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Mike Rothfeld

Good report, sir.

best regards

steve vaughan

Nicely done. What you've described is a typical Virginia lobbying shop, its not actually one of the bigger ones.
The answer to your scenarios questions is "C," which is why this largely goes unreported, because its not possible to PROVE where the money goes.

Brian W. Schoeneman

I knew that Virginia was pretty wide open when it came to campaign finance rules but I had no idea that there wasn't a Virginia equivalent of the Federal anti-lobbying act in place. Localities and taxpayer funded groups have lobbyists? That just rubs me the wrong way.

reston libertarian

Ben,
I'm surprised this particular post has not garnered more interest than the first two.
A lobbying firm that essentially is being used as a slush fund to mask corporate and taxpayer funded contributions is concerning and eliminates the benefits of our no limit full disclosure laws.

The donations to incumbents and recently elected officials neither surprises nor concerns me as it appears to be a clear attempt to purchase access, which in our system is for sale. The first two posts are critical of this system and rightly so, but we all know that the greater the donations, or the greater the electoral influence, the greater the access.

You implicate that taxpayer funded entities giving donations is likely illegal, which makes logical sense. Is there a specific law that prohibits such donations, and how harsh are the penalties for violating the law?

Finally there are plenty of reasons not to form two corporations such as tax implications, employee problems, and general accounting problems. These excuses will be raised by companies like Kemper, when I agree the primary reason to remain as one entity is to pool the resources of all 41 clients to achieve maximum access for Kemper lobbyists and avoid designating donations as coming from a particular client.

HisRoc

Brian,

Blame the Dillion Rule. Local taxpayer funded governments and agencies have no effective option but to use lobbyists to get the "mother-may-I's" that they need from Richmond to operate.

There is definitely something rotten in Richmond, but why else would anyone spend hundreds of thousands of dollars to win a GA seat that pays $17,640 per year?

Brian W. Schoeneman

HisRoc, what I don't understand is why those local taxpayer funded governments can't simply go to their legislators and work with them rather than having to hire lobbyists to do the work for them. That doesn't make a lot of sense to me.

This kind of thing has been banned in the federal government since 1919. You can't use appropriated funds to lobby Congress. It makes no sense that this is possible on the local level.

HisRoc

Brian,

I agree. As a former military officer in the Pentagon, I am painfully aware of the restrictions on lobbying Congress.

I think that the local governments have to not only rely on their representatives but also use lobbyists to "log-roll" their initiatives through the GA by buying support from representatives in other parts of the state.

Sleazy, isn't it?

Not Paul Blart

Brian, some local governments have lobbyists on their payroll (ie, Loudoun, Prince William, Arlington, and Fairfax). So technically, those localities are going directly to their legislators. Others (Herndon, Vienna, City of Fairfax) cannot afford such spending, so those are the ones that usually put private firms on retainer. It is cheaper than hiring a full-time employee to deal with the issues. Things move so ridiculously fast down in Richmond that localities really do need someone down there minding the store.

Donald

Brian:

One hypothesis that would explain the phenomenon is that "working with" state legislators does not work nearly as well as (essentially) bribing them.

HisRoc

Donald,

Thank you. My point, exactly.

Brian W. Schoeneman

NPB, you'd think that for localities that can't afford their own intergovernmental affairs staff that they'd simply give that job area to a senior staffer rather than spend taxpayer dollars on private lobbyists.

There's nothing wrong with public employees acting as government affairs staff. But when you've got situations like this - with private lobbyists spending taxpayer dollars on campaign contributions, that's a horse of a different color.

I'm not going to go as far as Donald or HisRoc and call this bribery, but I will say is that it gives rise to a considerable appearance of impropriety.

GOP PHANTOM

Kemper's clients are getting their money's worth.
I see Kemper people 24/7
in action during the General Assembly.

Not Paul Blart

Brian, consider that the most success for clients usually comes from having someone who understands how the world works in Richmond. Taking a senior staff member out of the loop of a local government for two months is a huge imposition for smaller governments, not to mention the fact that their success can be limited to the extent they do not understand the GA's wacky processes. That's fundamentally why lobbying exists as a profession in the first place - because lobbyists know the corridors of power like nobody else. If the issue were just as simple as stuffing money in envelopes, lobbyists would not be needed. :)

Larry Sabato's Hairpiece

Maybe I am missing something here.

I guess the implication is that since local governments, etc., cannot make direct donations for access, that part of their fees are essentially understood to be earmarked to provide donations in Kemper's name rather than in the client name as is done with private clients.

Assuming this were true, either Kemper would be collecting a larger fee from government clients to cover the expense of the donation, or retaining less income from government clients due to the additional overhead created by the donation.

Now this should be--albeit often is not--easily verifiable by a look at the disclosure form each lobbyist is required to file in Virginia. Of course, that form is hilarious in both its enforcement and its incompleteness, so you can't.

Because of that, there is no way to know if there is a specific, understood pass-through from local governments to legislative campaign coffers. After all, I would see some business merit in a lobbying firm making a donation in its own name to ensure its own continued access separate from their clients since clients can and do change lobbying firms.

If that is the case, then when is the money no longer "taxpayer money?" When is it now Kemper's money and no longer subject to whatever moral/legal restrictions you apply to public funds. After all, if a road contractor who has been paid exclusively with taxpayer money to fix potholes and maintain roads uses a portion of his income from the job to go and buy blow and hookers, you could easily say he used taxpayer money to do that, since that was his sole income source, or at least an income source intermingled with whatever other funds he has.

Personally, I think this raises a whole different question, which is why are local governments hiring lobbyists in the first place? First of all, many local governments keep a lobbyist/lobbyists on full-time payroll in the form of a "state government liaison" or other job title. Second, aren't all of those legislators who represent portions of Virginia Beach or Fairfax or whatnot supposed to be lobbying for the communities, among their other duties. Between the House and the Senate, Virginia Beach has like 8 legislators that represent parts of the city (I didn't count it up so I may be off slightly). Not only can those legislators lobby their colleagues on issues related to the City, but unlike private lobbyists, they get a vote on everything. What does it say about your legislative delegation's effectiveness or willingness to stand up for the community they serve if the locality has to spend taxpayer money hiring private lobbyists to augment the delegation's efforts?

steve vaughan

LSH-That's a good point. But regional cooperation isn't always what it should be. Because of partisan differences (and frankly sometimes just because the people involved may not get along) regional delegations don't always work together as effectively as you'd think they might. Northern Virginia typically does a better job of this than other areas of the state.

Gretchen Laskas

As with the other Homestead posts, I wanted to think about some things before I started typing. And again, I really appreciate Ben bringing this to our attention.

A few things that jump out at me -- I can think of several reasons why both companies and legislators would prefer to have some relatively anonymous sounding Kemper Consulting officially on their books rather than the names of the companies themselves. One might be the timing of such a donation -- it might appear too obvious for company X to have contributed money around a certain time, but not another, proving embarrassing, even if not illegal or even unethical given today's rules. Thus a company that donates directly, would still have incentives to donate from behind the scenes, so to speak.

I also think Steve's point about regional differences is an important one. Here in Northern VA, either you, your next door neighbor, your close friend or your child's scout leader is as likely to be a lobbyist as, say, someone is likely to be a computer programmer in a place like Silicon Valley. So I'm not surprised that our officials would immediately jump to thinking of using lobbyist as another means to an end, or that other communities would do so. (Not saying this is a good thing, just that it isn't incomprehensible.) Plus, all of us who follow VA politics know that no regional area of VA is opposed to cutting off its nose to spite its face if it means a region it's not happy about also goes nose-less. Thus, having some sort of go between like a Kemper probably keeps the wheels oiled and cooler heads prevailing. (Again, not saying this is a good thing, just trying to figure it all out. Sometimes a cooler head can be more sinisterly calculating that one who is emotionally involved. Grin -- Think Hannibal Lecter as opposed to your average person who comes home and catches his/her spouse in bed with another person!)

Third, I'm cynical enough to admit that my idea of "special interests" are all too often defined as "groups with which I ideologically disagree" and not always "groups which are lobbying the government." After all, I have my own personal priorities and principles, all of which I believe deserve a fair hearing. Of course, the larger point here is what constitutes a "fair hearing" and I think that many of us, on both sides of the partisan divide, are more than tired of what goes on every day in DC and Richmond.

Lastly, one of the points that bothers me personally in Ben's story is the automatic donation to the incumbent. This demonstrates to me the purely cynical nature of lobbying. They are obviously doing cost-benefit analysis, and deciding that the devil you know is better than the devil you don't. Having a stable pool of legislators, even with a set number against you, is less expensive to them than having to take the time, money and effort to learn the likes and dislikes of new people, even if they may, in time, be open to your views. That's beyond cool headed -- that's outright cold blooded. And that's Richmond today. Great.

I've never been a pro-term limits person. (How could I be? I was devastated when Robert Byrd died. WV will never see another like him, which might be good for the rest of the US, but is horrible for WV.) But this does make me one more incentive to work on seats for Democrats that are currently being held by Republicans. Not only do I get a candidate more in keeping with my own values, but I make the lives of lobbyists harder too! Icing on the cake. And it will likely make me a little more cautious when someone suggests simply rubber stamping a Dem incumbent who isn't, in my opinion, Democratic enough. Not that this would be reason enough, but it would be one more reason to think things through instead of simply jumping to a conclusion.

Looking forward to the next installment....

steve vaughan

Gretchen-As you noted, the automatic donation to the incumbent -- with is pretty much standard operating procedure for all the big lobbying firms -- is just the smart money bet. Incumbent members of the General Assembly very rarely lose. Why anger one by donating to his opponent when you can make it up to the challenger, if he does happen to win, with an immediate post-election donation?

Anon

Scenerio D - Kemper brings in money through its fees and retainers from all 41 clients it represents. They opt to use some of the money they earn to make contributions from their firm. It reduces their profit, but keeps their firm name in front of legislators. And most other firms do the same thing - look at any lobbying or law firm that represents a multitude of clients. Their clients make donations, but so does the firm itself.

How is this any different than a county rec and parks director deciding to make a personal political contribution? The director receives taxpayer money in the form of their paycheck in exchange for the services the director provides the county. Then the director decides to use the money they have earned to support the candidate(s) of his or her choice.

Your spin on this story is intriguing, but lacks any evidence of actual wrongdoing.

Not Larry Sabato

How is it different? An individual who wanted to do this would pay taxes on the money in between- making what was left clearly theirs. Kemper doesn't pay taxes on the money because it all stays in one account- kind of like cash in a suitcase.

steve vaughan

NLS-the other question not raise in this discussion is why local government need to pay a lobbying firm when they already have the Virginia Municipal League and Virginia Association of Counties, both of which employ lobbyists, lobbying on their behalf.

Anon

Can you prove that this is a direct pass-through of pre-tax money?

Not Paul Blart

As long as we have the Dillon Rule, where locals have to run to Richmond for permission to pick their own noses, there will be lots of local government lobbyists. The stakes are just too high.

Steve, not all localities are members of VML or VACO, and VML/VACO generally only lobbies on issues that have broad impact to locals. In other words, their job isn't to lobby for Tazewell if they want some specific legislative change, because what Tazewell wants might conflict with what Vienna wants. That's partly why the locals all have their own hired guns.

Not Larry Sabato

Anon, it isn't a pass-through at all because it is all the same account. It's a one step process of pre-tax money.

steve vaughan

Anon: You're right that it's not possible to PROVE that the money from the localities goes to campaign contributions because money is fungible. That's why it's hard to push the story past this point.
While it's not strictly proveable, it's a pretty easy inference. It looks bad. You're right that it might not actually be as bad as it looks, but there's no way to tell. That parable about Ceasar's wife might be appropriate here.

Larry Sabato's Hairpiece

Again, maybe I am missing something, but how is the amount of the donation not-taxable to the donor if it is made from corporate income? It certainly would not be deductible if an individual made the donation beyond a small amount allowed on state taxes for donations made to candidates for state office. It is my understanding that political donations are not deductible for federal income tax purposes and they are deductible from state income taxes to a maximum of like $25 or $50 total. I don't think this can be taken as a write-off the way a gift like a meal or event tickets can be.

Larry Sabato's Hairpiece

Again, maybe I am missing something, but how is the amount of the donation not-taxable to the donor if it is made from corporate income? It certainly would not be deductible if an individual made the donation beyond a small amount allowed on state taxes for donations made to candidates for state office. It is my understanding that political donations are not deductible for federal income tax purposes and they are deductible from state income taxes to a maximum of like $25 or $50 total. I don't think this can be taken as a write-off the way a gift like a meal or event tickets can be.

Not Larry Sabato

LSH, because they are making it directly from the corporate account- the rules you are citing are for individuals that were making political contributions and then claiming it on their taxes.

Larry Sabato's Hairpiece

So they are allowed to take it as a corporate expense tax deduction?

Not Larry Sabato

Why wouldn't they? Political donations are as central to their business as paper to a printing company.

Vivian J Paige

Political donations are not tax deductible per section 162(e) of the tax code.

Not Larry Sabato

Vivian, does that mean that Kemper is paying corporate federal taxes on the $350,000+ they have donated to candidates from their account?

Legal scholar

Yes, any lobbying firm, regardless of its form of organization, makes political contributions on an after-tax basis.

Not So Fast

I worked for a Richmond lobbying firm (not the one mentioned here) and what NLS is saying is absolutely correct. We did not pay taxes on the revenue that was donated to political candidates. The LLC we were set up as paid out through salary (and generous end of year bonuses) all of its monies, and owed no state or federal taxes. Obviously the employees paid taxes on our wages and bonuses, but the shop avoided taxes on the revenues that were donated to Virginia candidates.

Really??

Not So Fast - I think your firm would have been the extreme exception to the norm - and were I whatever firm you worked for I'd be nervous at the moment. Most (if not all) of these companies strictly adhere to the law and wouldn't put themselves or their clients (public or private) in harm's way by using before tax money for this purpose. Many of them are large law firms. I'm fairly certain they know the tax code and follow the rules. We may not like the rules - but you shouldn't accuse them of breaking the law without specific knowledge.

Vivian J Paige

Legal scholar is correct as is Really.

Legal scholar

The income and deductions of an LLC are imputed to the owners - the tax laws apply. This is corporate law 101 - any first year law student at a decent law school could answer this question. It used to be on the bar exam years ago. Really, there's no way to legally avoid the fact that political contributions are not deductible as a business expense, regardless of whether the donor is a person, corporation, LLC, partnership, etc.

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