In Capital, Business And Politics Firmly Entwined
USA Today
By Judy Keen
July 31, 2002
Hanging in the bar of The Caucus Room, an expense-account restaurant halfway between the White House and the Capitol, is a painting of an elephant, a donkey, a bull and a bear sitting amiably around a table.
The depiction of the symbols of the Republican Party, the Democratic Party and Wall Street in chummy repose is a metaphor for life in official Washington. Politicians of all persuasions, corporate executives and their lobbyists coexist in an insular universe, bound by money, social connections and self-preservation. It's a facet of Washington life that lawmakers don't usually brag about when they're back home.
Now, corporate accounting scandals and their political fallout have unnerved this cozy community. Cracking down on business abuses doesn't come easily to presidents and lawmakers who depend on corporate cash to underwrite their campaigns and to provide jobs for their family members and often for themselves after they leave office. A new law against corporate corruption won't change any of that.
The scene Tuesday in the White House East Room was a singular event. Bush, a former oil company CEO, signed the law tightening business accounting practices and setting tough penalties for CEOs who violate it.
Congress passed the law in a hurry because lawmakers feared voters' wrath, says Charles Lewis of the Center for Public Integrity, a non-profit group that tracks the influence of money in politics. But "both parties are in up to their necks with these folks," he says.
Until the Enron and WorldCom scandals hit the headlines, the bond between government and business thwarted efforts to tighten controls. Two years ago, the accounting industry successfully headed off a Securities and Exchange Commission effort to bar accounting firms from doing consulting work for the companies they audit. Fifty-two members of Congress backed the industry in letters to the SEC.
Enron lobbied the White House to install its favored picks in key regulatory positions. Enron CEO Kenneth Lay contacted Bush adviser Karl Rove and White House personnel chief Clay Johnson about appointments to the Federal Energy Regulatory Commission. Two of Lay's choices, Pat Wood and Nora Brownell, were appointed.
Some of the ties are obvious. Bush's Cabinet is stocked with former business bosses. Vice President Cheney was CEO of Halliburton, an oil-services company being investigated by the SEC for its accounting practices during his tenure. Both major political parties depend on business sources for about 70% of their income. Members of Congress rely on corporations and their lobbyists to underwrite their campaigns. More and more, companies are putting their headquarters in the Washington area. The region is the nation's third largest high-tech hub.
Big business also is entwined with big government in the social fabric of Washington. Lawmakers, federal officials, business executives and lobbyists serve on the same boards for museums and private schools. They spend weekends together on the sidelines of their children's soccer games.
"What you see in Washington today is a totally incestuous relationship," says Scott Harshbarger, president of Common Cause, a public-interest group. "The culture of influence and arrogance between business and politics" makes it hard for politicians to go after their corporate benefactors with gusto, he says.
Others see nothing inherently wrong. They argue that managers who have experience running companies are vital to government because they know how to meet budgets and goals. Business leaders say their relationships with lawmakers are beneficial because they help shape economic policy that creates jobs. "If we were not here to tell the business side, it would have a detrimental effect on public policy because business creates the wealth that this country depends on," says Hank Cox of the National Association of Manufacturers, the nation's largest industrial trade group.
Republicans have long been labeled the party of business. But the current business scandals are also awkward for Democrats.
For years, center-leaning Democrats have been working to emphasize their pro-growth policies. The strategy has worked, if corporate donations are any guide. Over the past decade, for example, WorldCom, the telecommunications company that filed for bankruptcy protection this month, spread its political contributions evenly between Republicans and Democrats. Over the past five years, the accounting industry gave more money to Democrats on the Senate Banking Committee than to the panel's Republicans.
Even in the current climate, lawmakers find it hard to wean themselves from corporate largesse.
A day after voting this month to limit debate on legislation tightening rules on corporations, 16 Democratic senators flew on corporate jets to Nantucket for a retreat with 250 campaign donors. Jets were supplied by BellSouth, Eli Lilly and FedEx. Among those at the island getaway were Senate Majority Leader Tom Daschle of South Dakota and Sen. Hillary Rodham Clinton of New York.
In 1995, 20 Democrats helped pass the Private Securities Litigation Reform Act, which shielded CEOs from shareholder lawsuits. When President Clinton vetoed it, the Democrats joined Republicans to override his veto. Among Democrats who voted to override the veto were two potential 2004 presidential candidates: Joe Lieberman of Connecticut and John Kerry of Massachusetts.
"Big business doesn't have a party," says lobbyist Haley Barbour. Barbour, a former chairman of the Republican National Committee, is an owner of The Caucus Room, where a porterhouse goes for $36.
Washington's elite social network knows no party affiliations. Boundaries between politics and business blur around dinner tables in Georgetown mansions and at horse shows in Middleburg, Va.
Earlier this month, Republican Fred Malek, chairman of a private venture capital company, hosted a dinner celebrating White House chief of staff Andy Card's designation as the Boy Scouts of America citizen of the year. At the head table with Card were Mac McLarty, a chief of staff in Bill Clinton's White House, former Clinton Transportation secretary Rodney Slater and Sen. Olympia Snowe, R-Maine.
No one in the eclectic group talked shop, says Malek, who ran the senior George Bush's 1992 campaign and headed the Office of Management and Budget in Richard Nixon's White House. "There's politics and then there's the other elements of life."
But Donna Shor, a society columnist for Washington Life magazine, says business conducted in social settings is just done more subtly. A casual chat over dinner negates the need for a workday phone call to discuss a troubling aspect of a pending bill, she says.
"Washington is a very small community, and we all swim in a small pool," Shor says. "Our kids go to school together, wives serve on the same charities and boards and our executives give to the same charities. When you spend that much time together, business and personal tend to blend together."
Overt examples of the merger of government and business in Washington are plentiful:
- Bush's 14-member Cabinet is one of the most business-flavored ever. Former CEOs are in three posts: Paul O'Neill at Treasury, who headed Alcoa; Donald Rumsfeld at Defense, who chaired Gilead Sciences; Don Evans at Commerce, who was CEO of energy services firm Tom Brown. No president since Dwight Eisenhower has had more than one CEO from a major company in his Cabinet.
Colin Powell has never worked in business but is the first secretary of State with an MBA. Card is a former GM executive who also was the auto industry's chief lobbyist. National security adviser Condoleezza Rice was on boards at Chevron and Charles Schwab. Labor Secretary Elaine Chao was on the boards of Northwest Airlines and Columbia/HCA Healthcare. Army Secretary Thomas White spent 11 years at Enron.
- Two dozen of Bush's ambassadors are former company presidents, CEOs, founders or chairmen who donated money to his 2000 campaign. They come from companies that include B.F. Goodrich, Bristol-Myers Squibb and Pace Communications. Presidents often reward big campaign donors with overseas postings.
- Invitations to state dinners are another perk for big donors. Bush invited several CEOs to the White House this month for a dinner for Polish President Aleksander Kwasniewski. Among them: Kenneth Chenault of American Express, Vance Coffman of Lockheed Martin and Sanford Weill of Citigroup.
- Some corporations with business before Congress pay congressional spouses to sit on their boards. The spouses of Sens. Evan Bayh, D-Ind.; Phil Gramm, R-Texas; Tom Harkin, D-Iowa; and Dianne Feinstein, D-Calif., all serve on corporate boards. Some held board seats before their spouses were elected. Compensation varies widely, though a new report says it averages $152,626 a year.
Susan Bayh is on the boards of E Trade Bank, pharmaceutical company Corvas International and health care and insurance company Anthem. Ruth Harkin is on the board of oil company Conoco. Richard Blum, Feinstein's husband, is on the boards of six companies. Wendy Gramm was on Enron's board until June 6. She also gets director's fees from State Farm.
- Among Washington's 20,000 registered lobbyists are former lawmakers and dozens of relatives of members of Congress. No ethics rules outlaw the practice. The most prominent is Linda Daschle, wife of the Senate majority leader — and a top lobbyist on aviation issues. She was deputy administrator of the Federal Aviation Administration from 1993 to 1997. Her clients have included American and Northwest airlines.
Sen. Harry Reid, D-Nev., has two relatives on Washington lobbying firms' payrolls: his son, Key, and son-in-law Steven Barringer. Doris Matsui, wife of Rep. Robert Matsui, D-Calif., lobbies Congress on trade and tax issues. Her husband is on the Ways and Means Committee, which writes tax legislation.
At least one administration official has a lobbyist spouse. Diane Allbaugh, wife of Joe Allbaugh, head of the Federal Emergency Management Agency, lobbies for electrical companies. She was a utilities lobbyist in Texas.
The Democratic and Republican presidential nominating conventions are unabashed festivals of corporate cash. Seven companies, including GM, Microsoft and AT&T, coughed up $1 million each for the Democrats' 2000 gathering in Los Angeles. One, insurer American International Group, gave $2 million. Global Crossing, a telecommunications company that filed for bankruptcy protection in January amid probes of its accounting practices, anted up $250,000. Adelphia Communications, which later disclosed that it guaranteed billions of dollars in loans to the company's founders and filed for bankruptcy protection, gave $100,000.
Eight companies, including GM, AT&T and Microsoft, gave $1 million each to the GOP convention in Philadelphia. Global Crossing and Enron each gave $250,000. Tyco, whose CEO resigned June 3 after being indicted for personal tax evasion, gave $100,000 to the Philadelphia host committee.
The influence of business on government is not new. Woodrow Wilson complained that "the government, which was designed for the people, has got into the hands of the bosses and their employers, the special interests. An invisible empire has been set up above the forms of democracy."
Lewis sees this era's business scandals as a chance for reforms that could crack the empire's foundations by limiting business donations to campaigns, for example.
"Is this a summer moment that will pass? Or is this a serious moment that could lead to a re-examination of how we view government accountability?" he asks.
"What's happening here is public blowback that's terrifying everyone in Washington. Maybe the sleeping beast known as public opinion is starting to awaken."