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US: One big country club: A UK marketing group leads the field in Washington power game

by Stephanie KirchgaessnerFinancial Times
November 26th, 2007

When New York City's Michael Bloomberg launched Mayors Against Illegal Guns, a nationwide campaign seeking to stop the flow of illicit weapons in cities and towns across America, he became a favourite verbal target of the National Rifle Association.

To bring more muscle to its fight in Washington, the mayors' coalition in May hired lobbyists at Dewey Square Group. To succeed, Dewey Square would have to go head-to-head with the NRA's own veteran lobbyists at Ogilvy Government Relations, one of the most powerful and well-connected such operations in Washington.

Although they are on opposite sides in the gun issue, the lobbying outfits do have one thing in common: both are owned by WPP, the UK marketing group.

WPP is best known as a powerhouse in the corporate communications business. Sir Martin Sorrell, its chief executive, has transformed what was once a business making wire baskets into the world's second-largest marketing services group. What has received less attention, however, is how WPP has also grown into a force in US political communications.

In setting its sights on Capitol Hill, WPP has targeted one of the most promising growth industries in America. The influence-peddling business was 5bn) last year, a 72 per cent increase from as recently as 1998, accoworth $2.45bn (1.18bn, 1.6bn) according to the Center for Responsive Politics, a research group that tracks money in politics.

The lobbying and public relations industry influences nearly every significant decision made in Washington. Lobbyists finance campaigns, shape proposals that become law, help create regulatory loopholes and tax breaks and play a key role in directing billions of dollars in government contracts to their clients. In 2000 there were 16,342 registered lobbyists. Today, that figure has more than doubled to 35,844.

At a time when the capital's public relations and lobbying organisations are more influential than ever, no single company has concentrated as much Washington influence under one corporate roof as WPP.

The British group owns three big public relations companies with Washington expertise: Burson-Marsteller, Ogilvy, and Hill & Knowlton. It owns BKSH & Associates, a lobbying shop, and Penn, Schoen and Berland, a pollster, both of which are units of Burson. It also owns Timmons and Company, Quinn Gillespie, and Wexler & Walker, three other lobbying operations.

It owns smaller niche entities, such as Dewey Square and Direct Impact, which specialise in creating "grassroots campaigns" for corporate clients who are seeking to influence local elected leaders and community groups. It also owns Public Strategies, a lobbying and consulting business based in Texas.

WPP's network of companies in Washington is remarkable not just because of the cache of brands it has acquired over the years but because of the number of political heavyweights who run the operations and count themselves part of the WPP family. They include some of the most important fundraisers, former government officials, consultants and media advisers of recent political campaigns and in the 2008 presidential race.

Among them are Mark Penn, the chief executive of Burson and chief adviser to Senator Hillary Clinton, the Democratic frontrunner; Wayne Berman, a top fundraiser to President George W.?Bush and vice-chairman of Republican Senator John McCain's White House campaign; Dan Bartlett, who served as counsellor to Mr Bush; Mark McKinnon, who was chief media adviser for Mr Bush in his 2000 and 2004 campaigns and these days advises Mr McCain; and Michael Whouley, a former senior adviser to Senator John Kerry who helped the 2004 Democratic candidate clinch his crucial caucus victory in Iowa.


Mr McKinnon and Mr Whouley, in particular, are seen as being among the slickest political operatives in their respective parties - with skills that WPP's network of companies offers to corporate clients and foreign politicians seeking to make inroads in the US and at home.

The WPP network has even represented both sides of the political fight in Pakistan. Early this year, the People's Party of Pakistan and Benazir Bhutto, the former prime minister who leads it, hired Burson and its subsidiaries for $28,500 a month (plus a one-time fee of $75,000) to help convince US government officials that Ms Bhutto was still "relevant" to the democratic process in Pakistan. Last year, the government of General Pervez Musharraf, Ms Bhutto's political rival, had turned to WPP for help in building its image in the US when it hired Quinn Gillespie, a lobby group whose co-founder, Ed Gillespie, now serves as a White House counsellor.

Its mission was to convince lawmakers to support a free trade agreement with Pakistan and promote it as a "reliable and attractive member of the global economic community". The work of the two units overlapped for a month, according to records.

WPP's reach raises questions about whether there is a limit to the number of companies, candidates and issues a single corporation and its network can represent. Craig Holman, a campaign finance lobbyist for Public Citizen, a Washington watchdog, says WPP epitomises the "monopolisation" of the influence industry that has Capitol Hill in its grip.

"It represents the devolution of lobbying through American history," he says. "The right to petition the government is in the constitution, so it is a constitutional right. But it has devolved from citizens into these huge for-profit conglomerates. It has got to the point where citizens have been pressed out of Capitol Hill and these for-profit businesses have a permanent voice here."

Mr Holman adds: "Those types of huge conglomerates can afford hiring former members of Congress. They go for about $2m a year and, once you hire those, you are the one who is controlling Capitol Hill." He says the government's interaction with business interests has become less transparent because of the convergence of lobbying groups, which must disclose who their clients are, with public relations companies, which do not have to reveal their clients' identity.

The increasing blurring of lines between political and corporate advisers, which is epitomised by Mr Penn's dual role as chief executive of Burson and adviser and confidant to Mrs Clinton, has also drawn scrutiny from the New York senator's rivals and union organisers.

At the heart of the criticism are allegations that the leading Democratic candidate espouses one set of values, while her chief strategist runs an operation that contradicts them by being pro-corporate and representing "union-busting" clients such as Cintas, the business services group that has fought unionisation efforts by its workers. Mr Penn says he personally does not represent clients on labour issues and adds that those who attempt to connect his work for Burson with the campaign are playing a "false game of gotcha".

"First, Burson is not working for the Clinton campaign, only myself and people from Penn, Schoen and Berland," says Mr Penn. (That company is a unit of Burson.) "Second, Burson has a 50-year history as a bipartisan firm and the clients that have been referenced are not clients I ever worked for, nor had any connection with," he says.

Burson has come under fire for its representation of other controversial clients. Last month it cut ties with Blackwater USA, the security group whose Baghdad guards are accused of killing 17 Iraqi civilians in September. The relationship, which began after the deaths, ended following criticism from John Edwards, Mrs Clinton's rival, who likened Mr Penn to Karl Rove, former senior adviser to Mr Bush. It was a WPP executive who made the decision not to extend the contract, according to people familiar with the matter.

Burson also recently ended its work with Countrywide, the embattled mortgage lender, though the circumstances of that separation are unclear. "Countrywide was a client of Burson but that ended," says Mr Penn, declining to elaborate.

In Washington, where lobbying and public relations are not closely regulated by any independent body, the saying goes that a conflict is only a conflict when a client says there is one. Some WPP clients, when asked, seem relaxed about the possibility that the outfit they hire to represent their interests may have the same owner as one that works for a competitor.

In the case of Mayors Against Illegal Guns and the NRA, each says it is not concerned about the potential for conflict even though each relies on companies that are owned by WPP. A spokesperson for Mr Bloomberg's anti-gun coalition initially said he was not familiar with WPP or the fact that it owned another unit that represented the NRA. A day later, after discussing the matter with lobbyists at Dewey Square, the coalition said it was happy with its representation.

Mr Bloomberg, the billionaire businessman-turned-politician, also has other ties to WPP. In 2005, his campaign for the mayoralty paid more than $17m to Penn, Schoen and Berland, in the most expensive electoral tussle in New York City history. It paid off on polling day, when Mr Bloomberg beat Fernando Ferrer, his Democratic rival, by 20 percentage points.

Since then, Mr Bloomberg has been castigated by the NRA for using his "tentacles" to extend "his reach, and his illegal anti-gun tactics, across America". Whatever WPP's role was in helping its rivals, the NRA nevertheless expresses satisfaction with its lobbyists at the WPP-owned Ogilvy: "They do a good job for us," says Andrew Arulanandam, an NRA official. "We are aware of that relationship ... But there have been assurances of firewalls." The pro-gun lobby has paid Ogilvy Government Relations $720,000 in fees since WPP took over the company, previously the Federalist Group, in 2005.

WPP is not the only company in Washington that has built up its arsenal in the US lobbying industry. But it is among the largest. In the first six months of this year, companies held by WPP generated an estimated $33.6m in lobbying fees, not including its public relations and consulting work in the capital, which is not publicly disclosed.

The figure represents only a fraction of WPP's total sales of roughly $12bn a year, but it trumps lobbying fees generated by two large law firms in town that are the largest single-brand lobby shops in Washington: Patton Boggs and Akin Gump. They generated $19.2m and $15.2m respectively in publicly disclosed lobbying fees during the first six months of 2007. Lobbying entities owned by Interpublic, a WPP rival that owns Cassidy and Associates, another big lobby shop, recorded $15.9m.

One financial services lobbyist who asks not to be named says he is sceptical about the role of large groups such as WPP that serve as holding companies for competing lobby and public affairs operations, because there are no regulatory restrictions that prevent senior corporate officials from discussing clients with one another.

"You could conceivably have company A and B working against each other on one issue and working together on another issue. This is a big country club," the person says, recalling how one lobbying industry veteran used to quip that there was no such thing as a conflict for clients who were worth less than $40,000 in fees.

To this ambiguity is added the complication that public relations houses do not have to disclose who they are working for or which corporate or political interest lies behind a campaign.

For example, Burson has recently been conducting a behind-the-scenes campaign on behalf of Microsoft, the software provider, to generate opposition to the proposed takeover of DoubleClick, the online advertising company, by Google, the internet giant.

When Burson sent an e-mail to a Financial Times journalist this year that pointed to "severe risks to privacy" posed by Google's desktop search product, the company suggested it was doing so on behalf of a group of "privacy experts" including Larry Ponemon, an independent researcher. In the e-mail, Burson did not identify its client as Microsoft.

When asked about the e-mail, the Burson employee who sent it said it was meant to "support" Mr Ponemon's institute. She later confirmed that it was sent on behalf of a Microsoft-sponsored initiative that is opposed to the DoubleClick deal. Mr Ponemon says he is flattered by the attention but did not hire Burson and is concerned about the "optics" the e-mail created.

Attempts to regulate influence- peddlers in Washington have generally been feeble. While public relations outfits are not regulated at all, lobbying reforms passed by Congress in the wake of the scandal surrounding Jack Abramoff, the lobbyist convicted of corruption in 2006, are centred on relationships with lawmakers, not on duties to clients.

Higher standards are set for law firms, such as Akin Gump, which have lobbying practices. They are regulated by state bar associations, which generally enforce conflict-of-interest rules that in most cases stop them representing opposing sides.

Daniel Joseph, a partner at Akin Gump who also serves on the Washington DC bar's legal ethics committee, says one theory behind the conflict-of-interest rules that apply to all individuals who work at law firms is that attorneys, who are obliged vigorously to represent their clients, might pull their punches if they thought that by helping one client they could hurt the interests of another. "A law firm could not simultaneously represent two clients who were taking opposing positions in lobbying," he says.

With no such stricture applying to public relations houses, activists such as Mr Holman raise the persistent issue of how many clients, on how many issues, a company such as WPP can take on before the interests of clients begin to conflict. "We are seeing a mega-corporation hold many of the largest, most influential firms in Washington under one roof. They have clients who are competing against each other. Any individual client that hires one of these firms cannot be guaranteed that the firm will represent their interests," Mr Holman says.

Sitting in his office just a block off the lobbyist-favoured K Street, Howard Paster, vice-president of public relations and public affairs at WPP and former head of legislative affairs during the Bill Clinton administration, says he is not bothered when companies within the WPP family have clients that oppose one another on issues on Capitol Hill. The situation is no different, he says, from two advertising agencies within WPP working for competing shampoo manufacturers.

"I don't see where a different value applies. What you can't do is have one person working two sides of the same issue," he says, emphasising that companies within WPP operate independently. "I think the ethical standards are high and demonstrably so," he says.

Mr Paster contends that WPP does not "hide" the companies it owns - indeed, a list is provided on WPP's corporate website. Yet it is not by accident that the WPP brand is itself not widely known in the US capital, says Dale Leibach, the founder of Prism Public Affairs, a Washington public affairs company, who worked at Ogilvy when it was acquired by WPP in 1989.

"If WPP was a household name, it would be tough to say, 'Burson, you can work for tobacco companies and Ogilvy, you can work for the American Cancer Society'. I'm not saying it is a giant conspiracy theory - I think it is trying to be smart," says Mr Leibach.

Another person familiar with WPP underscores the point. Two years ago, Sir Martin made "a big push", the person says, for all the WPP companies to consolidate their office space into one or two buildings to save costs. "Nobody in Washington wanted to be a part of that, because the notion of clients coming into the building, seeing all of them, knowing these companies were opposed to them on key issues, wouldn't fly very well."

Mr Paster says there "are always efforts to achieve efficiencies" but describes the anecdote as a "gross exaggeration" and adds that no "non-affiliated" WPP agencies are located together in Washington.

WPP's assertion that its operations in the US capital consist of little more than a group of independently run PR and lobby groups contrasts with the vision Sir Martin set out in an interview with the Financial Times two years ago. Then, the executive pointed out that his belief in WPP's activist corporate "centre" set him apart from his competitors, who operated "holding companies", not a parent company.

But asked about the Washington operations for this article, Sir Martin plays down WPP's across-the-group role: "Unlike accountancy firms or consulting companies or investment banks, which operate as single brands and sort out a conflict at the centre, we have many brands, operating independently with their own authority, so there is no risk of conflicts among our operating companies," he maintains.


"We often have very complex arrangements to ensure that those Chinese walls are enforced. You do that by physical audit, financial audit, by ensuring geographical separation of people and ensuring people don't work on conflicting business unless there is a strict and significant cooling-off period."

When it comes to Mr Penn, both WPP executives and Mrs Clinton's campaign say the pollster's day job as Burson chief executive has no crossover with - and, indeed, is irrelevant to - his work as her top adviser. Mr Paster insists that WPP has no role in deciding which clients its companies represent - though he says they will not work for states or groups that would bring disrepute to WPP.

On the decision last month that Burson would not extend its relationship with Blackwater USA, Mr Paster says only: "I can say unequivocally that the decision was not made on political terms." Asked about Burson's work for Blackwater, a Clinton campaign official says simply that the ending of the arrangement between those two companies "was the right thing to do".




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