Facing a battle with the Peruvian government over a smelting operation that has caused severe environmental damage to a town in the Andean mountains, the Renco Group and its owner, billionaire Ira Rennert, assembled a formidable lobbying team in a matter of months that includes eight former government officials from five different Washington firms, and has succeeded in getting members of Congress from both parties and the Obama administration to aid it in its cause.

Renco Group’s hiring spree, uncovered using Sunlight’s Lobbying Registration Tracker, shows how private interests strategically employ lobbyists with insider connections to current officials to influence public policy. However, because lobbyists are not required to disclose which members of Congress they’ve contacted, and because none of Renco Group’s lobbyists would comment for this story, we can only note the connections between the lobbyists and the members of Congress who acted on the company’s behalf.

Among its hires, the Renco Group retained the services of a pair of lobbyists with ties to Rep. Donald Payne, D-N.J., and House Financial Services Committee chairman Spencer Bachus, R-Ala. In January, both lawmakers wrote letters to the Treasury Department about Doe Run Peru (DRP), Renco’s subsidiary, and its dispute with the Peruvian government, Treasury letters responding to the congressmen show.

In February, eleven days after his former chief of staff, Kerry McKenney, registered to lobby on Renco’s behalf, Payne had a letter entered into the Congressional Record addressed to Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton in which he expressed a “serious concern” about Lima’s treatment of Doe Run Peru and the Renco Group.

"Secretary Geithner has indicated that they have approached the Peruvian government about the issue," Laverne Alexander, Payne's current chief of staff, said.

At issue is a complicated financial and environmental dispute involving a metal smelter that began operations in 1922 in the town of La Oroya, Peru. The Blacksmith Institute, an organization that focuses on industrial pollution in the developing world, called La Oroya one of the ten most polluted places on earth in 2006—a 2005 study found that nearly all of the children in the town of 35,000 under six suffered from lead poisoning. When it purchased the facility in 1997, Renco promised to remediate some of the contamination, but has received numerous extensions from the Peruvian government, and has yet to complete the work.

The company claims that Lima has failed to uphold its own obligations under the environmental cleanup agreement that was part of the terms under which the smelter was sold to Renco.

The Renco Group is no stranger to environmental controversy—in 1998, the Environmental Protection Agency rated its MagCorp subsidiary, based in Utah, as one of the biggest polluters in the country, and in 2010, its Doe Run subsidiary, based in St. Louis, agreed to spend $65 million to bring the operations of its Missouri facilities into compliance with environmental regulations, and agreed to a $7 million civil penalty for breaking a series of environmental laws.

In the dispute with Peru, members of Congress sided with the company, and pressured the Treasury Department to do the same. In response to the letters from Bachus and Payne, Marisa Lago, the Assistant Treasury Secretary for International Markets and Development, wrote on February 15 that, “Our embassy has been in touch with the Government of Peru on a number of different occasions with respect to this case, emphasizing that we expect it to make a good faith effort to work with DRP to resolve the pending financial and environmental issues.”

Those issues are daunting. Operations at DRP’s smelter in La Oroya, Peru, have been shut down for two years as the company has unsuccessfully sought to borrow money to resume work there. Meanwhile, the Renco Group still faces a lawsuit filed on behalf of bondholders who allege the company misrepresented the environmental liabilities of its MagCorp subsidiary.

Lima’s bankruptcy agency is now considering whether to restructure the idle company or liquidate its assets; Doe Run Peru has filed its intent to commence arbitration through the U.S.-Peru Trade Promotion Agreement. That trade deal allows for a neutral resolution of disputes though an international arbitration court, a fact mentioned by Lago in her letters to Payne and Bachus.

In its lobbying effort, Renco Group hired Palmer C. Hamilton, a former Treasury official and banking lobbyist who hosted a fundraiser with and contributed $18,000 to the campaigns of fellow Alabaman Spencer Bachus. The company also hired former Ways and Means Chairman Jim McCrery, R-N.J., who, as ranking member in the 109th Congress, was instrumental in securing passage of the U.S.-Peru free trade agreement, and Timothy Keeler, the former chief of staff of the United States Trade Representative office, whose responsibilities included overseeing the implementation of free trade agreements. Over a span of 82 days beginning in November 2010, Renco Group hired eight former government officials working at five different Washington firms. So far, those firms have reported receiving $245,000 to lobby.

Renco Group’s headquarters are in New York, as is Fair Field, the largest mansion in the United States and the home of the company’s owner, billionaire Ira Rennert, ranked by Forbes in 2010 as the 144th wealthiest man in the world, with a fortune estimated at $5.3 billion.

For more on this story, read the complete report and background information at the Reporting Group site.

If ever we saw the fruits, and possibilities, of disclosure and transparency, it is in this New York Times profile of Treasury Secretary Timothy Geithner. The article is based largely off of the Freedom of Information Act (FOIA) release of Geithner's 2007-2008 schedule when he served as president of the New York Federal Reserve Bank. The 658-page schedule is a monument, not only to the FOIA system (and to the new "presumption towards disclosure" ordered by President Obama and AG Holder), but also to what active disclosure could look like. Imagine these records released as the meetings were happening.

While the schedule rarely explains the contents of the meetings, the running list of financial titans tells its own story. As Joseph Stiglitz explains in the Times article:

“I don’t think that Tim Geithner was motivated by anything other than concern to get the financial system working again,” Mr. Stiglitz said. “But I think that mindsets can be shaped by people you associate with, and you come to think that what’s good for Wall Street is good for America.”

The Geithner profile shows his repeated meetings with Wall Street titans, particularly executives and high-level employees of Citigroup, the once-mighty superbank. The disclosure of these meetings helps explain the decisions that Geithner made during his term at the New York Fed and as Treasury Secretary. They are a vital part of the public record.

In Washington, the disclosure of these kinds of contacts would also be vitally important, not only for public consumption but for the awareness of lawmakers. If we were allowed to see the schedules of contacts made by lobbyists and influencers, stories like these -- pulling back the curtain -- would proliferate. Imagine every contact by a registered lobbyist or influencer to a congressional office and executive branch agency reported into a database, made into a schedule, and made available online.

This kind of transparency would alter the way the public sees politics in Washington. It would also provide lawmakers and others an important view into the pressure tactics of interest groups and lobbyists, something that they ought to be privvy to, to help make better decisions in their representative capacity. The more real-time disclosure we have the more likely stories like the Geithner profile will be able to come out while decisions are being made and not through when we are looking through the rear-view mirror.

As the bailouts mount serious questions remain about the future formation of the economy and the government. These questions revolve not just around policies, but around principles. One of those principles that everyone--senators, congressmen, newspapers, the President--has stated support for is transparency. But, the battle for real transparency in the current cleanup of the market mess is woefully wanting.

Bloomberg reports today that the Federal Reserve has rejected their Freedom of Information Act (FOIA) request for information relating to the nearly $2 trillion in Fed loans to banks and securities firms. The Fed states that their refusal to fulfill the FOIA request is due to an "exemption under trade secrets." Also, the source of a lot of the lending is the Federal Reserve Bank of New York, the former perch of Treasury Secretary Geithner, which is not subject to FOIA law.

Congress was able to extract some transparency from the Fed in the past, as Bloomberg recounts:

On Feb. 23, the Fed disclosed a breakdown by broad categories for $1.81 trillion of collateral pledged by banks and bond dealers as of Dec. 17 after Congress demanded more transparency from the central bank.

The largest portions of collateral being held by the Fed at that time were $456 billion in commercial loans, $203 billion in consumer loans and $159 billion in residential mortgages, according to the central bank’s Web site. It didn’t identify any loans or provide their credit ratings and said it will update the figures about every two months.

The Fed, however, is still remaining intransigent in their opposition to transparency in their lending. Aside from the refusal to disclose lending to these firms, the Fed is also refusing to provide details about the bailout of A.I.G., particularly the counterparties to the bailout. Meanwhile, the details of new transparency requirements for TARP and TALF recipients are still rather vague.

It is really important to stand firm in the insistence on transparency at the outset of this recreation of our economic and governmental spheres. All information that can be made public about the lengths taxpayer money is being used to finance the stabilization of private firms must be made available. Similarly, all efforts by private firms to influence the public sphere must be made available. The financial crisis was abetted by an institutional crisis in government caused by excessive political influence--lobbying, PAC money, campaign contributions. These influencing actions need to be made transparent just as much as the money pouring from the public coffers into private companies. That means real time transparency! When a lobbyist meets with a lawmaker or a regulator, it must be reported within 24 hours. When a CEO makes a campaign contribution, it must be reported within 24 hours.

When Louis Brandeis called for "Sunlight as the best disinfectant" (first published in 1913) he was discussing the new financial instruments of the early 20th century. His famous line was resurrected again after those financial instuments failed leading to the Great Depression. This crisis requires a more thorough implementation of Brandeis' ideal of transparency in our government and our markets. Without that we are asking to repeat the mistakes leading up to our current situation.

Just yesterday, I was posting about restricting TARP firms from using funds for political influence. Today, Treasury Secretary Tim Geithner went a step further and placed restrictions on the lobbying of Treasury Department employees by recipients receiving TARP funds. According to the AP:

Treasury's new rules restrict the contact officials can have with lobbyists in connection with applications for funds from the bailout program. The new restrictions are modeled on the limits that are imposed on political lobbying of Treasury Department officials on tax matters.

In making required reports to Congress on the operation of the $700 billion rescue program, officials will have to certify that each investment decision was based only on objective criteria and the facts of each case.

The rescue program will be required to publish a detailed description of the review process conducted in making the awards, and no bank will be considered for an award unless it was recommended for the assistance by the firm's primary regulator.

The new rules come in the wake of fresh lobbying reports filed with the government showing some big banks stepped up their lobbying efforts late last year even as they received billions of dollars from the bailout program.

This is a very important step in the process of making TARP and any other bailout free from the ordinary process of influence in Washington. The Feinstein-Snowe bill (S. 133) still remains important, as TARP recipients could still lobby other agencies, the White House, or Congress with TARP funds.

Here's a link to the actual Press Release from Treasury.

Today, President-Elect Barack Obama named the key members of economic team including Timothy Geithner as Treasury Secretary and Larry Summers as head of the National Economic Council. Notably, many in Obama's economic circle are acolytes of former Clinton Treasury Secretary Robert Rubin, the subject of much talk in the wake of the bailout of Citigroup. Rubin, a revolving door spinner between Wall Street and Washington, began his career at Goldman Sachs, moved to the National Economic Council, then Treasury, and in 1999, left government and joined Citigroup. Rubin's story provides a telling story about the conflicts of interest that can occur when a high-ranking official moves so seemlessly between the public and private sector.

In this New York Times article addressing Citigroup's economic troubles, Rubin appears as a key player, in both the deregulation that allowed the bank to become so large and unwieldy and as an adviser to the bank urging riskier behavior:

The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.

Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.

...

But while Mr. Rubin certainly did not have direct responsibility for a Citigroup unit, he was an architect of the bank’s strategy.

In 2005, as Citigroup began its effort to expand from within, Mr. Rubin peppered his colleagues with questions as they formulated the plan. According to current and former colleagues, he believed that Citigroup was falling behind rivals like Morgan Stanley and Goldman, and he pushed to bulk up the bank’s high-growth fixed-income trading, including the C.D.O. business.

Former colleagues said Mr. Rubin also encouraged Mr. Prince to broaden the bank’s appetite for risk, provided that it also upgraded oversight — though the Federal Reserve later would conclude that the bank’s oversight remained inadequate.

Once the strategy was outlined, Mr. Rubin helped Mr. Prince gain the board’s confidence that it would work.

The conflict of interest line is often easy to draw when involving revolving door moves from Washington to K Street. When high-powered officials move into other parts of the private sector they still maintain large amounts of influence in Washington, and have just as much of a need to influence officials as lobbyists. (Citigroup's lobbying expenses are close to $6 million for the year.)

In Rubin's case, the industry into which he went has fallen into complete turmoil roiling not only economic markets but politics in Washington. Yet, Rubin remains a top transition adviser to President-Elect Obama and, as noted above, his proteges are among Obama's top picks for economic positions.

Despite Rubin's hand in the current crisis and his revolving door tale, the line between his work and the new Obama appointments is not so clear. While Rubin came from the private sector, Geithner, Obama's Treasury pick, does not. Geithner has spent nearly his entire career in the public sector from positions in the Treasury Department, the IMF, and the New York Federal Reserve. This is quite a change of pace from the recent history of Treasury Secretaries. All three of President Bush's Treasury Secretaries were CEOs, with the current occupant Hank Paulson, like Rubin, the former CEO of Goldman Sachs. Going back more than 30 years, only George Schultz, Treasury Secretary under Nixon, and Larry Summers came into the job without a stint in the private sector. (They both came from acadamia.)

As Rubin's revolving door tale shows, conflicts of interest can pop up during government service and for years to come afterwords. The importance of controling these kind of situations is seen in the types of appointments like Geithner's and the revolving door restrictions that Obama has said he will implement.

For more discussion of revolving door policies, see this Sunlight Policy Review post from last week.