Wall Street Paying High Price to Keep Cash By Jeffrey H. Birnbaum
The nascent fight over whether to raise taxes on Wall Street hot shots has become one of the year's biggest lobbying bonanzas.
In order to defeat what amounts to two pieces of tax legislation, those new high rollers of finance -- private equity firms and hedge funds -- have been flooding Washington with money. Even though legislation was introduced just this spring, the buyout firms have already distributed at least $5.5 million in lobbying fees, quadruple what they spent in all of 2006, according to Bloomberg News.
A single lobbying firm -- Ogilvy Government Relations -- received $3.74 million in the first six months of this year from Blackstone Group, one of the world's largest private equity firms. That's the heftiest six-month payment to any lobbyist ever reported -- other than a series of fees delivered from 2003 through 2005 to the law firm now known as Bingham McCutchen.
But the law firm's situation was quite different from Ogilvy's. Bingham McCutchen was a principal player in one of the most complex multiyear negotiations ever undertaken in Washington involving asbestos litigation and legislation. Ogilvy Government Relations, by contrast, is fighting alongside others to block a much more straightforward effort to increase the tax rate paid by private equity managers to the 35 percent range from the current 15 percent.
For that, $3.74 million is a lot of money, lobbyists around town agree. How much is it?
It's 57 percent more than the biggest payment made to a lobbying firm for all of last year. It's 15 times what Ogilvy got from Blackstone in 2006. It's nearly double what disgraced lobbyist Jack Abramoff disclosed receiving in a full year from all but one of the Indian tribes he represented. And even that tribe reported spending less in one year than Blackstone is forking over to Ogilvy in six months. (Those amounts, of course, do not include the tens of millions of dollars in secret payments Abramoff and his associates collected from the tribes.)
Nonetheless, of the hundreds of lobbying firms in the nation's capital, only two dozen received more from all their clients put together than Ogilvy got this year from Blackstone alone through June 30.
An Ogilvy official, who said he was not authorized to speak on the record, acknowledged that the fee is, indeed, large. But he said it is not as large as it seems. About half of it settled unpaid bills from 2006, he said. His assertion is hard to verify, however. Disclosure forms do not reflect what services are bought, only when payment is made. Blackstone declined to comment.
Ogilvy's effort is headed by Wayne L. Berman, a prominent Republican fundraiser and the husband of Lea Berman, a former White House social secretary under President Bush. But he and his team are not alone in the battle.
Private equity firms and hedge funds have hired a who's who of Washington lobbyists. They include Kenneth B. Mehlman, a former chairman of the Republican National Committee who is now with Akin Gump Strauss Hauer & Feld. Akin Gump received $120,000 in the year's first half from Kohlberg Kravis Roberts, a prominent buyout firm, and also got $100,000 during the same period from the Private Equity Council, the industry's trade group, reports show.
Efforts to stop a tax increase have generated business for more than 20 other firms, including the capital's largest, Patton Boggs, which employs former senator John Breaux (D-La.), lobbyists said. Others: Capitol Tax Partners; Johnson, Madigan, Peck, Boland & Stewart; Brownstein Hyatt Farber Schreck; Public Strategies Washington; Capitol Counsel; OBC Group; Elmendorf Strategies; PricewaterhouseCoopers; and the Nickles Group, which is run by former senator Don Nickles (R-Okla.).
These firms don't come cheap, though none are being paid at the pace of Ogilvy. Still, their billings are sure to rise as autumn approaches and lawmakers return to work.