of unlobbyists actually spend their time for their clients.

“What that means is that some of the most powerful lobbyists in Washington don’t end up reporting,” said Lisa Rosenberg, a registered lobbyist for the Sunlight Foundation, a nonprofit that advocates for more transparency in government.

It’s a source of frustration for the rank and file of K Street and government reformers alike.

Sam Geduldig, a partner in the lobby shop Clark Lytle Geduldig & Cranford, explains that good lobbying doesn’t have to be time-consuming and helps keep some of the best advocates under the trigger. “The 20 percent threshold doesn’t make any sense,” said Geduldig, who registers. “I assume most of the people who avoid reporting can also secure a commitment in minutes” from a federal official.

Rosenberg said the law has other shortcomings. As a registered lobbyist, she must report quarterly who her client is and whether she’s lobbied on its behalf — but she doesn’t have to reveal which Hill offices or committees she’s visited. “We do believe all substantive meetings should be disclosed,” she said.

But even Rosenberg doesn’t divulge her own Hill meetings, though she said she initially tweeted the information. “If I meet with staffers, they’re not expecting me to disclose it,” she said. “We’re taking this in sort of baby steps because we understand there’s a resistance to the idea of this contact reporting.”

K Street denizens certainly are wary of making public their rendezvous with government officials, but Rosenberg said she meets regularly with the lobbyists’ league on issues such as the 20 percent rule where they mostly see eye-to-eye.

When it comes to the league’s own ideas for updating the law, Marlowe said the effort has required plenty of diligence and compromise. “We started out with a 20-some-odd-page draft of recommendations that had a lot of details at the beginning and found that people were arguing over the details,” he said. “We got it down to five pages.”

Marlowe said he and the league’s members are actively pushing their proposals, however vague, on Capitol Hill. They’d like to be able to issue a lobbying license — something similar to lawyers passing the bar — but so far, no group has that authority. “Your hairdresser can lose their license, but you can’t de-bar someone from being a lobbyist,” he noted.

“Having said that,” he added, “it’s far more of a profession than it once was.”

That sentiment was the motivation behind the proposal to rewrite the lobby law. “We just felt that instead of constantly responding to mostly the administration’s attacks on the profession, as well as some others that have come around, we’d put forth what the professional association for lobbyists wants to do to be part of the solution,” he said.

A Shift in the Business

In the past decade, the influence industry has indeed been accustomed to sustained revenue growth, although last year the partisan gridlock on Capitol Hill and the nation’s rough economy took a toll on K Street spending. Reportable revenue from registered lobbyists fell by about $100 million, to $3.4 billion in 2011, according to Political MoneyLine.

Lobbyists who have been around for decades generally agree with Marlowe’s assessment that the industry is more polished. And massive advertising and communications conglomerates, such as the Interpublic Group of Companies and WPP, own some of the biggest shops, including Cassidy.

Many top executives at lobbying organizations say the declining revenue reported under the law doesn’t provide a complete picture and that, in reality, much of the business has simply shifted to revenue streams not captured by the disclosure standards. Firms such as Cassidy — which made its money, and its mark, navigating the appropriations process to help clients secure government funding — also have found their lobbying business has declined in the face of Congressional earmark bans. So the shop has looked to international work to replace those lost dollars.

Some firms have seen their LDA work pick up. Alston & Bird made a bold entry into the lobbying business when it hired not only Daschle but also Bob Dole, the Senate Republican leader for a decade ending in 1996. Daschle left the practice three years ago, but the firm has since added a cadre of former Members including one-time House Energy and Commerce Chairman Billy Tauzin (R-La.), ex-Ways and Means Democrat Earl Pomeroy (N.D.) and former Senate Agriculture Chairman Blanche Lincoln (D-Ark.). Also on the payroll now is Thomas Scully, who ran the Centers for Medicare and Medicaid Services during the George W. Bush administration.

“You don’t replace someone like Sen. Daschle,” said Bob Jones, who leads Alston’s legislative and public policy group. “What I wanted to do, and the firm supported me 100 percent, was create a bipartisan, bicameral policy group, a really good marquee group.”

Though he first resisted registering as a lobbyist when he joined the influence game, Dole now does. So do Tauzin, Pomeroy and Scully. “It’s an obstacle if you want to go work for this president,” Jones said. “We register, but what we do is simply follow the law.”

The boldfaced names of Alston & Bird’s policy group have helped lure lobbying and legal clients, Jones said, noting one in particular: Texas oilman T. Boone Pickens, who hired the firm to help convert his plan for finding foreign-energy alternatives into legislative language. “We’ve grown in some very, very difficult cycles, and I think we’ll continue that with our team and the culture of the firm.”

Where some firms have weathered the downturn with big names, other shops have ventured into new areas. Steve McBee, a former Congressional aide who runs McBee Strategic Consulting and favors jargon heard much more frequently in business schools than in Hill offices, not only has invested in new lobbying practices but also has gone into consulting work for Wall Street investors and venture capitalists eager for political intelligence. “The key to being successful is being diverse enough in your sector approach to mitigate your risk in the policy areas that aren’t getting enough play,” he said.

McBee is also aiming well beyond the Beltway. “If you look at the business and investment climate globally, Europe and Asia, government and policy is a major macro risk everywhere,” McBee noted. “We’re trying to take the knowledge and networks and know-how of how Washington works and find ways to take all our research and advisory tools and move that into the global policy context.”

Nontraditional Venues

Unlike traditional lobbying work, political intelligence is another area of revenue not covered by the disclosure law. But it is an area that Congress is examining. In February, Republican Chuck Grassley of Iowa persuaded the Senate to embrace the idea of placing people in that burgeoning new industry under the same disclosure rules as registered lobbyists — “so when these people come around to get information from you that they sell to hedge funds, that you’ll know who they are,” Grassley told Senators at the time.

The vote was a solid 60-39, but at the insistence of the House GOP leadership, which faced a concerted lobbying effort by the industry, the language was left out of the final version of the law designed to ban insider trading by government officials.

In an effort to expand their business, some firms have honed a bigger presence online. Jeffrey Taylor, a Republican lobbyist who started the firm U.S. Government Relations International with Democrat Paul Sweet in 2010, said the pair has mined networking websites, such as LinkedIn and Twitter, to find potential clients that currently have no federal lobbyist. He pitches his firm as a “gateway” into lobbying, a low-cost option to the big shops to help clients dip their toes in the K Street waters.

“Let the big firms, the Patton Boggs, handle the AT&Ts and Googles and Exxon Mobils,” Taylor said. “We’ll handle the clients that are very new to lobbying.”

Taylor’s tiny shop illustrates another reality of K Street: bipartisanship. Members of Congress and the White House may be awash in partisan vitriol, but comity still thrives in the influence business. “I’m a conservative from the maroon state of New Hampshire,” Taylor said. “But I also have a partner who’s a lunatic lefty.” They share a common interest: their clients.

Lobbyists say navigating the tense environment on Capitol Hill has been difficult, but many are gaming out an active season of legislating after the November elections. Congress could well take up massive issues such as tax reform, big cuts to the defense industry and a revamping of entitlement programs as well as health care and infrastructure measures in the coming year.

And K Street may have an emerging, and largely covert, weapon in these big fights. The unregulated super PACs may add yet another denomination to the currency of K Street long after the elections this fall, according to Nick Nyhart, president and CEO of Public Campaign.

“If the person you’re sitting opposite knows you have a gun, and it has bullets in it, that changes the negotiation,” said Nyhart, whose group advocates for campaign finance and lobbying reforms. In this analogy, the loaded gun is a super PAC. When a lobbyist, registered or otherwise, with ties to a super PAC or one who represents interests that could easily form one sits down with a Member of Congress to talk policy, “there’s going to be an inference that this group will support people who align with their policy and attack those who are against,” Nyhart said. “It gives a lobbyist more clout in those conversations because every lawmakers is going to want more money to defend themselves and fears a bigger attack than they’ve ever seen before.”

The Sunlight Foundation’s Rosenberg puts it this way: “A lobbyist for a corporation could say, ‘We have this organization ready to air ads against you. What do you think about this bill?’”

“It’s another tool in a lobbyist’s toolbox,” she added, “and it is completely hidden from public view.”

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