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Up in Smoke

Tobacco Industry Saves on Soft Money, Spends On Advertising and Lobbyists
by Chris BerdikSpecial to Corpwatch
July 28th, 2004

Republicrat Tobacco Addicts
Tobacco Addicts
Cartoonist: Khalil Bendib

It's election season again, and the special-interest cash race is on once more. But this time around, Big Tobacco seems to be fading from the lead pack of contributors. In the last election, tobacco companies backed their favorite candidates to the tune of more than $9 million. As of the end of June, however, even with the presidency on the line, these same companies have not even managed a quarter of that sum, according to Federal Election Commission data.

Is the tobacco industry on the run? It may seem so in the wake of the 1998 multi-state lawsuit settlement for $246 billion, the increasing number of state bans on smoking in restaurants and bars, and an upcoming trial in which the government will seek to recoup $289 billion in "ill-gotten gains" from the tobacco industry.

Still, data from the Center for Responsive Politics, Common Cause, and the Campaign for Tobacco-Free Kids, shows a political system still awash with tobacco dollars. And a closer look reveals that when it comes to buying political influence, Big Tobacco knows you don't always have to be out front to win.

Campaign Contributions by Tobacco Interests:
Tobacco Free Kids and Common Cause Report

Much of the decline in tobacco's campaign spending is due to the fact that this is the first election since the 2002 McCain-Feingold ban on soft-money contributions to political parties. According to the Center for Responsive Politics (CRP), in the previous election cycle, the tobacco companies gave more than $6 million in soft money, mainly to the Republican Party. Between 1995 and the end of 2002, Philip Morris alone put up more than $10.7 million (about $9 million to Republicans), making it number four on the all-time soft-money donor list.

"Tobacco companies were very heavily reliant on soft money," says CRP communications director, Steven Weiss. "So the ban has really hurt them." Indeed, in the ranking of major donors by interest group, tobacco dropped from 41 in 2002 to a current ranking of 63. Nevertheless, Weiss points out that in terms of its donations through Political Action Committees (PACs), around $1.5 million as of June 30, the industry "looks to be right on track" compared with previous elections. And in terms of donations by individuals, with the nearly $770,000 already contributed by tobacco executives, the industry is "way ahead of the game." In the last election cycle, such contributions amounted to only about $550,000. In 2000, they topped out at $690,000.

Although the bulk of political money flows towards the close of any election season, William Corr, executive director of Tobacco-Free Kids, says the numbers he's seen indicate "that tobacco's campaign contributions in every other category are increasing."

A look at the top tobacco-money recipients for this election cycle shows a bit of what's on the industry's federal policy wish list. On top is President Bush, who, as of mid-year, had disclosed nearly $155,000 in tobacco donations. That places him just a hair under the $156,000 taken in by his father during the entire 1992 campaign, and it's the largest pot of tobacco cash taken by anyone since. His challenger, John Kerry, is number 20 on this list, having so far received about $14,500 in tobacco dollars. "Tobacco interests know whom to give to," says CRP's Weiss. "They know who to curry favor with." Thus, no matter who occupies the Oval Office next January, the tobacco companies are clearly hoping he'll be a friend.

It's not uncommon for tobacco industry contributions to both sides of the political duopoly. In the tobacco heartland state, North Carolina, Representative Richard Burr (R-NC) and the former deputy chief of staff for President Clinton, Erskine Bowles are vying for the North Carolina Senate seat vacated by Vice Presidential candidate John Edwards. Burr, a long-time friend of tobacco, is number two on the top tobacco-money recipient list at more than $106,000, the most raked in by any non-presidential candidate since records began to be kept in 1992. Meanwhile, tobacco companies have given Bowles (number eight on the list) just under $23,000.

A key issue for the tobacco industry is a proposal that the U.S. government fund a multi-billion dollar buyout of producers whose income has dropped precipitously as fewer Americans pick up the habit and as cigarette manufacturers increasingly import tobacco from overseas. Both Burr and Bowles, running in a state thick with tobacco farmers, are champions of a buyout. But there are key differences in buyout proposals that have been circulating through Congress. Bowles favors giving the federal Food and Drug Administration (FDA) regulatory authority over tobacco products and their marketing. This position is supported by both public-health advocates such as the American Cancer Society and the king of tobacco companies: Philip Morris (known by the name of its parent company, Altria, since 2003). In exchange for the regulatory control, tobacco farmers and quota holders would get $12 billion over 10 years. But Burr, along with most tobacco companies, opposes giving the FDA this power. As it turns out, Burr has been on Big Tobacco's most-favored list quite often. And the feeling is mutual. In addition to his steadfast defense of tobacco company interests, last year, Burr even took the time to introduce a House Resolution thanking RJ Reynolds for 33 years of sponsoring stock-car races.

Such cozy relationships don't just come from federal campaign contributions, of course. According to figures compiled by Common Cause in their report on tobacco money in politics between August of 2000 and April 2004, tobacco companies have contributed more than $4.2 million to so-called "527 groups," those political committees formed for the purpose of influencing elections through "issue ads" that don't name any candidate. In addition, every year, tobacco companies pay tens of millions to Washington lobbyists who push their agenda. The Common Cause report shows that campaign-finance reform hasn't slowed down lobbying one bit. In 2003, tobacco interests spent $21.2 million on lobbyists (amounting to more than $127,000 for every day Congress was in session). Similar lobbying sums were spent by the industry in the previous four years.

"I think a lot of what they do in their lobbying is defensive-maintaining relationships with members of Congress so they don't join in, or could possibly block, anti-tobacco measures." says Corr of the Tobacco-Free Kids. Indeed, the most recent spike in tobacco lobbying in 1998 correlated with the multi-state settlement and the introduction of comprehensive tobacco legislation by Senator John McCain (R-AZ). Tobacco lobbying that year topped $65 million, and the tobacco control bill was defeated by filibuster.

Meanwhile, tobacco money also continues to pour in on the state level where many recent battles have been fought over raising tobacco taxes and banning smoking in restaurants and bars. In Virginia, for example, in addition to the hundreds of thousands of dollars Philip Morris funnels into state's political coffers every year (more than $871,000 between 2000 and 2003), they have also been the most generous of any special-interest group in terms of lavishing state lawmakers with gifts. In 2003, according to the Virginia Public Access Project, Philip Morris/Altria gave more than $21,000 worth of gifts to state politicians. Over the years, these gifts have included dinners at Richmond steakhouses, invitations to NASCAR events, and the use of Philip Morris's private jet for Virginia Governor, Mark Warner, to attend the 2002 Democratic Governors Association Meeting in San Francisco.

Certainly, all this greasing of wheels has paid off for the tobacco giant. In May, Virginia's first increase in cigarette taxes since the 1960s was narrowly pushed through the state legislature. Nevertheless, the new rate of 30 cents per pack is still lower than it is 41 states. Furthermore, the state legislature also approved a 10-year tax break for Philip Morris. Beginning in 2006, the company will receive an annual credit on its state income tax bill of $6 million against sales of cigarettes manufactured for export.

California

It's not just states in tobacco's heartland whose policy agendas are within the reach of the industry's money. Over the years, California has effectively used its tobacco tax money for cessation and prevention programs with proven results. Between 1988, when Californians approved Proposition 99 to increase the tobacco tax and fund its Tobacco Control Program, and 2003, the state cigarette consumption was cut by more than 60 percent. Consequently, tobacco companies have dumped money into California to battle further tax increases. Since 2001, these companies have spent more than $4.6 million in lobbying and nearly $2.6 million in state campaign contributions, managing to defeat tobacco tax increases proposed for both the 2003 and 2004 state budgets.

"The tobacco companies know California is an important consumer market for them, and they play their politics to win," says Paul Knepprath, the vice president for government relations for the American Lung Association in California. Knepprath also notes the huge increases in tobacco promotional spending that have taken place despite the advertising restrictions put in place by the 1998 multi-state settlement. According to the most recent Federal Trade Commission data, such spending nearly doubled between 1997, the year prior to the settlement ($5.7 billion), and 2001 ($11.2 billion).

Kirk Kleinschmidt, who chairs the California's Tobacco Education and Research Oversight Committee (TEROC) says, "at present, there's this perception that the battle's done and it's time to move on"" As Kleinschmidt notes in his committee's report, Myth of Victory, California advertising has also skyrocketed reaching $1.6 billion, in 2000). In 1989, California's Tobacco Control Program was funded at 40 percent of the industry's statewide spending on tobacco promotion and advertising. By 2000, that ratio had dropped to 12 percent.

Perhaps the most recent impact of tobacco money on California politics was its role in defeating Proposition 56 in March, a measure that would have reduced the legislative majority required to raise state taxes from two thirds to 55 percent. According to public records, tobacco interests put more than $780,000 towards defeating the measure. Of course, because the proposition dealt with taxation generally, tobacco didn't lack for allies, including alcohol companies, who contributed $2,946,106 to the no-on-56 campaign. Indeed, alcohol and tobacco interests often team up to battle state initiatives for increased excise taxes and smoking bans in restaurants and bars. And when tobacco companies can't find allies, they simply create them in the form of front groups. Take, for instance, the Consumers for Responsible Solutions, which in 2002 attempted undermine a proposed workplace smoking ban in Florida with a weaker, countermeasure. The group was bankrolled by Philip Morris and disbanded after its funding source was exposed.

Ruth E. Malone, an associate professor of social and behavioral studies at UCSF and a researcher for UCSF's Institute for Health Policy Studies, says the use of such front groups is in line with Philip Morris changing its name to Altria and running television ads about its charitable donations. "As the tobacco industry engages in their makeover campaign, they don't want to be [seen as] out there throwing their money around," she says.

But throw their money around they do, even at the somewhat reduced rate following the soft-money ban. In California, to date, in the 2003-2004 election cycle, tobacco companies have contributed about $800,000 to electoral candidates, elected officials and party committees. The results are easy to spot. Take Assembly Bill 2997, a measure introduced this year that would have outlawed smoking in cars with a passenger 6 years old or younger. This spring, on the Assembly floor, the measure fell short by four votes of the 41 vote majority it would have needed to pass. The 30 state legislators who voted against the measure took an average of $4,060.67 from tobacco companies in 2003-2004, more than 4 times the average amount taken by the 37 who voted in favor of the ban. There were 13 members of the Assembly who sat out the vote, and their tobacco take averaged nearly 3 times that of those who voted yes.

In addition, according to Paul Knepprath of the American Lung Association of California, behind the scenes there was "tremendous lobbying by Philip Morris" to kill the bill. Tobacco lobbying money flowing into California so far in the 2003-2004 cycle totals more than $1.5 million. And, says Knepprath, it's not just money. "Sometimes [the lobbyists] aren't even arguing issues, but just providing a presence in the capital," he explains.

Indeed lobbyists working for tobacco in Sacramento are very well connected within the halls of political power. Terrance Flanigan, one of the primary lobbyists who have so far been paid $280,000 in 2003-2004 by RJ Reynolds, was the key aid for picking state judges for two governors before entering his current line of work. Robert Naylor, who received a chunk of the nearly $700,000 in lobbying money paid in the same period by Altria/Philip Morris, served as a member of the California Assembly for eight years. Daniel Boatwright, another Altria lobbyist, formally registered to the Kraft Foods subsidiary (which has paid more than $260,000 in lobbying fees so far), was a California legislator for nearly a quarter century, having chaired the Senate Appropriations Committee, the Assembly Ways and Means Committee, the Senate Committee on Business and Professions, among several other prominent committees. Kristy Wiese, who also lobbies for Philip Morris, previously served as the deputy director of the California Department of Consumer Affairs, the group mandated to represent the interests of California consumers before the state legislature.

"They are good at their jobs and they have many old friends," says Knepprath when describing the more informal influence of tobacco lobbyists among lawmakers.

Furthermore, most of these lobbying firms represent several blue-chip clients, besides tobacco companies. "Those companies are passing out a lot of campaign checks," explains Knepprath. "So when [one of these lobbyists] walks in a room, people don't just see tobacco. The totality of your representation can be brought to bear for any of your clients." Of course, some of these multiple representations by lobbying firms are more interesting than others. For instance, Capital Advocacy, a lobbying group raking in some of the more than $340,000 in lobbying fees thus far paid in 2003-2004 by US Tobacco is also a major lobbying group for the California Association of Health Facilities. The firm's lead lobbyist, David Helmsin, spent ten years in the California Department of Health Services.

Another California lobbyist (also previously on the payroll of US Tobacco), Richie Ross, is an example of just how crossed the state's lines of power can be. Over the years, Ross has made millions serving simultaneously as a lobbyist for various special interests and as a chief campaign advisor to state candidates such as Senate President John Burton and Assembly Speaker Herb Wesson. "The worry is, is that candidate beholden to such an adviser and will listen to him more than to his or her constituents," says Bob Stern, president of the nonprofit Center for Governmental Studies in Los Angeles. He adds, "Also, the question is, who is paying these guys during the campaign, the candidate or their lobbying clients?" Legislation introduced in the California Assembly this year to prohibit lobbyists from assuming this kind of dual role has been bogged down in committee. Considering the number of powerful state legislators who've hired Ross and others of his ilk in the past, that shouldn't be much of a surprise.

Nationally of course tobacco is also an adept player in the revolving door governance which is becoming an ever more prominent feature of U.S. political life. Karl Rove, currently President Bush's most trusted political strategist, was once a political consultant for Philip Morris. In addition, before being elected Governor of Mississippi last November, Haley Barbour was a highly paid tobacco lobbyist for years. And, finally, an Altria executive, Scott Fisher, is currently one of two vice chairmen on the "private enterprise" board of directors for the American Legislative Exchange Council (ALEC), a group of conservative lawmakers and big business executives who meet regularly to craft "model legislation" that can then be introduced in state legislatures.

Thus, even without the use of unlimited, federal soft-money donations, the multi-billion dollar tobacco industry has other levers of influence it can pull in this and future election cycles. "I don't think these people have folded up their tents and gone home," says Samantha Sanchez, a senior research fellow at the Institute for Money in State Politics. Indeed, adds Corr of Tobacco-Free Kids, with soft-money gone, "what's left is tens of millions of dollars flowing to the Congress, and with millions and millions more in lobbying they are present ever day, in the face of members of Congress, constantly. McCain-Feingold can't reach the vast bulk of that influence."