Lee Fang

Pentagon contractors flock to Mrs. McKeon

Why are defense lobbyists funding the pet crusade of the wife of Buck McKeon, House Armed Services Committee chair?

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Pentagon contractors flock to Mrs. McKeon Howard "Buck" McKeon: Help my wife. Please! (Credit: AP/Susan Walsh)

Patricia McKeon, wife of a powerful committee chairman in Congress, announced her bid for California Legislature last fall by telling local Republicans that she decided to run for office because she’s fed up with the plastic bag tax in Los Angeles County. “Just think how much food we could buy if we weren’t forced to pay 10 cents for grocery bags,” she said in announcing her campaign. Within days of her official announcement, one industry stepped up to finance her campaign — but it wasn’t the plastic bag industry. It was military defense contractors and their Beltway lobbyists.

Disclosures posted last evening at the California secretary of state’s website confirm that a flood of military contractor money has flowed to Patricia McKeon, who is running for an open Assembly seat in a district that overlaps that of her husband, Republican Rep. Buck McKeon, chairman of the House Armed Services Committee.

As Salon first reported this week, defense lobbyists are scrambling to mitigate looming defense budget cuts and appear to be donating to Patricia McKeon because of her husband’s powerful position overseeing  the Pentagon budget.

In her first few months of fundraising, Patricia McKeon collected at least $19,200 from defense contractors or their registered lobbyists. Her husband of 49 years is already the top recipient of military industry cash in Congress, so some of the contributions to his wife appear to be an attempt to get around federal campaign contribution limits.

Lockheed Martin, a company locked in a pitched battle to stave off cuts to the lucrative F-35 Joint Strike Fighter jet, cut Patricia McKeon’s campaign a $3,000 check.

Rep. Buck McKeon has rigorously defended the jets, despite growing concerns that the planes will run almost $90 million over budget each.

The lobbying firm Beau Butler LLC gave to Patricia McKeon as well. Beau Butler lobbies for Proxy Aviations, a drone company. Although it’s not clear why a drone maker would rally to Patricia McKeon’s call to end plastic bag taxes, the industry is an important cause for Buck McKeon. He’s co-chairman of a caucus dedicated to promoting drones for both military and civilian purposes.

Other Buck McKeon-related lobbies also donated to Patricia McKeon’s campaign coffer. Bruce Leftwich, a government affairs executive with a group associated with for-profit colleges, gave $500. In his previous committee chairmanship, at the helm of a subcommittee dealing with post-secondary education during the Bush years, McKeon helped for-profit colleges with a rule that extended billions in taxpayer money.

D.C. lobbyist aids Rep. McKeon’s wife

The spouse of the House Armed Services Committee chairman got Washington money for California Assembly bid

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D.C. lobbyist aids Rep. McKeon's wifeHouse Armed Services Commitee chairman, Howard "Buck" McKeon (Credit: AP/J. Scott Applewhite)

Could an effort to lift his wife’s political aspirations land the powerful chairman of the House Armed Services Committee in hot water?

Recent disclosures reveal that a federal lobbyist with ties to Rep. Howard “Buck” McKeon, R-Calif., the senior member of the committee overseeing the Pentagon, provided financial support to McKeon’s wife, who is seeking a seat in the California Assembly this year. As defense industry lobbyists scramble to head off looming cuts in the Pentagon budget, they are looking for new ways to ingratiate themselves with McKeon.

Patricia McKeon, Buck’s wife, surprised many when she announced her intention last September to run for an open seat that largely overlaps her husband’s district. One of the first reported contributions to her campaign came from a political committee called the Fund for American Opportunity, registered to a post office box in Washington, D.C., that donated $1,000. The fund, which is financed by a number of corporations including the drug industry trade association PhRMA, is owned and operated by Mark Valente, a Beltway lobbyist.

The contribution, reported here for the first time, appears to be an effort to circumvent federal campaign limits. Federal campaign disclosures show that Valente has already maxed out in donations to Rep. McKeon this cycle, having given $2,500 to his campaign for Congress. And the contribution came within a day of Valente’s donation to Patricia’s campaign for the California Assembly.

Valente’s lobbying firm, Valente and Associates, reported over $1.4 million in fees last year. The firm represented at least one company, 3Leaf Group, a government contractor specializing in human resources, that sought help from Valente on issues relating to the Defense Authorization bill. McKeon, as chairman of the Armed Services Committee, was the principal author of that legislation.

Valente did not respond to a request for comment. But his so-called 527 campaign entity, the Fund for American Opportunity, gave only one contribution to a California state politician in all of 2011: Patricia McKeon.

Craig Holman, a lobbying expert with Public Citizen, says that the donation to McKeon is part of a larger pattern of influence peddling in Washington: “The objective is to throw as much money as possible at the feet of the lawmaker; that includes at the feet of his family as well.”

It’s not the first time McKeon has raised eyebrows by using his elected office to boost his wife. For the last 10 years, Buck McKeon made Patricia McKeon his highest-paid campaign staffer, an arrangement that ethics experts have criticized as an invitation for corruption. In 2007, a report exposed the fact that Patricia McKeon was by far the highest-compensated family member of the few members of Congress employing relatives for their campaigns.

A review of campaign documents by Salon found that, counting reimbursements for food and travel, the McKeon campaign committee has paid Patricia over $547,584 since 2001.

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Correction: The original version of this article stated inaccurately Patricia McKeon was “the only state candidate” to receive contributions from the 527 committee run by lobbyist Mark Valente for the period covered by the disclosure. She was the only California state politician to receive a contribution in that period. We regret this error.

 

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Romney relied on corporate welfare

How Bain Capital leveraged government assistance to boost profits.

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Romney relied on corporate welfareMitt Romney, center, celebrates Bain Capital profits with colleagues in 1984. Taxpayers helped fund the party (Credit: Bain Capital)

During the presidential campaign, Mitt Romney has lashed out at the Obama administration’s taxpayer subsidized grants to clean energy start-up companies. “The U.S. government shouldn’t be playing venture capitalist,” wrote Romney in October. “The very process invites cronyism and outright corruption.” But public records show that Romney’s private equity firm, Bain Capital, repeatedly persuaded the government to play venture capitalist when it came to its own portfolio of companies.

News outlets have recently focused attention on Romney’s history as a businessman at Bain, which he founded in 1984. What hasn’t been reported, or fully explained by the candidate, is how Romney often got ahead in the private sector by using government help.

The likely GOP nominee made much of his estimated $250 million fortune buying companies, reorganizing them, and selling them for a profit. Though Romney, whose only government experience is his one term as Massachusetts governor, is quick to claim that he turned around investments using sound management and data-driven strategies, he does not mention one aspect of his success. Bain Capital owned companies that padded their profits using millions in public subsidies. In other cases, firms owned by Bain employed K Street lobbying firms to pursue lucrative government programs.

Consider two of Romney’s first major investments: office supply company Staples Inc. and photo album manufacturer Holson Co. Both persuaded state officials to subsidize their growth.

Shortly after Bain took control of Holson in 1987, executives pushed for the company to expand in the South. Officials from the firm had negotiated with Gov. Carroll Campbell, a Republican, to extend $200,000 in utility support for a new Holson plant in the city of Gaffney. The local city council also approved a $5 million bond for construction, after meeting with representatives from Holson. Five years after South Carolina’s taxpayers had helped finance the factory, Bain chose to sell Holson’s Gaffney facility for $2.8 million. Romney’s firm reaped the profits on the taxpayers’ expenditure.

The history of Staples, a company that Bain grew from a single store, is a hallmark of the Romney record. Staples’ rapid growth, however, drew on substantial state subsidies.

In 1996, Tom Stemberg, a close Romney business partner leading Staples, met with Maryland Gov. Parris Glendening, a Democrat, to negotiate a package of taxpayer sweeteners to build a new distribution center in Hagerstown. The Glendening administration, using a “Sunny Day” fund of discretionary development money, awarded Staples $2.3 million in grants and low interest loans. The following year, as Glendening prepared for his reelection campaign, top Staples executives maxed out in donations. Stemberg and his colleagues gave a total of $16,000.

A similar story played out in Connecticut, where Staples landed a deal in which taxpayers subsidized over $6 million in low-interest loans for the company to construct a distribution center in Killingly in 1998.

Tapping Washington

The federal government also played a pivotal role in Romney’s ascendant path through corporate America.

GS Industries, a steel company purchased by Bain in the early ’90s, faced fiscal problems as Bain withdrew large dividends and management fees. Under Bain’s leadership, the steelmaker hired the K Street lobbying firm of Wiley Rein to seek government support. In 1998-99 the firm paid $140,000 for a lobbying team that included former Democratic Rep. Jim Slattery. GS Industries eventually won a federal loan guarantee, but before the loan could be delivered, the company fell to bankruptcy in 2001. Bain’s executives still made $50 million from their involvement with the firm.

In 1999, Romney departed Bain to take over as the chief executive officer of the Salt Lake City Winter Olympics. The experience, turning an organization in disarray and deeply in the red into a popular event that actually earned over $100 million in profits, is portrayed as yet another example of the candidate’s private sector management skills. Yet the turnaround was achieved in part through the use of professional influence peddling. Under Romney’s management, the Olympic organizing committee spent over $3.3 million on Beltway lobbyists to secure federal funding for the 2004 Winter games.

Olympics lobbyists from firms like Patton Boggs and King & Spalding helped secure federal grants for communications equipment, educational money and public transportation. Millions of dollars were procured from federal officials, who wanted to allay safety concerns in the aftermath of 9/11.

As the New York Times reported earlier this week, Romney’s has continued to earn a windfall from Bain. When he left the firm, he signed a severance package that allowed him to share in the company’s profits in perpetuity. The arrangement might come back to haunt the candidate, given Bain’s increased reliance on lobbyists over the last five years.

Starting in 2007, Bain Capital began retaining various  lobbying firms to pressure lawmakers to keep open a loophole that allows much of the earnings by private equity managers to be taxed as capital gains rather than the top income bracket of 35 percent. Given Romney’s profit-sharing retirement deal, the campaign to extend the loophole, which still hasn’t been closed, likely boosted the candidate’s fortune. (Romney has refused to release his tax return, leaving questions about his income.)

As Romney pillories Obama for using the government to fix problems in society (health reform, the auto bailout, etc.), he invites a closer examination of his own career. A balanced view of the Romney record shows he has never had any qualms about government help when it came to his own bottom line. Whether through hiring insider lobbyists or funneling taxpayer subsidies to his companies, government assistance has been part and parcel to the rise of Romney.

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Gingrich lauded “good parts” of Obama health plan

“There are clearly things that we’d like to see continued," he told clients

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Gingrich lauded Newt Gingrich on "the good parts" of Obama's healthcare reform (Credit: AP/Bob Child)

Since Newt Gingrich’s meteoric rise in the polls in the last two months, the Washington Post and New York Times have begun reporting on the Republican front-runner’s dual role as a vocal critic of President Obama’s healthcare overhaul and as a paid consultant who explains the law’s benefits to corporate clients.

What hasn’t been reported yet are two conference calls in June and December 2010 in which Gingrich and his for-profit Center for Health Transformation touted “the good parts” of Obama’s plan and offered advice about how clients might take advantage of a myriad of provisions of the Affordable Care Act.

In a February 2010 investigation into Gingrich’s healthcare business, I found that the Center’s consultants had curried favor for drug companies, health insurers, health IT companies and hospitals, which paid Gingrich hefty retainer fees in exchange for access, advice and health-related earmarks.

The conference calls, co-sponsored by Siemens and NextGen Health Care, were central to Gingrich’s effort. In her introductory remarks, co-host Charlene Underwood, government affairs vice president at Siemens,  described the calls as a “GPS” for firms seeking to “navigate what promises to be a circuitous route for health care reform.”

On both occasions, David Merritt, the vice president of Gingrich’s health firm, spoke first, explaining the law and the stages of implementation. Merritt praised many parts of the law, including spending on public wellness programs and incentives for employers to encourage people to focus on preventative care.

”I think the bill, and the provisions that have the most potential to truly transform the delivery side of care, would be in what’s called Title III where a lot of these demonstrations, a lot of these changes to reimbursements, will be found,” he said.

For clients in the business of electronic medical records, Merritt said the Affordable Care Act offered incentives for better reporting standards and that early adopters of health information technology would benefit. Siemens and NextGen Health specialize in health information technology.

Gingrich also spoke on the calls reminding listeners that health reform could be shaped through committee hearings in 2011 and through the repeal-and-replace period in 2012, when (he suggested) a Republican president would take over. Touting his access to the Republican Party, Gingrich said he would be advising the congressional leaders as they took aim at the law.

On one call, Gingrich suggested that his clients — each paying as much as $200,000 in yearly retainer fees — would have a role in crafting policy.

“There are clearly things that we’d like to see continued and we’d like to see legislation passed almost concurrently that will sustain the good parts,” said Gingrich, explaining what would happen if the bill were to be repealed. Showing his savvy at generating business, he added that he would “love the help of all of our members in identifying” which parts of reform should remain law.

Gingrich’s private description of the Affordable Care Act differs dramatically from what he had said to voters publicly. In interviews over the last two years, he has described President Obama’s program as a “centralized healthcare dictatorship” with provisions that “would, in effect, be death panels.” At Republican debates, he said that if elected, he would literally sign the repeal at his inaugural ceremony.

He stuck a different tone on the 2010 calls with his clients.

Gingrich applauded the “rapidly emerging standard of care” that would come with new Medicare reporting patterns prescribed by the law. “I think that those people who understand it and adapt to it, and learn how to use it faster will have a substantial net advantage,” Gingrich advised.

Gingrich has dismissed criticism about his influence peddling, saying he has done “no lobbying.” But according to his clients, he is part of their lobbying operation. In slides before the Gingrich webcast, Siemens listed the Center for Health Transformation and  “N. Gingrich” as part of its “Influencers” campaign, along with its team of D.C. lobbyists and trade association memberships.

In 2010, I asked  the former speaker about his refusal to register as a lobbyist. Although he met with lawmakers and helped craft industry-friendly legislation with Capitol Hill staff, he told me that his influence peddling did not technically constitute lobbying because it “benefit[ed] the country at large.”

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Listen to  June 2010 webcast here

Listen to the Dec. 2010 webcast here:

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