PMA Battles Ex-Clients in Court

Posted December 10, 2009 at 4:09pm

A year after being raided by the FBI, the now-defunct PMA Group lobbying firm continues to battle some of its former clients in court, two of whom argue that they shouldn’t have been expected to pay for lobbying services by a firm facing a criminal investigation.At the same time, a Crystal City real estate firm is suing PMA and its founder, Paul Magliocchetti, for $6.5 million in lost rent.The PMA Group is at the center of several ongoing investigations into the connection between earmarks and campaign contributions. FBI agents raided the firm in November 2008; after news of the raid broke in February, the firm closed its doors. The House Committee on Standards of Official Conduct and the independent Office of Congressional Ethics are both investigating PMA’s ties to members of Congress, and the Justice Department has subpoenaed records from the office of Rep. Peter Visclosky (D-Ind.) in connection with the probe.To date, neither the PMA Group nor any of its employees have been named in any criminal charges, and no Member of Congress has been charged with wrongdoing. But as it was shutting its doors in March, PMA filed more than a dozen lawsuits against its clients, generally alleging that the clients had failed to pay their bills as required under PMA’s standard representation contract.Most of those lawsuits have been settled under confidentiality agreements that prohibit the release of the terms of the deal; in most of the cases, PMA was seeking less than $50,000 in back pay.But two ongoing cases — both scheduled for status hearings Friday in an Arlington County court — shed light on how PMA conducted its business and exactly what its clients knew about its legal troubles.In both cases, PMA sued the clients — Intelligent Optical Systems Inc. of California and Profile Systems of Indiana — for failing to pay their monthly retainer fees.But the two companies fired back that they had no obligation to pay PMA once it was clear the FBI investigation would cripple the firm. Thomas Kelley, the lawyer for both companies, told Roll Call, “Our position is you were fraudulently taking our consulting fees and you didn’t say you were sinking.— Intelligent Optical Systems’ response to the PMA suit claims that at the end of 2008, when the company’s annual contract with PMA was renewed, “PMA representatives knew that PMA had been raided by the FBI, that PMA was under suspicion of illegal quid pro quo dealings with members of Congress [which] nullified their ability to perform their contract obligations.—Kelly said the value of PMA’s services “resides in their good relationships,— which would obviously be damaged by news of the FBI raid.Profile Systems makes largely the same case, alleging that “PMA concealed this information from Profile Systems in order to project a false impress[ion] of its capabilities and induce Profile Systems to renew the contract.—Even when Magliocchetti formally closed the firm in March, he did not directly address the FBI raid.A March 1 letter from Magliocchetti to Intelligent Optical Systems included in the court docket says only that “due to personal and medical reasons I must permanently close the doors of PMA Group,— going on to suggest that the firm continue to do business with the lobbyist who had been its primary contact at PMA.PMA has responded to both complaints with a detailed list of questions asking the client firms to produce evidence that PMA lobbyists knew about the raid, that the company was suspected of illegal quid pro quo deals or that the legal troubles had prevented the company from providing services.In an interview Wednesday, PMA’s lawyer, Raighne Delaney, said the clients will have a hard time proving that PMA was unable to lobby after the raid because in early 2009, news outlets “reported that PMA clients were getting earmarks even after the spring … so there is no question that PMA was still able to perform.—But Intelligent Optical Systems alleges that PMA was failing to deliver even before the raid. Part of their complaint is that for much of 2008, PMA lobbyists told the company that Rep. Jane Harman (D-Calif.) had submitted an earmark request on their behalf, but the earmark never materialized. “PMA, in response to direct inquiries by Intelligent, repeatedly assured Intelligent during this period that [the company’s earmark request] had been sent to the House Defense Appropriation subcommittee by the office of Cong. Jane Harman,— the company claimed in court filings. “Intelligent learned in October that no such request had been made, and that in fact the office of Cong. Harman had made the determination not to forward such a request in April of 2008.—Intelligent Optical Systems claims that it complained about this to PMA in November 2008 and was offered a reduced fee contract for the following year, but no mention was made of PMA’s legal troubles.PMA had helped the company get a $2.2 million earmark from Harman in 2007 to develop a fiber-optic sensor system for airport and mass transit security. By the end of 2008, PMA’s landlord was apparently aware of the problems the company faced, even if its clients were not.According to the lawsuit filed last month by Fourth Crystal Park Associates, “On Dec. 9 2008, a PMA employee told a contractor who had been hired to make alterations to the leased [office space] premises not to do the work. The PMA employee explained, ‘[u]nfortunately, my company has come upon some circumstances from which we will not be able to recover. As such, we will not be making any changes to our space.’ This communication was shared with Plaintiff at that time.—Delaney said the litigation in the PMA cases is fairly typical of any company that closes its doors. “Like any corporation, you would expect it would owe money to some people and be owed money by some people,— he said. While the lobbying business is closed, the corporation still “has to wind down its operations.—The Intelligent Optical and Profile Systems cases are both scheduled for trial early next year, though settlement talks are ongoing, the lawyers said.