The Multinational Monitor


T H E I R    M A S T E R S '    V O I C E

Contributions Watch
Corporate Lapdog Poses
as Citizen Watchdog

OVER THE SUMMER, a new Washington, D.C. watchdog group, Contributions Watch, released a report on the amount of money trial lawyers have donated to federal candidates. The study received substantial coverage, including a story in The Wall Street Journal and a lengthy cover article in Rupert Murdoch's Weekly Standard. The latter article, written by Carolyn Lochhead, Washington correspondent for The San Francisco Chronicle, called the report from the "non-profit" Contributions Watch a "major breakthrough" that revealed trial lawyers to be the "most powerful special interest group in the United States."

But this study was no disinterested piece of research and Contributions Watch is not an "independent, national research organization committed to examining the amount of special interest money that flows to candidates," as it claimed in the introduction to the trial lawyer report. Documents I obtained (along with John Stauber, co-author of Toxic Sludge is Good For You: Lies, Damn Lies and the Public Relations Industry) reveal that Contributions Watch is a fraud, created and controlled by the State Affairs Company, a powerful Washington, D.C. lobby shop. The "independent" study on trial lawyers was bought and paid for by Philip Morris and the tobacco industry as part of the unceasing campaign for "tort reform" -- a code phrase for the corporate campaign to shield companies from product liability lawsuits stemming from their manufacture and sale of defective or inherently unsafe products. State Affairs even billed Philip Morris for planting the reports in the Journal and the Standard.

Contributions Watch marks a new step in the debasement of the political system by the Fortune 500. Corporations have moved beyond merely setting up bogus "grass-roots" organizations to back their legislative goals. Now they're establishing their own "watchdog" groups.

In the service of tobacco

State Affairs is a PR operation staffed with players from the beltway's bi-partisan political establishment. The firm's partners include:

State Affairs' clients -- who pay billing rates of $200 per hour for partners and $150 per hour for associates -- include Citicorp, Blue Cross/Blue Shield, the National Firearms Association, Wells Fargo Bank and Bering Fisheries, as well as the Democratic National Committee.

But the firm's biggest cash cow is the tobacco industry. Philip Morris is the firm's largest single client. Fee projections prepared earlier this year show that the tobacco maker would account for $35,000 of April's billings of $90,000 and $40,000 of May's billings of $71,000. State Affairs also works for Brown & Williamson Tobacco; Covington & Burling, the tobacco industry's favorite law firm; various statewide chapters of bogus "lawsuit reform" groups; and the National Smokers Alliance.

State Affairs' involvement with the National Smokers Alliance -- a "grassroots" group set up by Burson Marstellar at the behest of Philip Morris -- is particularly close. The documents show that State Affairs advises the Alliance on everything from membership recruitment to the selection of its board of advisers. Internal Philip Morris memoranda reveal that the National Smokers Alliance has an annual budget of roughly $11 million, of which some $7 million is provided by the tobacco maker.

Fronting for tort reformers

Contributions Watch was founded early this year. A memo written by McCloud says the idea for the outfit "came from our work over the past two years on behalf of clients pursuing tort reform in 17 states." Another document, an internal State Affairs business plan, says that even with the GOP's seizure of Congress, "anti-smoking activists have controlled the debate, and politicians from both parties have felt no political pain!" One of the company's primary goals for its tobacco clients is to "raise the stakes for any politician who enters the fray." Most important to the firm's strategy is developing a strategy "that places a premium on actions below the radar of the anti-smoking activists. Tactics must be developed for each unique political situation and not from some standardized political play book."

This, of course, is where Contributions Watch comes in. The documents show that State Affairs provided Contributions Watch with its seed money and then recruited its executive director, Warren Miller, a former research analyst and information specialist for the Federal Election Commission.

State Affairs exercises total control of Contributions Watch. The PR shop charges its clients for Contributions Watch's research reports and then funnels the money through to its subsidiary "watchdog." Until mid-year, State Affairs paid Contributions Watch's employees. The watchdog now has its own payroll but all of its employees except Warren Miller still work out of a State Affairs office. Contributions Watch finally set up an independent office for Miller in late September after a Washington Post reporter asked uncomfortable questions about the group's funding.

Contributions Watch is now applying for foundation grants, as well as trying to sign up corporate subscribers at $10,000 a pop. Ken Cohen, a lawyer for the Exxon Corporation, wrote a solicitation letter to big companies saying that he wanted to bring "a new `watchdog' group" to their attention, "one which I believe deserves the business community's support." Cohen mentioned the trial lawyers study and said that it was "of fundamental importance to legal reform efforts in the United States for this kind of data to be researched and made available to the general public." Targets of the corporate fundraising campaign include General Motors, Ford, Shell, Procter & Gamble, Mobil, Monsanto, Texaco and W.R. Grace.

State Affairs knows very well that exposure of its links to Contributions Watch -- particularly the tobacco connection -- would be fatal. The firm's business plan says that Contributions Watch may sometimes conduct a research study for a corporate sponsor but will not release the report itself if such a step will make the mighty watchdog "look like an advocate for a particular industry." In that case, the sponsor will release the study itself, thereby serving to "inoculate CW from criticism." In a memo from earlier this year, Miller warned that "when the trial lawyer studies currently in the pipeline are released, CW will become extremely vulnerable to attacks that we are nothing more than an arm of the tort reform industry. We need to diversify and release other studies."

Miller asked an attorney for State Affairs, Henry Hart of Hazel & Thomas, what to do if asked by reporters about the source of Contributions Watch's money. Hart suggested that Miller stonewall in cases "where you cannot preclude the possibility that the person making the inquiry has interests hostile to Contributions Watch." Based on Hart's advice, Contributions Watch devised a "Talking Points" memo to help employees deal with the press. If pressed, staffers are to admit that the trial lawyers study was "sponsored by supporters of tort reform" but to insist that Contributions Watch "is an independent, non-profit, non-partisan, non-ideological watchdog research and monitoring organization. We have no position on tort reform. We focus solely on the numbers."

If asked about the links between Contributions Watch and State Affairs, Miller is programmed to reply: "I worked for the FEC as an analyst, and then worked for a time at State Affairs as a research wonk. Back last year, I approached State Affairs with the idea of spinning me off as a non-profit organization. I'm happy to say that Contributions Watch is now an independent organization with our own offices and own board of directors, none of whom, I might add, are employees or directors of State Affairs."

In an adroit step designed to establish legitimacy, Contributions Watch's debut study was on state financial disclosure laws. This brought favorable coverage in a number of newspapers, including The Miami Herald, The Richmond Times-Dispatch, The Seattle Times and The Albuquerque Journal.

Contributions Watch then turned to its true aim, promotion of "tort reform," with the release in July of its perversely titled report, "Off the Radar Screen: Plaintiff's Lawyer Contributions to Federal Candidates." Tobacco industry money, especially from Covington & Burling and Philip Morris, paid for the report and an updated version. In August alone, State Affairs billed the law firm for $65,547.86, much of that to cover data collection for the update. State Affairs billed Philip Morris $13,000 for its work in placing the trial lawyer study in The Wall Street Journal and the Weekly Standard, as well as for time spent by PR shop staffers in "meetings with journalists in Washington to discuss story concepts." (The Journal's story did report that the Contributions Watch study had received funding from "backers of tort overhaul.")

The smear machine

In addition to attention it has received in the media, the ersatz "watchdog" has also duped some consumer groups. Mike Odom, head of the Alabama chapter of Citizen Action, was so impressed with the report on state disclosure laws that he sent a letter to Contributions Watch asking how the two organizations might work together in the future. Contributions Watch now has a proposal in to the Joyce Foundation's Money and Politics Project, which funds legitimate campaign finance reform groups such as the Center for Responsive Politics.

State Affairs is also coordinating a new Contributions Watch investigation designed to smear Consumers Union. In a August 27 letter to Duncan MacDonald, general counsel for Citicorp, State Affairs partner Charles Francis wrote, "I think you will enjoy a major column targeting Consumers Union to appear soon on The Wall Street Journal editorial page. Quoting Tim McVeigh, `something big is going to happen.'" The explosion came soon after, when The Journal's Max Boot wrote an op-ed article attacking Consumers Union for its alleged ties to trial lawyers.

A broader study in the pipeline will target a host of organizations linked to the corporate world's most hated foe, Ralph Nader. The proposal for the study -- which Contributions Watch plans to have released by a university or think tank -- makes clear that the chief aim will be to discredit enemies of the tobacco industry. The Center for Science in the Public Interest was picked for investigation because it once worked on a study "revealing that the ACLU, which defends the rights of tobacco companies to advertise, has accepted large amounts of money from tobacco companies." The proposal calls for coordination with two of the most rabid GOP members of Congress, David McIntosh, R-Indiana, and Ernest Istook, R-Oklahoma.

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