Campaign Software Makers All About Disclosure, Except their Own
NGP Software, a leading provider of software for electronically disclosing campaign contributions to the Federal Election Commission, is striving to keep its long-running legal battle with a competitor, Aristotle International, under wraps. In August 2005, plaintiff Aristotle filed suit against NGP alleging unfair business practices, claiming that the firm falsely advertised as serving only Democrats while selling an identical product at a heavy discount to political action committees that supported Republicans.
Aristotle International and NGP have nearly exclusive control of a market that appeared virtually overnight when the FEC introduced electronic filing requirements in 2001. The companies write and sell software that manages records ofand takes a cut ofnearly all campaign donations, which amounted to more than $1 billion in the 2008 election cycle. The software costs tens of thousands of dollars per copy.
In testimony in the suit, NGP Software, which bills itself “the leading provider of fundraising and compliance software for Democratic campaigns” on its Web site, acknowledged a hidden partnership with Capital Advantage under which NGP’s software was re-branded and sold to PACs that, in the 2006 cycle, gave more to Republicans than they did to Republicans. NGP has for years scored points with Democratic congressional offices by advertising that it worked “solely with Democrats and their allies.” Aristotle casts itself as a nonpartisan technology provider.
When a reporter tried to obtain a copy of the partnership agreement with Capital Advantage last Octoberwhich like many records in the case was sealed to the publicNGP said she might be an agent of Aristotle. Aristotle had, in fact, helped the freelance reporter, Alison Gregor, prepare the legal paperwork, and has also launched an aggressive public relations campaign aimed at convincing Democrats to demand a refund and switch to Aristotle. The suit seeks all profits made by NGP by selling to Democrats.
Aristotle, founded in 1983, stressed its nonpartisan credentials as a provider of software for campaignsit boasts that the 1992 presidential campaigns of George H.W. Bush, Bill Clinton and Ross Perot all used its software. The company dominated the market for filing software when the FEC first mandated that House and presidential campaigns and political action committees disclose their contributions electronically, but it has lost a tremendous amount of business to NGP in recent years.
NGP was paid $5.6 million in the 2008 election cycle by PACs and House and presidential candidates, compared to $2.8 million paid to Aristotle, according to the Center for Responsive Politics. (The amount paid by Senate candidates is unknown because they do not file electronically.) Some 169 Democratic members of the House used NGP, while 147 members used Aristotleall but 35 of them Republicans.
Expenditure reports filed with the FEC show that Capital Advantage (now owned by the parent company of newspaper Roll Call) was paid $146,000 for helping groups that, at the time the suit was filed, were far more generous to Republicans than Democrats, raise money. A Web site paid for by Aristotle, NotRobinHood.com, lists Republicans who have received money from those PACs, implying that Democrats who use NGP software are unwittingly supporting their political opponents.
But Capital Advantage has never worked directly for a Republican candidate, and while it did raise money for the RNC, the PACs it raised money for in 2008 gave slightly more money to Democrats than they did Republicans. Corporate PACs tend to support incumbents, and, with some exceptions of course, the party in control of Congress generally gets more support from them.
Aristotle says in court filings that NGP’s fierce determination to keep the agreement secret proves its significance. NGP says they’re not concerned with the truth coming out so much as they are with what Aristotle would do to “misrepresent” the facts.
The rival companies demanded every piece of information they could get out of each other, fishing for damaging information in discovery while agreeing to keep the information sealed from the public. NGP and Aristotle both sought at times to limit disclosure, sealing even deliberations about what should be kept hidden.
By contrast, the heated competition between the firms is no secret in Washington circles.
NGP’s CEO, Nathaniel Pearlman, served as Chief Technology Officer for Hillary Clinton’s 2008 presidential campaign, for which he was paid about $1 million. He began his career at Aristotle, but left to start his own company because he couldn’t stand the thought of helping Republicans, he told the Wall Street Journal in 2006.
In court filings, NGP downplayed Pearlman’s partisanship, arguing instead that Aristotle, whose revenues had actually increased from $8 million to $14 million during the period of NGP’s alleged misconduct, couldn’t prove it was harmed. Even if customers switched, NGP argued, it was because NGP offered a better product, not because of its ideology.
“That’s almost like a person who kills his parents and then claims he’s an orphan,” a lawyer for Aristotle, Robert Bredhoff, told the trial judge. “Their ads emphasize over and over that people choose us because we’re partisan.'”
Secrecyand alleged secrecyis as much an issue in the trial as partisanship. “You used the statement several times that they have a secret, concealed relationship with CapAd,” the judge, Thomas Hogan, asked Bredhoff. “You get that from where?”
“This is not known to the general public,” argued Bredhoff. “The reason they don’t want it out there is because it completely contradicts their message, which they promulgate constantly. It was not known to anybody until this litigation began, and it’s been agreed by the parties in the course of this litigation that that fact remain secret.”
“There’s an awful lot under seal in this case,” Hogan said of the battle between two firms that make money in part from the FEC electronic disclosure business. “I think we may eventually have to look.”