Also In This Issue Good Times, Bad Times • Speed Bumps On The Exit Ramp

By Eliza Newlin Carney, National Journal
© National Journal Group Inc.
Friday, March 21, 2008

Plenty of clients are knocking on the door these days at Bonner & Associates, a prominent Washington consulting shop that specializes in what it calls "grass-tops" lobbying. The firm is in regular contact with thousands of companies, trade associations, labor unions, and civic groups across the country. On issues ranging from health care to tax policy, Bonner & Associates tells its clients what their federal, state, and local representatives are up to, and it helps them get in touch with public officials.

But try to pin down the firm's annual revenues, or a list of its clients, and you'll come up empty-handed. That's because none of the shop's work technically constitutes "lobbying," as defined by the Lobbying Disclosure Act, which was passed by Congress in 1995 and amended twice, most recently last year.

The LDA requires federal lobbyists -- as well as the corporations, trade associations, and other organizations that hire outside firms or have in-house lobbyists on the payroll -- to register with Congress and publicly report their activities. But the law covers only lobbying activity that involves direct contact with lawmakers or their staffs, or senior federal officials.

Bonner & Associates steers clear of such direct lobbying. Instead, the firm's stock-in-trade is teaching clients how to tap their own networks of well-placed civic, business, and labor leaders to reach public officials themselves -- hence the term "grass tops."

"More and more people are coming to appreciate that this is a very good way of influencing public policy," says company President Jack Bonner, who boasts that his firm is thriving after 24 years in business. But ask how much the company made last year, and Bonner is polite but firm: "We don't give that out."

Bonner is one of a growing number of Washington influence-brokers whose work has a big impact on legislation and federal policy but who don't disclose their company's activities anywhere. As the lobbying business expands and changes, an increasing portion of the work that lobbyists do -- from public relations to policy research and legal advice -- falls outside traditional disclosure rules.

The LDA "does not at all touch most of the industry in Washington that's involved in public advocacy," says James A. Thurber, who directs the Center for Congressional and Presidential Studies at American University. The actual number of lobbyists in the nation's capital goes far beyond the 16,469 active lobbyists currently registered with Congress, Thurber says.

By his count, approximately 261,000 lobbyists are toiling in Washington's advocacy industry. Thurber and his researchers arrived at that estimate after poring over published indexes of those involved in the business of advocacy, which they defined broadly to cover the full range of jobs that lobbyists do. That includes landing federal contracts; intervening in the regulatory process; building coalitions; mounting grassroots lobbying campaigns; advising foreign interests; and even running issue ads at election time.

"If you're trying to influence public policy in Washington, that's lobbying," Thurber says. "And the law does not keep up with that."

New Rules, Old Conflicts
To be sure, the lobbying and ethics law that amended the LDA -- officially the Honest Leadership and Open Government Act of 2007 -- imposed substantial new disclosure rules. Lobbyists must now file reports to the House and Senate four times a year, up from twice a year. They also must report their federal campaign donations twice a year, as well as their contributions to charities and political action committees controlled by members of Congress. And for the first time, violators will face stiff criminal and civil penalties.

Some lobbying activities that fall outside the LDA are disclosed through other channels. Under the Internal Revenue Code, for example, 501(c)(3) charitable groups must report their lobbying activities to the IRS. Certain federal contractors must disclose their lobbying expenditures to the agencies that they lobby. Lobbyists representing foreign governments (but not foreign companies) must report their contacts with public officials to the Justice Department.

But when it comes to lobbying, federal reporting rules involve myriad conflicting definitions and disparate government agencies. This situation creates headaches for lobbyists trying to file forms, and it paints a muddy picture of the industry as a whole.

"There are many federal lobbying disclosure requirements that overlap, that use inconsistent terms, and whose scope is unknown," says Brett G. Kappel, a lawyer at Vorys, Sater, Seymour & Pease who specializes in campaign finance and ethics regulations.

The lobbying and ethics law passed last year, moreover, leaves substantial reporting gaps. Reform advocates argued without success to include disclosure requirements for grassroots lobbying. The idea was to shed light on high-dollar phone-bank, e-mail, and letter-writing campaigns designed to gin up public pressure on Capitol Hill. Congress dropped grassroots disclosure rules, however, after activist groups on the left and the right loudly complained of free-speech infringement.

"This is something that is a major omission in the disclosure requirements of lobbying activity," says Craig Holman, legislative representative for Public Citizen's Congress Watch. "And it's going to become more so as a lot of the larger industries and companies realize the value of doing grassroots lobbying."

The new law did include disclosure requirements for lobbying coalitions, which critics say often represent moneyed interests from behind a facade of nebulous groups with civic-sounding names. The rules require coalitions to disclose members who "actively participate" in their lobbying activities and who pay at least $5,000 per quarter to help finance them.

But that measure is being challenged in court by the National Association of Manufacturers, also on First Amendment grounds. "We believe that the Constitution is pretty clear about our right to have free association and to petition our government," says NAM President and CEO John Engler, a Republican former governor of Michigan. He argues that coalition disclosure rules place "an undue burden" on NAM and other trade associations by forcing them to report the names of their members and that the rules thus have "a chilling effect" on free speech.

No other group has joined NAM in the lawsuit, although the U.S. Chamber of Commerce is watching it closely; the case is on a fast-track schedule in the U.S. District Court for the District of Columbia. Some legal experts suggest that NAM may face an uphill fight, given past Supreme Court rulings that upheld lobbying disclosure rules.

The trade group's court challenge, however, points up how tough it is to broaden lobbying disclosure laws. "Whatever makes it easier for constituents and constituent groups to get involved, and to come before the Congress, is good," consultant Bonner maintains. "One of the questions that has consistently come up with all of these grassroots [disclosure] provisions is: Will it in any way chill involvement by these groups?"

Outside The Box
Most lobbyists agree that their LDA disclosure reports capture an ever-smaller portion of the overall work they do. And that's problematic, some of them say. Cassidy & Associates, for example, has been pushing National Journal and other Washington publications that compile a list of the top Washington lobbying businesses by revenue to go beyond the LDA reports and include all of the components that make up a firm's bottom line, from public relations to federal marketing.

"We've been encouraging publications for the last couple of years to change the way you report the story," says Gregg Hartley, the firm's vice chairman and chief operating officer. He notes that Cassidy's own LDA reports, which show $24.7 million in lobbying activity last year, omit close to $8 million in other revenues. The other income includes $2.1 million in lobbying reported under the Foreign Agents Registration Act; $439,500 in federal marketing work; $709,355 in public-relations receipts; and $43,417 in small, one-shot lobbying jobs that didn't meet the LDA's minimum reporting threshold.

The rest of the $8 million came from a Cassidy operation called the Rhoads Group, which specializes chiefly in lobbying that targets military base closures and pulled in $4.4 million for the firm last year. That puts Cassidy's true bottom line closer to $32.4 million, company officials say.

For some K Street outfits, particularly law firms that also lobby, the disparity is even greater. Holland & Knight's "advocacy" work totaled about $45 million last year, says Rich Gold, who heads the firm's public policy group. But its direct federal lobbying in 2007, according to the most recent disclosure documents filed with Congress, was $15.8 million.

"Oftentimes [in] our work for a particular client, the LDA piece is only the tip of the iceberg," Gold notes. Say, for example, his firm is hired to pursue a particular rule-making in the environmental arena, a job that entails "political advocacy at the agency, as well as grassroots work, as well as some Hill contacts," Gold explains. "And the only thing that would show up on the LDA would be the Hill contacts."

In part, lobbyists are simply going where the work is. Even the new lobbying and ethics law has helped to fuel a growing cottage industry of lawyers who specialize in compliance with campaign finance and lobbying regulations. These lawyers are busier than ever giving seminars and briefings, yet none of their work must be reported under the LDA.

Similarly, firms enjoy a lucrative market in advising private companies, domestic and foreign, on a range of unreported transactions. Examples include product approvals or so-called strategic communications, which typically means gathering intelligence on pending legislation or regulations without actually contacting public officials.

Another big, unreported growth area is advising clients who are called before congressional committees doing oversight and investigations, a situation that has exploded in recent years. That work also falls outside the LDA, although some lobbyists argue that there's a good reason for that: When Congress asks someone to testify at a hearing, that information is part of the public record. The fields of grassroots and grass-tops lobbying also continue to mushroom.

"I think the traditional Washington lobbying is going to be dwarfed by the grassroots lobbying in the coming years," says conservative activist Richard Viguerie, the chairman of American Target Advertising and a pioneer in direct-mail and grassroots advocacy. Viguerie sends out hundreds of millions of letters annually to generate grassroots support for conservative groups and causes, and all of that work is outside the LDA's reach. He has also begun using the Internet.

The new disclosure rules may even be encouraging some lobbyists to seek work that won't require them to fill out onerous reports, or run the risk of tough penalties.

"I'm making a transition to strategic communications because there's not all the ethics work," says John Feehery, a lobbyist who opened his own shop last year. Feehery served as a spokesman for then-House Speaker Dennis Hastert, R-Ill., and as an executive for the Motion Picture Association of America. "It's not direct lobbying, and it's more fun. You can work with the '527' world [political organizations that may raise unlimited funds] and advocacy campaigns, and you don't have to file reports on everything and there isn't somebody checking everything you do." Feehery notes that he does file as a lobbyist for one of his clients.

The Permanent Campaign
For ideological and interest groups, including trade associations and labor unions, the business of advocacy has long since gone beyond direct lobbying. Over the past decade, organizations ranging from the National Rifle Association to the abortion-rights group NARAL Pro-Choice America have developed a model that blurs the line between election politics and lobbying.

Political campaigns and lobbying drives no longer have a clear beginning or end. Rather, interest groups engage in a permanent operation that blends public education, issue advocacy, grassroots lobbying, and direct political messages. The typical activist group now runs multiple affiliates under one umbrella, often including a 501(c)(3) charity, a political action committee, and a 527, which must steer clear of explicit campaign messages and must disclose its donors to the IRS.

"We see politics as being tied to issues -- not political parties, not necessarily political candidates, but issues," says Anna Burger, secretary-treasurer of the Service Employees International Union. "We see it as a 12-month process, day in, day out."

A $202 million operation with 1.9 million members, the SEIU reported spending $380,000 on lobbying last year, according to the Center for Responsive Politics. The union also reported $17.2 million in PAC receipts to the Federal Election Commission. But the group's actual advocacy work dwarfs those figures. This year, the SEIU plans to spend at least $70 million on direct mail, advertising, and grassroots lobbying "to help elect a pro-worker president and pro-worker Congress," a union spokeswoman says.

The union also runs a 527 that spent $14 million in 2007, and it has donated $2.5 million to a start-up 527, the Fund for America, that Burger helped found with Democratic activist and Taco Bell heir Rob McKay. Fund for America reportedly plans to raise between $100 million and $200 million in this election cycle to dole out to progressive groups.

The U.S. Chamber of Commerce reported $30.8 million in lobbying last year, according to the Center for Responsive Politics. But it spent an additional $10 million on mail and phone contacts, and yet another $10 million on an ad campaign thanking pro-business GOP candidates, according to the nonpartisan Campaign Finance Institute. The chamber plans to spend $5 million a year for the next five years on grassroots and grass-tops advocacy.

Watchdog groups bemoan this lack of disclosure and the increasingly blurry line between lobbying and political campaigning. Stephen Weissman, associate director for policy at the CFI, says: "When does an organization stop being a grassroots lobbying organization and become an election-oriented organization at a time when elections are going on all the time?"

Put another way, when does political advocacy become actual lobbying? It's a question that is increasingly difficult to answer.