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Under the Influence McCain: �Reformer's' Backers Call Beltway Home
Sen. John S. McCain's presidential aspirations are firmly anchored to his central theme of campaign finance reform. "The influence of money is corrupting our ability to address the problems that directly affect the lives of every American," states McCain's Web site. The Republican from Arizona has proposed several bills over the years that would ban soft money from the political process, eliminating what he believes to be the corrupt influence of special interests, lobbyists and fat-cat donors.
So when McCain's reform plan was attacked in recent months by Washington lobbyist Grover Norquist's group Americans for Tax Reform, the campaign found a perfect opportunity to lash out at its critics. "It is clear that John McCain has upset the lobbyists and status quo establishment in Washington with his calls to clean up our political system," McCain 2000 New Hampshire Chair Peter Spaulding said. "The fat cats may be against him, but here in New Hampshire, John has the people on his side."
But while the people have supported McCain in the New Hampshire primary, back in the Washington suburb of Alexandria, Va., the same Beltway establishment that McCain frequently criticizes is heavily backing and advising his campaign. At times, it seems as if the McCain campaign has a very arbitrary process by which it labels some lobbyists as representative of corrupt special interests, while others become inner-circle campaign advisers. Norquist, for example, has lobbied for the same interests as two of McCain's top political advisers, Washington super-lobbyists Vin Weber and Kenneth Duberstein.
Among other interests, Norquist has been a registered lobbyist for the Distilled Spirits Council, BP America and the Edison Electric Institute, while Weber is registered with Joseph E. Seagram & Sons, Inc., Mobil Corp. and Edison as well. Both were registered in 1999 to lobby for Microsoft Corp., pulling in a combined $280,000 from the software giant in the first half of 1999 alone. Duberstein is a powerful lobbyist for the American Gaming Association and COMSAT, a government-owned satellite services company, while Norquist has raked in hundreds of thousands of dollars from the Interactive Gaming Council and Echostar, another satellite services firm. By the Center for Public Integrity's count, Weber and Duberstein together are currently registered to lobby for more than 55 corporate and special interests, many of them with concerns before the Senate Committee on Commerce, Science and Transportation, which McCain chairs.
But it's not that Weber and Duberstein are the only two K Street lobbyists in an otherwise untainted campaign. Consider the following:
McCain's own campaign manager, Rick Davis, has been a registered lobbyist for GTECH (the world's largest lottery company, which has been
under the shadow of possible federal prosecution for years) as recently as June 1999.
While Davis and Ken Duberstein lobby for gaming companies, foreign policy adviser Richard Burt is vice chairman of one. The gaming industry has given more money to McCain than any other presidential candidate.
Former Sen. Warren B. Rudman, R-N.H., a proud co-chair of McCain's 2000 campaign who told the Center for Public Integrity, "I don't lobby," has been a registered lobbyist for a coalition of utility companies seeking help in overturning a 1935 federal law.
When asked by the Center how he reconciled those two facts, Rudman stated that
he registered with an "abundance of caution" and was minimally
involved with the account, which did not cross his threshold for what
constitutes lobbying.
So which should the voter believe? The McCain rhetoric, which emphasizes cleansing Washington of its corrupt special-interest culture, or the McCain adviser, who represents the worst examples of that same special-interest influence? The answer isn't easy.
Like many campaigns, McCain 2000's advisers are generally divided between the hard-core Washington operatives who advise politically, and the policy-oriented issue advisers from outside the city. While there are some crossovers, most of the candidate's policy people come from Arizona, South Carolina and academia, while the crucial fund raisers and politicos are based in Washington, D.C.
While stumping across the country, McCain emphasizes his outside-the-Beltway approach to campaign finance reform. But his innermost circle of advisers consists of veteran K Street lobbyists and special-interest fund-raisers, many of whom make a living trying to influence McCain's Commerce Committee. The harsh reality of needing to raise huge amounts of money to compete effectively in a presidential campaign has forced McCain to turn to the very same special-interest lobbyists that his campaign rhetoric routinely slams.
The credibility gap starts with his campaign manager, Davis. A former White House aide to President Reagan, Davis is a name partner with the lobbying firm Davis, Manafort & Freedman, Inc. In 1999, the firm had four active clients: GTECH Corporation (gambling), SBC Communication, Inc. (a Baby Bell phone company), COMSAT Corp. (a government-owned satellite company), and Fruit of the Loom, Inc. (a basic apparel manufacturer). Two of those companies, COMSAT and SBC, had major (and controversial) mergers pending before the Federal Communications Commission in 1999, and both mergers were approved (the Commerce Committee has legislative oversight authority, and therefore quite a bit of political influence, over the FCC). While Tim McKone, a McCain fund-raiser who left the firm in November 1999 to become the top lobbyist at SBC, handled the SBC and COMSAT accounts, it was Davis who was registered to lobby for GTECH through at least June 30, 1999, well into the campaign season.
Davis isn't the only lobbyist who guides the McCain campaign. McCain 2000 national chairman and former Sen. Warren Rudman recently told the Center, �I�ve never been paid for anything I�ve done in political life and I don�t lobby.� Yet, federal lobbying records show that as recently as January of 1999, Rudman was a registered lobbyist for the Coalition of Utility Companies Seeking PUHCA Repeal. "PUHCA" is the Public Utility Holding Company Act of 1935, a bill championed by Franklin Roosevelt to ensure that the nation's power supply didn't fall into monopolistic hands, as it had in 1932, when J.P. Morgan controlled 44.9% of the nation's electricity through various holding companies.
When the Center asked Rudman in 1996 whether he had gone through the Washington revolving door (he was then advising Republican Sen. Robert Dole's presidential campaign), the New Hampshire senator responded, "I have like hell -- I practice law. You're absolutely dead wrong." As proof, he said that he did not lobby.
In response to an inquiry from the Center, Rudman argued that his minimal
involvement with the coalition did not qualify him as a lobbyist. He said he
never went to Capitol Hill and was involved only in strategy.
TWO OF THE TOP political advisers to McCain are Vin Weber and Ken Duberstein, lobbyists whose client lists read like a who's who of companies with major issues before the Senate Commerce Committee. Weber's clients for 1999 include some of the biggest companies in telecommunications, aviation and space, including AT&T, Microsoft, Air Transportation of America and Lockheed-Martin. Other big business clients include Edison Electric; the National Association of Homebuilders; the National Association of Realtors; New York Life Insurance; Fannie Mae, the government
chartered corporation that facilitates mortgages for low- and middle-income families; Sallie Mae, the government sponsored student loan company; Schering-Plough; Mobil Corp., now part of Exxon-Mobil; and Visa USA.
Duberstein's big-bucks client list includes the likes of COMSAT, Dow Corning, Fannie Mae, General Motors, Goldman Sachs & Co., Business Roundtable, CSX, United Airlines, Transportation Institute and Time Warner, Inc. It's no surprise that so many air, rail and telecommunications companies look to Duberstein and Weber for help in persuading lawmakers. Not many lobbyists can claim such a close relationship with the chairman of the Senate Commerce Committee. Besides acting as political advisers to McCain, they also co-hosted a fund raiser on March 23, 1999, that raked in $120,000 for the candidate.
Perhaps the best example of Weber's and Duberstein's dual roles as advisers and lobbyists came at the end of 1999, when Lockheed-Martin was engaged in a fierce battle to buy COMSAT. This came at the same time that McCain was in the throes of his presidential campaign, gaining momentum and traction in New Hampshire.
COMSAT is the U.S. government's reseller of International Telecommunications Satellite Organization (INTELSAT) service, which is the global satellite coalition founded in 1964. Under current federal law, COMSAT has a monopoly over offering lucrative INTELSAT telecommunications services to private customers. When Lockheed-Martin announced in 1998 that it intended to purchase COMSAT for roughly $2.7 billion, it knew that only congressional legislation could authorize the full sale of COMSAT to a private entity.
ALTHOUGH LOCKHEED managed to win Federal Communications Commission approval to buy 49% of COMSAT in September 1999, the company faced stiff opposition from other telecommunications companies in trying to purchase the remaining 51%. In addition, the badly needed bill that would have given Lockheed the go-ahead to buy the remainder of COMSAT was languishing in the House, where Commerce Chairman Thomas Bliley, R-Va., refused to offer Lockheed more than 10% of COMSAT.
Faced with a stalemate, Lockheed brought in the big guns; among the high-powered lobbyists signed up for the COMSAT deal were Duberstein (for COMSAT) and Weber (for Lockheed-Martin). McCain fund-raiser Tim McKone, still with Rick Davis at Davis, Manafort & Freedman, was also hired on for COMSAT. The Capitol Hill newspaper Roll Call reported that in 1998, Lockheed spent $6.6 million on lobbying and had more than 45 outside firms on its payroll; in 1999, COMSAT had spent most of its $2 million lobbying budget by September and had hired six outside firms of its own. Federal lobbying records show that in just the first half of 1999, Duberstein's firm brought in $140,000 from COMSAT and Weber's Clark & Weinstock was paid $160,000 by Lockheed, while McKone earned a more modest $39,000 from COMSAT.
The lobbyists certainly paid off. Where Bliley had concerns about approving the Lockheed-COMSAT deal because of the larger implications
for U.S. satellite policy, McCain's Commerce Committee had no such qualms. The committee moved a bill (S. 376) through the Senate and won unanimous approval by July 1999, a move that put increasing pressure on Bliley to act. Facing a pro-Lockheed Senate version of the bill, a ferocious lobbying effort with close ties to the Senate Commerce chairman, and pressure from House Speaker Dennis Hastert, R-Ill., Bliley finally caved in December and agreed to expedite the conference process needed to reconcile his legislation with the Senate version. Conferees, among them McCain, were named on Jan. 24, 2010, and a Lockheed-favorable resolution
is predicted in March.
FIVE DAYS AFTER an industry newsletter announced that Bliley would acquiesce to Duberstein, Weber and company, McCain appeared at a GOP debate in Arizona. There, he thanked conservative candidate Gary Bauer for agreeing with him on campaign finance reform. "I am grateful for Gary's support in my effort to limit the corrupting influence of special-interest money," McCain said. "Reforming the way campaigns are financed is the only way to . . . restore confidence in our government."
But until that reform is enacted, the only way McCain can effectively challenge George W. Bush is with fund-raisers who can bring in cash, and lots of it. So it's no surprise that two of McCain's top fund-raisers are also special-interest representatives. Timothy McKone, formerly of Davis, Manafort & Freedman, returned to his old employer SBC in November 1999 to become vice president for congressional relations. While campaign manager Davis employed McKone as an SBC Communications (and COMSAT) lobbyist at Davis, Manafort & Freedman, SBC was in the midst of a fierce regulatory battle for the right to purchase Ameritech Corp. for $62 billion. Ever the mindful campaign fund raiser, however, McKone sent out a fund-raising solicitation
for McCain's presidential campaign on May 11, 1999, proclaiming that, "John McCain has become a recognized leader on telecommunications, insurance, and aviation issues, stressing the need to promote competition and government deregulation . . .�
The chairman was certainly becoming a leader in milking the corporate cash cow; he was reported to have pressured the FCC into approving the SBC merger, which the agency did by early October 1999. The deal gave SBC control over one-third of all local phone service in the country. In the meantime, SBC has given McCain more than $45,000 since 1998.
Another fund-raiser with interests before McCain is Solomon Trujillo, chairman, president and CEO of U S West, John McCain's number one career patron. Trujillo is also McCain's national finance co-chairman. Over the years, Trujillo and the company have given McCain $107,520. As chairman of the Commerce Committee that regulates the telecommunications industry, McCain has been able to return the favor; in May 1999, McCain introduced the Internet Regulatory Freedom Act, legislation that would have allowed such Baby Bells as U S West to enter the lucrative broadband Internet market. Broadband is the commonly used term for next-generation high-speed telecommunications service. Trujillo praised the bill, exulting, "If the Internet is deregulated in the manner Senator McCain is suggesting, U S West will be able to provide high-speed Internet service to an additional two million households and businesses throughout our region during the first year alone."
One of the more interesting statistics to come out of the 2000 presidential campaign is that through Dec. 31, 1999, John McCain had received more
than $69,000 from the casino and gambling industry, according to the Center for Responsive Politics. That amount makes candidate McCain the number two recipient of money from the industry, after George W. Bush ($95,450).
After all, it is McCain who recently butted heads with the gaming industry over slot machines that feature child-enticing themes based on the television show South Park and the cartoon characters Spiderman and the Pink Panther. On Dec. 11, 1999, McCain announced he would investigate the practice and possibly hold hearings to investigate the matter. Speaking about what its opponents call "slots for tots," McCain stated, "I question the propriety of companies using child-based themes that may entice children in an obviously adult industry." The industry was not pleased. Three days after McCain's announcement, American Gaming Association President Frank Fahrenkopf Jr. remarked that "the enemies of gaming have been firing missiles at us."
While the "enemies of gaming" may be behind McCain's decision to investigate "slots for tots," the friends of gaming are some of the closest advisers behind McCain's presidential campaign. While McCain has been railing against the gambling industry that targets the nation's youth, his own advisers have been working for, and earning substantial money from, that very same industry. This helps to explain why the campaign cash from gaming interests continues to fill McCain's coffers.
While many support McCain's most recent campaign against gambling, the senator's prior record is filled with inconsistencies on the subject. As the Center for Public Integrity reported in its recently released book The Buying of the President 2000 (Avon), McCain has done several favors for the gaming industry over his career. The industry has contributed over $100,000 to the senator since 1993.
IN JUNE 1998, MCCAIN VOTED for legislation to overhaul the Internal Revenue Service that included a tax exemption for the casino industry for free meals given to employees. Earlier, in 1995, McCain supported legislation that paved the way for gambling "cruises to nowhere," the same year he sponsored legislation that would have limited states' abilities to regulate Indian gambling. More recently, McCain seems to have hit the jackpot with Native American gambling interests by opposing legislation that would have halted the expansion of gambling onto Indian reservations. As the legislation was debated in Congress throughout the summer and fall of 1999, the Mashantucket Pequot Indian Nation, which operates the world's largest casino, gave McCain more than $25,000, more than half coming from a fund-raiser the Indian nation hosted for him on June 30, 1999.
Even more startling, however, is the number of close advisers to McCain's presidential campaign who have strong ties to the gaming industry. Campaign manager Rick Davis was registered to lobby for GTECH up through the middle of 1999. GTECH is the world's largest operator of computerized online lotteries, with businesses spanning five continents. It also runs 29 of the 38 U.S. state lotteries. But the huge company has had its problems over the years. GTECH's most recent annual report highlights some of the difficulties:
"In December 1998, Lawrence Littwin, the former Executive Director of the Texas Lottery Commission from June 1997 to October 1997, filed suit against GTECH in the United States District Court for the Northern District of Texas alleging that GTECH, as operator of the Texas lottery, unlawfully attempted to have Mr. Littwin removed as Executive Director of the Texas Lottery Commission in order to continue its alleged unlawful control of the Texas Lottery Commission and the Texas lottery. The specific causes of action alleged by Mr. Littwin include alleged tortious interference by GTECH with Mr. Littwin's employment relationship with the Texas Lottery Commission which caused him to be removed as the Executive Director; alleged conspiracy with unspecified third parties to maintain control of the Texas Lottery Commission and the Texas lottery; and various alleged civil violations by GTECH of the Racketeer Influenced Corrupt Organization Act (18 Sections 1961(4) and 1962(b), (c) and (d)) ('RICO')."
Littwin and his attorneys have suggested throughout the proceedings that GTECH was allowed to keep its state lottery contract in exchange for former Texas Lt. Gov. Ben Barnes' silence. Barnes, a former GTECH lobbyist, admitted under oath that he helped George W. Bush enlist in the Texas Air National Guard rather than go to Vietnam 31 years ago.
TEXAS ISN'T THE ONLY place where GTECH has had its problems. In October of 1994, the New Jersey U.S. Attorney's office secured an indictment of GTECH's former sales manager for taking kickbacks from two company consultants; the sales manager and one of the consultants were later convicted. The company, which runs Ireland's lottery system, is also under investigation by the Irish Parliament for an investment of $100,000 made by Guy B. Snowden, then-CEO of GTECH, in a business owned by the former Irish Prime Minister's son.
Apparently undeterred by GTECH's checkered past, McCain's campaign manager has been a registered lobbyist for the company through at least June of 1999. For the first six months of that year, Davis earned $30,000 from GTECH. In 1998, the company paid Davis $70,000 for services rendered.
In addition to Davis, political adviser Ken Duberstein is an active lobbyist for the gambling industry. Duberstein represents the American Gaming Association, a typical inside-the-Beltway trade group for the casino-based gambling sector. When asked by the Center why so much gambling money was going to McCain, AGA President and CEO Frank Fahrenkopf Jr. postulated, "He's a big boxing fan," referring to the large amount of time the senator spends in Las Vegas. Boxing fan or not, Duberstein's firm was paid $60,000 through the first half of 1999. In 1997 and 1998, the firm brought in $260,000 from AGA. AGA, like most interest groups in Washington, has strong political ties. Farenkopf is a former Republican National Committee chairman, and the current vice president for government affairs for AGA, John E. Shelk, is a former Republican counsel to the House Commerce Committee.
WHERE MCCAIN'S ADVISERS aren't lobbying for gambling interests, they're actually part of the interests themselves. Richard Burt, the United States' chief negotiator for the START I treaty with the Soviet Union and a McCain foreign policy adviser, was chairman of Powerhouse Technologies, Inc., from 1994 through June 1999, when it was purchased by Anchor Gaming. Burt is now vice chairman of Anchor, a diversified gaming company best known for its slot machines, which it leases to casinos. The company also runs lotteries and casinos itself, and recently signed on to build the Pala Band of Mission Indians a $90 million casino in California. Powerhouse Technologies, a maker of online and video lottery systems and equipment, was expected to help grow Anchor's revenues to $500 million in the first year after the merger. The company also announced on Dec. 13, 1999, that it was awarded a contract to provide the first online lottery program in the People's Republic of China.
Like its competitor GTECH, Anchor has had its share of unsavory publicity. The company was hit with five lawsuits in 1997 and 1998. Shareholders alleged that the company artificially inflated its stock price so insiders could sell off their holdings at a profit. According to Anchor's 1999 annual report, the suits have been dismissed or are still pending.
Given his expressed concern for protecting children from the "adult industry" of gambling, perhaps McCain should have looked into who the first innovators of those much-beleaguered themed slot machines were. In 1993, a four-year old company named Anchor Gaming, in conjunction with International Game Technology, introduced a "Wheel of Fortune"-themed slot machine, the first of its kind. Political
Advisers and Fund-Raisers
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