A Multimillion-Dollar Scam Finally Gets Some Close Scrutiny

When we heard about a stunning report on lobbying that was discussed on National Public Radio, we presumed there wouldn’t be much coverage of it in the major media, and we were right. But the Center for Public Integrity, the non-partisan Washington research group that compiled the report made it all fairly visible.

We asked Roberta Baskin, an award-winning journalist recently named the executive director of the Center, to provide more information on the report. She and her staff researched the little-known modern mode of “lobbying,” the century-old attempts of business and other interest groups to influence congressional legislation by gathering with members of Congress in Capitol Hill halls and offices. From their executive suites along Washington’s business- and law-firm occupied blocks of K Street, lobbyists send handsome cash donations to the members to solicit their votes.

More than 90 years ago, President Woodrow Wilson admonished the Washington press corps that its members were “missing a lot of stories about the extraordinary lobbying in this town at this time.” With a trace of sarcasm he told the group: “This town is swarming with lobbyists. . . . You can’t throw bricks in any direction without hitting one!”

He could not have imagined today’s army of Washington lobbying persuaders. Some 14,000 registered lobbyists influence the legislation and policies put forth by Congress, the White House and more than 200 federal agencies.

Lobbying—more quaintly described by our Founders as petitioning the government for redress of grievances—is entirely legal. Like freedom to worship, or to assemble, or to speak, or to publish this article, it’s an activity protected by the First Amendment. But when analyzing the forms filed by the some 21,000 lobbyist registrants—the law firms, companies, state or local governments, nonprofits or trade associations that register with Congress to lobby—we also found that most lobbying activity is hidden from public scrutiny. In many cases, the results of that activity (what lobbyists get in return) are also hidden.

Too much bargaining takes place in back rooms, and too many times special interests influence government decisions at the expense of the broad public interest.

That’s why the Center for Public Integrity undertook its investigation of the clandestine, almost mysterious world of federal lobbying. To do this, the computer wizards at the Center built a database containing, altogether, 2.1 million bits of information. We cleaned and coded the data, and put it all up on our website—the first time the public has had access to a comprehensive resource on federal lobbying.

LONGTIME RESEARCHERS WERE AMAZED—The Center for Public Integrity has been muckraking in the area of federal lobbying for years. But the new results of our aggregating and classifying of the data surprised even us.

Usually when we think of the Washington influence game, we think of campaign contributions. We look at the millions of dollars that political action committees and wealthy individuals pump into campaigns, and try to discern the extent to which policy followed the political money.

But the amount that lobbyists have reported spending—and there’s some question as to how accurately they report those amounts—each year since 1998 is twice the amount contributed to campaign committees and political parties.

In 2004, lobbyists reported spending more than $2.1 billion. Yet in that same year, there were 10 news articles written about campaign finance for every one that mentioned lobbying, according to the Lexis-Nexis news database.

One result of this inattention is that gaps in disclosure go unnoticed. We found, for example, that 49 of the top 50 lobbying firms—the blue chip firms that know the rules of the trade—have failed to file the required disclosure forms. We also found that 800 individuals, companies and associations have lobbied without even bothering to register. Twenty percent of lobbying forms are routinely filed late.

Further, of the 1,421 companies, unions and other organizations that use both in-house employees and outside firms to lobby the federal government, some 769 of them—54 percent—have inaccurately disclosed to the House and Senate the amount they spent influencing federal policy, failing to reveal tens of millions of dollars paid to lobbyists.

DON’T LOOK—It’s clear that oversight of the lobbying industry is lax. When Congress debated the Lobbying Disclosure Act in 1995, it considered, then rejected, creating a new agency or tasking an existing one—the Federal Election Commission—with overseeing what lobbyists do to disclose their work.

 
Congress preferred to keep that task for itself, and with minimal effort: neither the House nor the Senate offices responsible for keeping records on K Street’s activities have audit or investigative powers.

It is almost impossible, for example, to determine how many lobbyists there actually are in Washington. According to the standard set by the Senate Office of Public Records, there are 30,402 registered lobbyists in Washington. Yet the Center for Public Integrity found that fewer than 14,000 actually filed reports last year. The Senate’s much larger number mainly reflects what is going on with the lobbyists themselves. When lobbyists get out of the influence business, they’re supposed to file a termination form. But thousands of lobbyists never bother to file that form, and the Senate continues to keep them on the active roles, including, in some cases, people who have died.

THE REVOLVING DOOR—We can’t help wondering whether this self-imposed weak disclosure and lax enforcement might have something to do with the many members of Congress who have gone through the “revolving door” from Capitol Hill to lucrative posts at K Street firms. Our research found that almost 250 former members of Congress and federal agency heads are currently registered to lobby their old colleagues. So far, Center researchers have identified 2,200 former government officials who have spun through the revolving door.

Aggregating all this information was a daunting task. Technically, the Senate Office of Public Records database is not available under the Freedom of Information Act. It’s not that the information is forbidden to the public, just that access is difficult. But the Center’s database editor, Daniel Lathrop, had an inspiration and designed a computer code that allowed him to download the database. The next step involved enhancing the data with our own research and organizing it in what we hope is a user-friendly format. With the click of a mouse, you can find out who is lobbying what issues for what company and for how much.

Our database makes these records transparent and helps ensure accountability for lobbyists and for the people being lobbied. We are making the database available as a resource for journalists to use in their reporting and for the public to gain a clearer insight into how our government operates. And how our tax dollars are being spent.

The Center’s Lobby Watch project can tell you that, surprisingly, accounting is an exploding area of legislative interest at this time. This is clear by looking at the number of registrants in this area and examining their lobby disclosure forms. On the other hand, interest in tobacco has declined the most in the past seven years. The database can tell you which 16 firms have more lobbyists than the Senate has senators. It also reveals the 82 companies represented by four or more former member of Congress. Which, by the way, is more than eight entire states have as representatives of their constituencies.

It’s easy to infer why corporations think it’s worth it to invest millions of dollars in lobbying. Take defense giant Lockheed Martin. Since 1998, the company has received more than $94 billion in defense contracts while spending a comparatively little $55 million in lobbying. That’s more than a thousand percent return on its investment.

And it’s not just companies that lobby. During the past seven years, lobbyists have reported spending more than $420 million to lobby the federal government on behalf of all 50 states. They represent local governments, too—even school boards. Similarly, 300 universities have spent well over $133 million lobbying the federal government.

But if you truly want to understand the influence of lobbying, there’s no better demonstration of its power than a look at one of the top lobbying industries: pharmaceuticals.

YOU NEED A PILL—If you were to take a snapshot of the past seven years, you would find that the pharmaceutical and health products industry had spent more influencing the federal government than any other. From 1998 to 2004, the industry spent more than $681 million on federal lobbying. It employed approximately 3,000 lobbyists, a third of whom were former government officials.

In 2003 alone, the industry spent nearly $116 million lobbying the government. That was the year that Congress passed, and President George W. Bush signed, the Medicare Modernization Act of 2003, which created a taxpayer-funded prescription drug benefit for senior citizens.

By adding the benefit to Medicare, the government program that provides health insurance to some 41 million people, the industry found a reliable purchaser for its products. Thanks to a provision in the law (for which the pharmaceutical industry lobbied), government programs like Medicare are barred from negotiating with companies for lower prices.

By its own admission, during the run-up to the 2003 Medicare legislation, an important industry trade group, the Pharmaceutical Research and Manufacturers of America, known as PhRMA, organized more than 800 state and local allies and more than 40 national organizations to support a federal legislative agenda helpful to the drug industry; arranged 50 district meetings with key members of Congress; recruited more than 35 prominent academics to discuss the importance of intellectual property protection in the pharmaceutical field; organized more than 10 issue briefings by research organizations; and hosted fly-in educational visits to Capitol Hill by allies and PhRMA researchers.

 
At the state level, PhRMA formed more than 20 state-based patient coalitions, organized support for state legislation to enhance patient protections in the Medicaid program, and held more than 60 events with lawmakers to promote access to quality health care and generate media coverage of the topic, according to its website.

The onslaught was obviously successful, and considering the value that the prescription drug benefit may ultimately add to drug makers’ bottom lines, a modest investment with the potential for maximum returns. According to a study done in October 2003 by Boston University professors Alan Sager and Deborah Socolar, 61 percent of Medicare prescription-drug spending will become profit for drug companies. The study predicted that over the next eight years drug makers will receive $139 billion in increased profits.

At first glance, it makes less sense why, in 2004—when there were no big-ticket items on Congress’s agenda to rival the Medicare prescription drug benefit—the drug industry spent a whopping $128 million on Washington lobbying. The explanation, of course, is that special interests have interests all around the nation’s capital.

Apart from Congress, the pharmaceutical industry lobbied an array of agencies, including the State Department, the Department of Health and Human Services and the Food and Drug Administration. PhRMA has lobbied 35 federal agencies on 38 issues. Among the agencies it lobbied was the Office of the U.S. Trade Representative (USTR), which shapes the country’s trade agreements with other nations. Since 1998, PhRMA has filed 62 lobbying reports listing contacts with USTR. In fact, it surprised us to find that the trade group now devotes more lobbying resources to USTR than to the FDA, which directly oversees the industry.

It’s impossible to say what the effect of that lobbying is, but consider: current drafts of the Dominican Republic—Central American Free Trade Agreement reflect PhRMA’s desire to remove price controls on drugs and provide intellectual-property protection in proposed member countries. Recently, USTR, at the request of the pharmaceutical industry, pressured Guatemala to repeal a law its government had adopted that permitted lower-cost generic drugs to compete with name-brand prescription drugs. Guatemala complied.

Of course, it’s not just the pharmaceutical industry seeking favors in Washington. Since 1998, nearly 300 companies and organizations, including oil companies and nuclear power trade groups, have sought to influence the agencies responsible for overseeing the integrity of American democracy. Among the more than 200 agencies lobbied during the past six years, one finds Washington’s mercenaries disclosing contacts with the likes of the Federal Election Commission, which regulates political spending and fundraising by candidate, party and political-action committees; the Office of Government Ethics, which helps oversee the executive branch; and the Government Accountability Office, which serves as the investigative arm of Congress.

And since 1998 nearly 500 companies and organizations, from virtually every sector of the economy have reported lobbying the Internal Revenue Service. The nation’s revenue collector is among the top 30 most frequently lobbied federal agencies.

And then there’s the tax code itself. Its 17,000-plus pages—how many there are exactly the IRS can’t say—provide lobbyists with a full-employment guarantee. Since 1998, more than 3,500 companies or organizations have lobbied the federal government on tax issues directly, or hired one of 885 outside firms to do so on their behalf. Lobbyists have slipped provisions into the Internal Revenue Code guaranteeing that one company will be exempted from certain tax rules, while its competitors will have to abide by them. Sometimes whole industries have sought special rules for themselves: pharmaceutical companies managed to keep the unpopular Section 936, which bestowed huge tax breaks on their Puerto Rican manufacturing operations, on the books for years.

But not all of this information is disclosed in the reports that lobbyists file, which is another huge problem with the system. Lobbyists can provide merely vague descriptions of why they are contacting a federal agency, so it is impossible to determine exactly why the nearly 500 companies that mentioned contacting the IRS did so. “Tax” is an acceptable description of what lobbyists wish to influence. But precisely how they want to influence a particular tax is left in the dark. The disclosure forms leave more questions than they answer.

Recently three members of the House of Representatives introduced legislation to improve disclosure, citing the Center’s work. But even the reform bills leave much to be desired. There’s nothing inherently wrong with lobbying, but the public has the right to know who lobbyists are contacting, what bills they’re pushing or opposing, and how they are influencing the democratic system to their own advantage.