Un-Conventional Success

Posted July 9, 2004 at 6:14pm

Wherever Congress goes, the K Street crowd is sure to follow. And now, bolstered by new campaign-finance rules, this summer’s political conventions are proving to be no exception.

“Some of the best lobbying in the world is done at these conventions,” said former Democratic National Committee Chairman Don Fowler last week during a panel discussion on convention financing. “Because campaign-finance law is looser and there are less restrictions than there used to be, more people give. It’s that simple.”

In fact, donor lists for both the Boston 2004 host committee and the NYC Host Committee 2004 read like a who’s who of corporations, law firms and wealthy individuals with interests before Congress.

Boston 2004, the entity that is raising funds for the Democratic extravaganza, has disclosed contributions of $1 million or higher from such well-known companies as Fidelity Investments, the Bank of America Corp., Raytheon and State Street Corp. — all of which have legislative business pending before Congress.

Meanwhile, the New York host committee’s donor list — which does not list dollar amounts — includes such heavyweights as Credit Suisse First Boston, Fannie Mae and IBM. Collectively, these three companies spent $8.74 million on federal lobbying during the last six months of 2003. (For a more complete list of donors to both parties’ host committees, see p. 14.)

In many cases, the nexus between policy needs and convention sponsorship appears to go beyond the accidental.

In January, The Boston Globe reported that convention organizers were specifically “setting their sights on Washington and focusing particularly on the corporate interests that look to curry favor by donating to the national parties.” That effort appears to have paid off.

According to the Campaign Finance Institute, the host committees for the 2004 Democratic and Republican conventions in Boston and New York have collected $39.5 million and $64 million respectively from corporations, unions and individuals — light years beyond the $400,000 or $700,000 they collected in 1980. In 2000, such committees raised $20 million for the Republican convention and $36 million for the Democratic.

But despite the high price tag, many donors say that access to an elite crowd is well worth the costs of sponsorship.

“You know how it works,” explained Rachel Bloom-Baglin, a spokeswoman for AstraZeneca Pharmaceuticals. AstraZeneca spent more than $1.4 million on federal lobbying activities last year and recently dropped between $250,000 and $499,999 into the Democratic convention host committee’s coffers, plus an undisclosed sum to the GOP convention’s host committee.

“I don’t think it’s about selling ourselves at the event,” she continued. “It’s the number of credentials you get …. It’s about being visible, making sure that people — the delegates and members of the legislature, Members of Congress — understand what AstraZeneca is all about and what we do.”

The international pharmaceutical giant is just one of several corporations covering its bases with so-called double giving.

A recent study by the Campaign Finance Institute found at least 17 companies that had donated a minimum of $100,000 to the Boston host committee and also made contributions to the New York host committee.

This, the report said, was a “sign of possible interest in the federal political access.”

To be sure, at least one double-giver, the Boston-based athletic wear company New Balance, seemed to have another explanation for its interest in both conventions.

New Balance spokeswoman Kathy Shepard said her company, which has no D.C. lobbyists, made its initial financial commitment to the Boston convention “because we are a Boston company and we believe that Boston is a great city and we want to support Boston.”

But because the company also does significant business in New York — “and we’re neutral as far as the [political] parties go” — Shepard said New Balance decided to make a lesser donation to the New York event.

Nevertheless, the CFI study concluded that host committee fundraising has evolved into a new and, to some critics, unseemly soft-money chase.

What is different this year is a regulatory shift by the Federal Election Commission that affected host committees — the nonprofit entities that are structurally independent of the parties but work closely with party officials to promote the convention city and its commerce. Traditionally, host committees handle a variety of functions, including setting up convention facilities, providing transportation for convention attendees and making sure needed infrastructure such as telecommunications is available.

In 2003, the FEC — arguing that the existing rules put small cities at a disadvantage in competing for conventions — decided to loosen regulations that govern how host committees can raise money. Whereas the old rules required host committees to raise funds only from businesses or unions with a local presence in the host city, under the rules adopted in 2003 the FEC eliminated the local requirement, thus opening up new frontiers of fundraising among companies that did not have operations locally. This change was not officially prompted by the soft-money ban of the 2002 Bipartisan Campaign Reform Act, but some campaign-finance experts suspect that without soft money, conventions needed new sources of money.

The shift this year toward host-committee giving by national corporations challenges the FEC’s longstanding premise that donors to host committees are simply motivated by civic and commercial, not political, concerns.

“There may be civic and commercial motivations for giving, particularly on the part of firms headquartered in the host city. But the data show that many of the firms also have strong federal interests as reflected by their political contributions and their chief executives’ fundraising activities,” the CFI report concluded.

However, some in the influence industry argue that the watchdog group has got it all wrong.

“The host committee has nothing to do with the legislative process,” said John Fluharty, a Washington lobbyist who represents the Mashantucket Pequot Tribal Nation, a donor to the New York City Host Committee that spent $170,000 on lobbying last year alone.

“The reason my clients would be” contributing to the host committees is to get access to the convention, Fluharty said. He added that it would have “nothing to do with legislation.”

Sen. Edward Kennedy (D-Mass.), one of a few key fundraisers for the Boston host committee, has publicly stated that he has taken the necessary precautions to avoid any potential conflicts of interest related to his fundraising activities. Those safeguards, according to The Boston Globe, meant that Kennedy had to delay his request for a donation from AmGen Inc. until the company had resolved a business matter with the federal government.

AmGen, which has given to both host committees, ended up committing $500,000 to the Democratic event.

A Republican lobbyist told Roll Call that corporations he is familiar with are attracted to conventions not by lobbying potential, but by the “exposure you get at a market level.”

“People underestimate the power of that and the presence,” he said, noting the thousands of convention-goers and millions of television viewers who pay attention to the extravaganzas.

As part of its in-kind contributions to the host committees, for instance, New Balance has designed and manufactured special bags that will be provided free of charge to the media and delegates. While the host committees will benefit from the product, New Balance will benefit from the advertising potential associated with it.

Beyond access and marketing potential, donors to the host committees also receive a benefit from the Internal Revenue Service. Because the host committees are 501(c)(3) nonprofits, donors are able to receive a tax deduction.