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In Year of Scandal, Reform Bill Stalled in Congress    [

    $2 Million Payment to Former Lobbyist Raises Eyebrows
    By Jeffrey H. Birnbaum
    The Washington Post

    Monday 10 July 2006

    You've probably never heard of Jeffrey S. Shockey. So, for simplicity's sake, think of him as the Two Million Dollar Man.

    The 40-year-old congressional staffer last year collected nearly $2 million in severance payments from his former employer, a lobbying firm that specializes in winning benefits from the committee he now serves. Many longtime Washingtonians are shaking their heads in disbelief over the payout's enormous size, its ad hoc method of calculation and the fact that Shockey received it while working as a senior congressional aide.

    No wonder Americans hate the nation's capital. Federal employees are prohibited from supplementing their incomes with money from private sources, especially from lobbyists who have business before the government. Shockey says his payment was justified and within the rules. But experienced lobbyists around town question both its economics and its propriety.

    The situation is an example of a common occurrence - the spinning of the "revolving door" between the public and private sectors. Shockey is deputy chief of staff of the powerful House Appropriations Committee. Before that he was a partner for five years in a lobbying firm that made its living extracting goodies from the same committee. And before that he worked for Rep. Jerry Lewis (R-Calif.), who was then a member of the committee and is now its chairman.

    Along the way, Shockey made millions. As a lobbyist in 2004 he earned $2 million, which is double what the city's top lobbyists were said to earn just a few years ago. Shockey, in fact, was on track to make $3 million in 2005, the year he returned to government as the No. 2 staffer for the Appropriations Committee.

    Lobby shops often give parting gifts to colleagues who go into public service as a way to maintain strong relations. But the amount tends to be nominal and strictly tied to past performance to avoid even the appearance of paying a federal official in exchange for favorable treatment - an exchange that would be illegal.

    Why, then, would Shockey's former firm pay him so much? The reason, several seasoned lobbyists speculated, must have been the firm's desire to keep its communications with Shockey and the appropriations panel absolutely seamless. "There would be no need to pay out that amount of money unless you needed to maintain a superlative relationship with that person after he leaves," one veteran lobbyist said.

    Spokesmen for Shockey's old firm say the company already had deep connections with Lewis and didn't need any more. Still, who can blame skeptics for thinking that $2 million might buy more than merely goodwill?

    Congressional appropriators like Lewis were once hesitant to explicitly fund pet projects for fear of being accused of playing favorites and of micromanaging the government. But that was a long time ago. The Republican Revolution of 1994 ushered in a new congressional majority that professed to be distrustful of government but also worked overtime to maintain its control by directing federal aid into popular programs that would help reelect GOP members.

    Lawmakers were encouraged to earmark billions of dollars for thousands of home-state projects every year as a way to court their constituents. To take advantage of those giveaways, lobbyists increasingly specialized in appropriations work. Shockey and his firm were leaders in the field.

    Lobbyists were hired in droves and dozens of them made fortunes, including Shockey. Inundated by requests for earmarks, some congressmen began to rely on their lobbyist friends to help them select which projects to back and to monitor them as they moved through the legislative process. In turn, the lobbyists supplied the congressmen with campaign contributions and other amenities.

    Critics decry such mutual back-scratching as incestuous, undemocratic and potentially corrupting. Lobbyists (and their grateful clients) say it's just the way things work in the complicated world of Washington. In any case, it surely was no coincidence that many of Shockey's four dozen clients - including the city of Redlands and the county of San Bernardino - were in the southern California district of Shockey's once and current boss.

    Shockey's former lobbying firm, now called Copeland Lowery Jacquez Denton & White, assisted lots of California-based organizations and municipalities. One of its partners is a former California congressman, Bill Lowery (R), who, like Shockey, is close to Lewis - so close that federal authorities in Los Angeles have subpoenaed many of the firm's clients to learn more about the relationship of the firm, Lewis and Lowery.

    Publicity over the investigation has broken up the partnership. The firm's two Democratic partners, James M. Copeland and Lynnette R. Jacquez, told their Republican colleagues last month that they were leaving. The reason, they said, was that ethical and legal questions threatened to destroy their professional reputations and ruin their commercial prospects. Lewis has denied any wrongdoing, and the firm has said it has complied with all the rules.

    Shockey has not received a subpoena. He has been careful to disclose his severance package and has removed himself from dealings with the firm and his former clients.

    But several of Washington's prominent lobbyists question the deal. I spent a few days talking to owners and managers of lobbying firms about Shockey's $1.96 million payment. None wanted to be quoted by name for fear of angering Lewis, and many might benefit if Copeland Lowery fails. But they all agreed that the payout was far larger than was common in similar cases.

    They also said a transaction that pricey might look like a conflict of interest even if it isn't. And that's a major danger in a political town.

    Here's how it came to be:

    After Lewis became chairman of the appropriations panel in early 2005, Shockey surprised his partners by announcing that he wanted to return to Capitol Hill. The question then became how much they would pay him for his ownership in the firm.

    One answer could have been nothing. Copeland Lowery had no written partnership agreement and functioned under an "eat what you kill" arrangement. That meant its partners kept the revenue they collected from their clients less overhead costs, which were divided among them based on the percentage of total firm revenue that each of them brought in.

    In other words, Shockey had already taken out of the firm everything he brought into it. Once the company got current with its receivables and gave Shockey his share, it could well have said goodbye to him and that would have been that.

    But Shockey was one of the firm's main breadwinners. According to the firm's lawyers, he presented his partners with an implicit choice. He would recommend that his clients stay with Copeland Lowery in exchange for a severance or he would sell his "book of business" to a competing lobby shop.

    So the partners cut him a deal at what they felt was fair market value. They agreed to give him six times the amount that his clients were producing per month at the time of his departure. They removed from their calculation the few clients that Shockey thought would not continue with the firm after he left and came up with roughly $1.5 million. Adding in revenue he was entitled to receive from bills that were still being paid, his severance package totaled $1.96 million, which was paid in installments in 2005.

    Outsiders have several concerns about this transaction. One is that lobbying is very personal. When a key lobbyist leaves, his or her clients often bolt. That's why turnovers of business like Shockey's generally produce for the departing lobbyist nothing more than a "finder's fee," if that. Ten top lobbyists I spoke to said that departing partners rarely get more than two or three months' worth of retainers-on-the-books because there isn't any guarantee that their clients will continue with the firm.

    Shockey's threat that he would park his clients elsewhere was probably empty because he was not going to go with them.

    These lobbyists also could not understand why Copeland Lowery would shoulder so massive a financial burden. Shockey's payout ate up 26 percent of the firm's 2005 lobbying revenue of $7.4 million, based on the firm's public disclosures. Even if the firm had a 50 percent profit margin (which is possible in lobbying), that would mean that half the partners' earnings went to someone who was no longer there.

    I guess keeping appropriators happy is worth an awful lot.

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    Jeffrey Birnbaum writes about the intersection of government and business every other Monday.

 

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    In Year of Scandal, Reform Bill Stalled in Congress
    By Andy Sullivan
    Reuters

    Sunday 09 July 2006

    Washington - A free Rolls-Royce, expensive trips to a storied Scottish golf resort, even a freezer stuffed with $90,000 in cash have so far failed to move the U.S. Congress to clean up Capitol Hill.

    Efforts to tighten lobbying rules have stalled in the months since a series of corruption scandals, creating potential trouble for Republicans who vowed to institute tough ethics reform.

    With the August recess approaching, and then the campaign season when many lawmakers pay scant attention to policy matters, negotiators have little time to resolve differences between bills in the U.S. House of Representatives and Senate and come up with legislation President George W. Bush can sign.

    That might not be a bad thing, say some reform advocates who view the proposals as much too weak.

    "I'd much rather see Congress fall on its face and not pass anything this year," said Craig Holman, a campaign-finance lobbyist for the nonpartisan group Public Citizen. "What they're considering is really nothing but a PR gimmick to placate the American voters."

    Inaction could hurt Republicans if the U.S. Justice Department brings charges in any one of several ongoing corruption probes, others say.

    "I don't think it's dead, only because I think the public's attention is going to return to this when members of Congress begin to get indicted," said Mike Surrusco, director of ethics campaigns for Common Cause, another nonpartisan reform group that has pushed for tighter regulations.

    No lawmakers have been charged since former California Republican Rep. Randy "Duke" Cunningham pleaded guilty to accepting $2.4 million in bribes last year, including a Rolls-Royce.

    Probe Continues

    But the Justice Department is apparently continuing to investigate Cunningham's former colleagues on the House Appropriations Committee.

    A separate influence-peddling scandal centered on disgraced lobbyist Jack Abramoff - who flew powerful Republicans to Scotland for rounds of golf on the fabled course at St. Andrews - has so far yielded three guilty pleas from former House Republican aides.

    Federal prosecutors said they found a $90,000 payoff in the freezer of Rep. William Jefferson, a Louisiana Democrat, in a Justice Department probe of his relationship to telecommunications deals in Africa and elsewhere.

    Since Republican leaders said in January that ethics reform would be a top priority this year, the Senate passed a bill that would require lobbyists to disclose more about their activities and ban gifts from them to members of Congress and their staff. It would also extend to two years the "cooling off" period a retired lawmaker must wait before lobbying his former colleagues.

    The bill passed by the House also requires greater disclosure by lobbyists, though it does not change the current $50 limit on gifts and "cooling off" period of one year.

    House Speaker Dennis Hastert, an Illinois Republican, and Senate Majority Leader Bill Frist, a Tennessee Republican, had hoped to resolve their differences before July 4.

    A spokesman for Hastert said passage of a final bill was still possible.

    "This is a complex bill and it takes time to accomplish, but the fact that both the House and the Senate passed their own versions shows the seriousness with which Congress is addressing this issue," said spokesman Ron Bonjean.