Lobbyist's close ties to senator pays off for them both — and clients

PART 4 OF 4

jcheves@herald-leader.comOctober 23, 2006 

Mitch McConnell said Medicare will 'tank in 10 years' if action isn't taken.

MATT GOINS — Herald-Leader Buy Photo

WASHINGTON -- Kentucky farmers needed help from Sen. Mitch McConnell, R-Ky., three years ago as Congress debated a buyout of their government tobacco quotas.

The farmers ended up with the perfect lobbyist to present their case: Gordon Hunter Bates, McConnell's recently departed chief of staff and campaign manager, just getting his start in the private sector.

They signed up as clients of the brand-new Bates Capitol Group, a small firm Bates opened after he was disqualified from the 2003 race for Kentucky lieutenant governor because he had been living in Virginia. Bates charged about $350,000 in fees, and with McConnell's help, the farmers got what they wanted, a $10 billion buyout over a decade.

As the deal was approved, McConnell gave a Senate floor speech and described Bates' role as "extremely important."

"Hunter is like a son to the senator, and having that kind of access is a big help," said Danny McKinney, chief executive of the Burley Tobacco Growers Cooperative Association in Lexington. "Most of the work he did for us was just the two of them in a room, in private, without the rest of us."

Bates soon hired other lobbyists tied to McConnell and is now perceived as a gatekeeper to one of the most powerful figures in the Senate. His business likely will boom if McConnell, now the majority whip, replaces the retiring Senate Majority Leader Bill Frist, R-Tenn., in January, as planned.

From his seat on the Senate Appropriations Committee, McConnell has recommended about $45 million in federal funds for four of Bates' clients, interviews and public records show. The senator has filed or rewritten bills for three other clients, loosening pension contribution rules and making it harder to sue businesses.

Overall, Bates, who is 38, reports that he has charged about $2.4 million in fees to clients helped by McConnell -- more than half of the fees he reports for his first three years as a Washington lobbyist. Those clients have given McConnell about $120,000 in campaign contributions. Most did not give to McConnell until they hired Bates. They declined to say whether Bates, who asks people to give to McConnell, solicited their own donations.

In a city still touchy about the criminal investigations that surround disgraced Republican lobbyist Jack Abramoff, watchdogs are critical of cozy ties between members of Congress and the connected lobbyists whose special-interest work seems to pump money into their campaigns.

Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, a watchdog group, says a new breed of lobbyists is especially troubling: congressional aides who go private not to market their knowledge of Congress, but to sell precious access to their onetime bosses, becoming highly paid doorkeepers.

For example, Sloan said, the high-powered Alexander Strategy Group was founded by former aides to House Majority Leader Tom DeLay, R-Texas, who resigned this year after being indicted.

"Alexander Strategy's whole raison d'etre was that they got you into the room with Tom DeLay ... until they both collapsed in scandal," said Sloan, previously a federal prosecutor and congressional aide.

In a recent interview, McConnell said he helps worthy Kentucky companies whenever he can. If much of his assistance has gone to Bates' clients, that is coincidental and unrelated to their friendship or the money Bates raises for his campaigns, he said.

"I'm not sure who Hunter's client list is," McConnell said. "I have 280 former employees. I know some of them work in this town (as lobbyists). I couldn't tell you who represents who."

Some farmers say McConnell himself sent them to Bates -- "He told us, 'You need to hire Hunter Bates, I can work with Hunter Bates,'" said Versailles farmer Rusty Thompson, a Burley Tobacco Cooperative board member -- which McConnell denied.

Bates declined to be interviewed.

In a prepared statement, Bates wrote: "Working with members of Congress to achieve outcomes that are consistent with shared vision and values is not corrupt, but rather, is a critical part of the democratic process."

"I also have been blessed to work with talented, principled friends that I previously worked with on Capitol Hill and have known for more than five years," he wrote. "Again, such actions would be viewed by most reasonable observers as natural and sensible, not alarming and inappropriate."

Going underground

One beneficiary of Bates' pull with McConnell is eCavern, a Louisville company that leases out space within a 3-million-square-foot, man-made cave near the airport.

Founded in 1999, eCavern hopes to create an underground computer data storage center in a quarry once mined for limestone to pave highways. It promoted itself at trade shows and for three years retained a Louisville lobbyist, Timothy Mulloy, to get federal money.

Mulloy said he introduced eCavern president Mark Roy to Kentucky's congressional delegation but had no luck winning funds for the untested company.

Luck improved once eCavern replaced Mulloy with Bates in 2003. Since 2004, McConnell has set aside $2.5 million for eCavern from the Treasury Department, with $1 million more announced for the coming year.

Under a deal proposed by eCavern, the University of Kentucky will use its cave to study the effectiveness of underground storage of computer data from the financial sector in the event of disasters or terrorist attacks.

"In a post-9/11 world, it is critical that our financial institutions be secure," McConnell said in a 2004 press release. "ECavern is ideally suited to protect critical data and communications facilities."

ECavern came up with the idea and asked UK to join as research partner, said Wendy Baldwin, UK's former executive vice president for research. "They had this unique resource and were thinking, 'Hmm, how do you take advantage of this?'" Baldwin said.

The project is supposed to start this year and continue indefinitely.

UK, which would not allow a tour, pays by far the highest rent in the cave.

Louisville Underground rents out storage elsewhere in the cave for cars, boats and other items, charging from $3 to $5 per square foot annually. UK is paying eCavern $173.60 per square foot for the first 19 months, according to its lease.

eCavern charges so much because of infrastructure improvements needed for computer equipment, such as a raised floor, high-speed Internet access and backup electrical systems, said Larry Williams, a Louisville leasing agent for eCavern and Louisville Underground.

In fact, taxpayers are enhancing eCavern's prospects.

"That's the exciting thing about the Treasury Department project, that it's facilitating improvements to the space that will allow eCavern to leapfrog forward with additional customers in the future," Williams said.

Bates has reported about $400,000 in fees charged to eCavern so far. (In a written statement, Roy -- eCavern's president, who declined to be interviewed -- said that sum is what Bates has charged, but his company has been able to pay Bates only about $7,700 so far. "Hunter Bates is a hero to Kentucky and should be applauded," Roy wrote.)

ECavern officials gave $3,000 in donations to McConnell in 2005. They gave $2,000 to an out-of-state Republican Senate candidate for whom McConnell held a fund-raiser. ECavern also gave $1,000 to the legal defense fund of Tom DeLay, who was indicted on multiple criminal charges.

Independent watchdogs who monitor federal spending say it's not unusual for the government to protect things by burying them, such as the North American Aerospace Defense Command, beneath Cheyenne Mountain in Colorado.

But a commercially owned cave 50 feet under Louisville, with its plans and location revealed by McConnell in press releases, isn't the same thing as NORAD, they said. And if the project is essential, they asked, why is eCavern the only site participating?

"It's the politics of contracting," said Jennifer Porter Gore, spokeswoman for the non-profit Project on Government Oversight. "There was no open competition from other companies that might offer their own ideas on data-storage protection. It's a contract steered to one company by a friendly senator. We find that troubling at best."

McConnell earmarks

ECavern is only one of at least four Bates clients to win federal money from budget "earmarks" added by McConnell. An earmark puts language into spending bills that orders federal agencies to give money to specific companies for projects the agencies did not request. There is no public notice or debate. McConnell has claimed credit for the eCavern earmarks in press releases.

"There's really very little oversight that takes place after an earmark is given out. It's not like when you have a planned project that an agency requests, with competitive bidding and progress reports," said David Williams, vice president for policy at Citizens Against Government Waste, a congressional watchdog.

* In 2005, McConnell earmarked $2.1 million from the Defense Department for Accella Learning, a division of Boardpoint LLC of Lexington, a Bates client.

Accella is developing an "intelligent tutoring system" at the Army's Fort Detrick, in Maryland. In one example in Accella sales material, medical personnel are shown skin sores on a computer and taught to identify the one caused by anthrax.

Bates has charged Boardpoint about $240,000 in fees so far. Director Joe Coons, a Lexington businessman, made a $2,100 donation to McConnell in October 2005. Coons declined through a secretary to comment.

* Bates also lobbies for Appriss Inc. of Louisville, which sells communications technology to law enforcement and owns VINE, the National Victim Notification Network.

Bates has charged Appriss about $260,000 to promote government purchase of its victim-notification products. Scores of local and state police agencies use Appriss products, from the Texas Rangers to the Kentucky Justice Cabinet.

Since 2004, the small Senate budget negotiation teams on which McConnell sat have earmarked $17 million from the Justice Department for the purchase of victim-notification systems. At a Washington news conference about the products in 2004, McConnell praised Appriss for "innovative techniques that are going to help us make children of this country a lot safer."

Appriss values McConnell's assistance, said Mike Davis, Appriss's president. But the money that he helped set aside must be matched by money from state and local governments before police agencies make purchases, Davis said. Even then, Appriss shares the pot with competitors.

"We certainly won't get all of that," Davis said.

Appriss created a political-action committee in 2003 that has given $11,200 to McConnell and $3,000 to out-of-state GOP Senate candidates for whom he bundled donations. Appriss executives and their wives gave $28,400 to McConnell in recent years and $3,000 to out-of-state GOP Senate candidates for whom he held a fund-raiser.

* Bates' work for Voice for Humanity Inc., a Lexington company, won attention last year in a Herald-Leader story. The company sells small audio devices -- similar to iPods -- with recorded messages.

Bates has billed Voice about $200,000 to get federal funding.

Since 2003, McConnell has earmarked $8.3 million for Voice from the State Department to send its devices to Afghanistan and Nigeria, with messages intended to promote democracy or AIDS prevention. McConnell recommended Voice get $15 million more to move into Iran and North Korea.

The State Department paid nearly $8.5 million of the $23.3 million to Voice by this summer, spokesman David Snider said. More than 60,000 of its devices went to Afghanistan alone. State Department officials said the devices are unusual but effective. They cited a study, released in January, of 364 Afghans who listened to the devices before parliamentary elections in 2005.

Voice founder Michael Kane gave $4,200 to McConnell in 2005. He gave $1,000 to an out-of-state Republican Senate candidate for whom McConnell held a fund-raiser.

Changing laws

Some of McConnell's favors for Bates' clients involve changing laws, not appropriating money. The senator has introduced or amended bills for at least three, including UPS, the shipping giant that has its main U.S. air hub in Louisville.

Bates has charged UPS about $400,000 since 2003 to lobby Congress on several topics, such as the company's effort to ease its burden under federal pension-contribution rules.

In 2004, President Bush signed a law to let many large employers delay pension fund contributions for two years because of stock market losses. At the last minute, McConnell persuaded the Bush administration to include the pension fund that covers UPS.

UPS is grateful to McConnell for "making sure" it was added to the plan, said UPS spokesman David Bolger. The UPS PAC has given McConnell more than $45,000 since 1999.

Another Bates client is the American Beverage Association, a trade group for soft-drink makers. Since 2005, Bates has charged it about $100,000 to lobby for a law to shield soda and food companies from obesity-related lawsuits.

Shortly after Bates was hired, McConnell filed that bill, the Common Sense Consumption Act, which states that "fostering a culture of acceptance of personal responsibility is one of the most important ways to promote a healthier society."

McConnell's bill -- similar to one he pushed in 2003 -- won praise from soda, candy and fast-food companies. They face challenges from consumer groups, such as the Center for Science in the Public Interest, which this year sued Louisville-based KFC over "startlingly" high levels of artery-clogging trans fats in its fried chicken.

"It's not Ben & Jerry's fault if you eat too much ice cream. It's not Sara Lee's fault if you eat too much cake," McConnell argued when introducing his 2003 bill. The latest version of his obesity bill awaits committee action. A House version has moved through that chamber.

The association's PAC has given McConnell $2,000 since 2002. The PACs of association members Coca-Cola and Pepsi-Cola have given him at least $25,000.

Finally, Bates has billed the U.S. Chamber of Commerce's Institute for Legal Reform about $260,000 to lobby for McConnell's Common Sense Consumption Act, and for a law to protect corporations from class-action lawsuits, which allow large pools of people who claim related injuries to combine their resources and seek compensation.

Last year, three months after Bates took that client, McConnell co-sponsored the Class Action Fairness Act to make it harder for people to win damages through those kinds of suits. It passed Congress. President Bush signed it into law.

A grinning Chamber official shook McConnell's hand after the Senate vote, shown on the Chamber Web site. The Chamber PAC gave McConnell $2,500 two months later. Corporations represented on its board of directors -- such as Massey Energy, Accenture and BellSouth -- have given tens of thousands of dollars to McConnell.

'The right people'

As Bates prospered, he hired other lobbyists from McConnell's circle. They included Holly Piper, wife of McConnell chief of staff Billy Piper, who left Bates' firm earlier this year. Former McConnell aides Patrick Jennings and Lesley Elliott currently work for the firm.

For all those connections, though, clients say it's the Bates-McConnell relationship that is invaluable.

"He has Mitch McConnell's cell phone number. I know I don't," said Roger Quarles, president of the Tobacco Growers Cooperative.

In his spare time, Bates raises money for McConnell. Louisville lawyer Robert Cusick said Bates approached him and several colleagues last year and urged them to give money to McConnell's re-election fund. Cusick gave $2,500.

Months later, Cusick said, McConnell wrote him a recommendation letter, and President Bush named him to direct the U.S. Office of Government Ethics, a post he desired. Cusick said he does not think his donation prompted the offer. The Senate confirmed Cusick this year. McConnell introduced him as "a man of wisdom, character and judgment."

Bates gets client referrals from other McConnell donors, such as Louisville attorney C. Edward Glasscock, whose law firm provides Bates with Kentucky office space; from other Republicans in the Kentucky congressional delegation, and from McConnell's Senate staff.

Dan Parker, owner of a Louisville environmental management firm, said he spoke by telephone to Billy Piper and McConnell aide Michael Zehr in 2004, seeking federal funds. One of them -- he's not sure which -- suggested he hire Bates, he said.

"They knew I didn't have anyone who could help me in Washington, and within a few weeks, I got a call from Hunter," said Parker, who used Bates for a year. "He got us in front of the right people. He even got us a bill written, but we couldn't quite get it to the floor."

Parker said he never questioned why his senator's office would refer him to a lobbyist. He assumed that's how Washington works.

He declined to say whether Bates recommended the $1,400 he has given the National Republican Congressional Committee, starting six months after he hired the lobbyist. Giving to political parties once you ask for help -- he assumed that's also part of the game. "They've got a business to run as well," Parker said.

Reach John Cheves at jcheves@herald-leader.com.

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