OCE report on financial reform shows nexus between fundraising and legislating


On Nov. 24, 2009, Sara Conrad, the fundraising consultant for Rep. Joseph Crowley, D-N.Y., sent an email to Michael Stein, head of government relations for financial services giant Morgan Stanley, inviting him to attend a Dec. 10 fundraising reception for Crowley’s campaign. The email was a follow-up to a prior conversation he had with Crowley’s chief of staff, Kate Winkler, about the Ways and Means Committee member's upcoming campaign events. 

Around the same time, Conrad, who worked for Crowley's campaign and not his congressional office, sent several other emails, including similar notes to lobbyists for Time Warner, the Mortgage Bankers Association; like Stein, both were registered to lobby on the Dodd-Frank Financial Reform Bill (H.R. 4173), the biggest overhaul of the nation's investment and banking rules since the Glass-Steagall Act was passed in 1933. Winkler, who worked in Crowley's congressional office and draws a salary from taxpayers, sent an invite directly to a lobbyist for Zurich insurance.

A little more than two weeks later, a day before the House would pass Dodd-Frank, the Time Warner and Zurich lobbyists, a lobbyist from Morgan Stanley and a Mortgage Bankers Association lobbyist were on the attendance list for the Dec. 10 fundraiser and campaign finance disclosures from the Federal Election Commission show that the PACs for all four firms each contributed $1000 to Crowley's campaign.

The Reporting Group has annotated the House Ethics Committee report with research and links to data using Document Cloud, a tool that allows users to make documents more accessible. This story summarizes some of the findings from the Office of Congressional Ethics, showing the nexus between public acts and private interests that exists in Washington fundraising practices.

Communication between Stein and Crowley's office continued after the fundraising invitation was sent. On Dec. 3, 2009, a day after the financial reform bill was introduced in the House and referred to several committees for amendment, Stein wrote an email to Winkler complaining about the “anticompetitive” and “market stifling” Lynch amendment in the bill. Winkler responded that her boss is working on the issue and forwarded the email along to Crowley’s chief legislative aide for financial services. A week later Crowley voted against the amendment, on the same evening of the fundraising reception. Winkler and the legislative aide both attended the event, according to the report issued by the House Committee on Ethics last week.

The ethics committee report cleared Crowley, chair of the New Democrat Coalition and chief deputy whip and two other lawmakers, Reps.Tom Price, R-Ga., and John Campbell, R-Calif., both of whom sit on the Financial Services Committee, of appearing to grant special access to Wall Street donors. In doing so, it disagreed with the findings of the independent Office of Congressional Ethics, which opened the investigation last May, and recommended the cases to the Ethics Committee for further consideration in September.

Here's a list of the fundraisers examined in the ethics report.

When it announced it would not take further action, the Ethics Committee noted that each member hired outside fundraising consultants. The committee saw a “strict separation” between the fundraising and official staffers and also cleared the lawmakers because the events were open to others outside of the financial industry.

However, as in the case of Crowley, emails uncovered by the Office of Congressional Ethics reveal that the separation was not so strict. Official staff were informed weeks in advance about many lobbyists’ interest in donating. For instance, Gregg Sheiowitz of Zurich insurance, who before becoming a lobbyist had served as Crowley’s legislative director, sent an email to both Winkler, who worked for Crowley's official office, and Conrad, who was paid by the campaign, telling them he would attend back in November. By that time, members knew that a vote on H.R. 4173 would come up in December, according to the OCE’s interview with House Financial Services Committee chairman Barney Frank, D-Mass.

For each of these events, the members and their chiefs of staff were given attendance lists which in some cases detailed how big of a check each attendee had committed to give. The fundraising consultants handed over the lists either the day of or the day before the event. Crowley’s two Dec. 10 fundraisers would bring in $90,000, emails exchanges between his consultant and his congressional staff reveal.

Ethics rules say that while a staff member is working on legislation supported by a corporation, and for a period thereafter, the aide should not solicit contributions from that corporation. The Ethics Committee saw nothing improper in the email traffic.

The timing of fundraisers was ‘happenstance’

The Ethics Committee wrote that the timing of floor action related to the bill was uncertain and concluded that fundraisers coinciding with the amending of and voting on H.R. 4173 was “happenstance.”

Not everyone agreed–even those attending fundraisers weeks before the bill was formally introduced. At an Oct. 21 John Campbell fundraising event, just before a committee markup on the overhaul bill, 16 of 17 attendees were registered to lobby on the bill. This timing was enough to raise the eyebrows of one lobbyist, Scott McLucas of KPMG, who wrote in an internal email: “[i]s it wrong for me to reply and say that’s not such a good night given we have this crucial piece of legislation being marked up the next day?” McLucas was on the attendance list for the event, and his PAC contributed $2,500 to Campbell.

Timing, which McLucas raised in his email, was an important factor in the OCE’s overall investigation and findings, the report shows. The OCE considered the House ethics rules, which say though it is acceptable for campaign managers to solicit contributions from people who have gotten favors, members should allow “a decent interval of time to lapse” after the official action to avoid the appearance of impropriety. For some lawmakers working on the financial reform bill, a few hours were sufficient to provide a "decent" interval.  

On Dec. 9, the day before voting on amendments to the bill took place, a member of Crowley’s staff broke good news to a group of lobbyists over email and included Winkler on the email. The staff member, Adam Pase, executive director of the New Democrats Coalition, chaired by Crowley, wrote that amendments proposed by moderate Democrats, many of which were to the liking of the financial industry, would receive a vote in the House, thanks to Crowley's negotiations with leadership. Shanti Stanton of Elmendorf Strategies, whose clients include Time Warner, Verizon, Ernst & Young, all of whom were on the list for the Crowley reception on Dec. 10, was one of the recipients of the email.

After that reception, Crowley and his two top staffers attended a dinner for his leadership PAC, which began at 7 p.m. At the same time, the House was debating the merits of Lynch amendment, which would have prevented any one bank from owning more than 20 percent of derivatives’ clearinghouses. The measure was opposed by big banks. Price, a Republican member of the Financial Services Committee, took to the floor to argue against the amendment because “the people who know about the issue of trading in these areas” were opposed to it. He cited the opposition of the Securities Industry and Financial Markets Association (SIFMA), the American Bankers Assocation Securities Association and NYSE EuroNext.

That afternoon, a few hours before Price argued against the Lynch amendment, lobbyists from Bank of America and Morgan Stanley, two of the five banks that control most of the over-the-counter derivatives market, attended Price's “Financial Services Industry” luncheon; the banks' PACs contributed $1,000 around that time. Bank associations, including the Investment Company Institute and the Financial Services Roundtable also attended. A SIFMA lobbyist was on the attendance list but did not attend, according to the report.

Later that evening, the amendment passed despite the votes of Crowley, Price and Campbell.

Thousands were invited, so there’s nothing to see here

The Ethics Committee also cleared members who held fundraising events for financial industry lobbyists while Congress considered the financial reform bill because the events were open to a broad list of people. Invitations were sometimes sent as “blast” emails to as many as 5,000 people and were planned months ahead. However, those who showed up were interested in financial reform.

And some members had their staffs make sure that word got out to lobbyists for banking interests. For Rep. Tom Price’s Dec.10 lunch, his fundraising consultant asked Bank of America lobbyist Ed Hill and Properties Casualty Insurers Association of America's Paul Kangas to round up other companies’ representatives, specifically mentioning Morgan Stanley. 13 of the 16 actual attendees were registered to lobby on the bill, the OCE wrote.

According to the OCE, 31 of the 42 people expected to attend Crowley’s 5 p.m. holiday reception were either registered to lobby on the bill or represented groups that did, as was all but one of the attendees at Campbell’s October dinner.

Nevertheless, the Ethics Committee concluded that "each Member's fundraising activities raised no appearances of impropriety."