Dick Gephardt's Fall: How a Progressive Stalwart Turned into a Spectacular Political Sellout
In March, months after the government gave an unprecedented $85 billion to AIG, the insurance giant released a list of counterparties, exposing some of the world's top financial institutions as the real recipients of the bailout. First among its peers, Goldman Sachs got a whopping $12.9 billion, despite having claimed in September to be insulated from AIG's troubles. Based on these revelations, Maryland Democratic Congressman Elijah Cummings, who had dogged the financial industry since the crisis began, told his staff to prepare a letter calling for an investigation.
Two Congressional staffers familiar with the matter told The Nation that a draft was circulated to House members on March 23. Within hours, Cummings's office had received a phone call from a lobbying firm hired by Goldman Sachs, making an "insistent but polite" request for a meeting. Cummings, intending to send the letter regardless, granted the audience, and so it was that top Goldman executives like president Gary Cohen and CFO David Viniar arrived the next day. They brought someone else too, a big-name Democratic politician with serious populist credibility: Dick Gephardt.
While Gephardt spent most of his twenty-eight years in national Democratic politics quietly promoting and voting with establishment interests, he is best known for his friendship with labor and advocacy for universal healthcare during two presidential runs. In 2003 he harshly condemned corporate crime, which he said "ruined people's lives for selfishness and greed," and launched his candidacy claiming, "Every proposal I'm making, every idea I'm advancing has a single, central purpose: to revive a failing economy and give working Americans the help and security they need." So why, six years later, was he on Capitol Hill representing one of the biggest players in the largest economic crisis since the Great Depression? And further, why was he recently working for Visa to kill credit card reform, helping Peabody Energy stymie climate change legislation and consulting for UnitedHealth Group alongside Tom Daschle to block meaningful healthcare reform?
As autumn sets in, the progressive agenda on which Barack Obama rode to victory last November has stalled, even with Democrats controlling every branch of government. Key aspects of healthcare reform, like a public option, appear dead; climate change legislation, having narrowly passed the House in June, awaits an uncertain fate in the Senate; the Employee Free Choice Act and financial industry reforms have gone off the grid. Behind all these setbacks is a pattern: with little outright opposition, corporate interests have insinuated themselves into the legislative process to co-opt attempts at reform. As a result, the big-ticket items are rotting away, key provisions have been removed and bills are being weakened beyond recognition behind closed doors.
Certainly there are still those in Congress willing to stand up to pressure from lobbyists--like Cummings, who, after meeting with Gephardt and the Goldman Sachs executives, sent his letter anyway, launching an investigation by TARP inspector general Neil Barofsky. But the broader momentum is with the corporate interests, thanks to players like Gephardt who have escorted them to the bargaining table. In a town where everyone seemingly has a price, Gephardt has distinguished himself, selling his reputation as a pro-labor, pro-universal healthcare, pro-environment expert and advocate to his new corporate masters, giving their efforts to kill and maim reforms a familiar, friendly face in the Democratic establishment. As a result, Gephardt has become a highly sought-after and very effective lobbyist. He has also betrayed nearly every principle he once claimed to hold.
When Gephardt ran for president in 1988, his ads claimed he had "defeated the strongest lobbying effort in history," and even in his waning Congressional years, he hardly seemed a defender of lobbying. "I'm running for president because I've had enough of the oil barons, the status-quo apologists, the special-interest lobbyists running amok," he proclaimed in February 2003. By January, his run for the presidency was over; a year later, he gathered with friends in St. Louis for a retirement party. Many politicians and celebrities paid homage: via video, Bill Clinton and Jimmy Carter lavished praise on him, and sportscaster Bob Costas called him "the best president America never had." When a reporter asked Gephardt about his plans for the future, he said he was going to spend some time with his family and consider a couple of employment opportunities.
On January 1, 2005--before Gephardt's term had even expired--the Congressman's son-in-law signed papers to form a consultancy firm based in Delaware called Gephardt and Associates (now the Gephardt Group). But for most of 2005 it lay dormant as Gephardt joined corporate boards and advised a few big-name companies. Banned from lobbying Congress for a year, he soon discovered there were places outside Washington that needed influencing.
Like California: when Governor Arnold Schwarzenegger introduced legislation that would have opened the door to increased infrastructure privatization in January 2006, Democrats in the legislature balked. So Goldman Sachs, standing to benefit from these policies, sent Gephardt as an emissary to Sacramento, hoping to persuade the state to monetize infrastructure by levying tolls and then leasing roads to private investors for decades. "I've done some work with Goldman Sachs in their capacity as adviser to both the City of Chicago and now the State of Indiana," Gephardt told California lawmakers at a February 14, 2006, hearing, before extolling the virtues of infrastructure privatization if "negotiated properly."
Several years on, the results have been lackluster. In certain cases, poorly negotiated contracts with little oversight have allowed high tolls and, because of failure to estimate the true value of the infrastructure, have given the private sector windfall profits at the expense of local communities. Transit grids have been fragmented, causing unpredictable congestion, leading to significant litigation.
Gephardt has remained committed to the cause of infrastructure privatization, visiting Nevada's legislature in 2007, and at last year's Democratic National Convention joining bankers from Goldman Sachs and JPMorgan Chase to advocate for the practice on a panel discussion. By then, however, Gephardt had a new day job. In June 2005 he joined DLA Piper, a large Washington lobbying firm, as a consultant. He would not lobby, he told the Washington Post at the time; he would just offer "strategic advice." His new boss had other ideas, however, telling the trade publication Influence a few days later, "Once he's able to, he'll lobby if that's something that might be useful." As it turned out, it would be indispensable, because on November 7, 2006, the Democrats recaptured Congress.
A few days later, DLA Piper welcomed "friends, clients, dignitaries," to a postelection briefing featuring Dick Armey and Dick Gephardt. Armey uttered an audible sigh as he began to speak, but Gephardt was upbeat, beginning his remarks with, "Let me get the smile off my face for a minute." He had reason to grin: the value of his services had just risen astronomically. Peabody Energy, for example, approached Gephardt in late 2006 about signing on to lobby for the company. As Frederick Palmer, Peabody's top in-house lobbyist, told the St. Louis Post-Dispatch a year later, "I can meet with a lot of people, but I'm Fred Palmer. He's Dick Gephardt."
Initially, the Gephardt Group claimed to have standards about the types of clients it would represent. In April 2007, soon after the firm's first set of lobbying filings became public, Matthew Gephardt, a founding partner in his father's business, laid out the firm's philosophy: "We're really getting involved with companies that share our values--ones involved in good corporate citizenry, with taking care of their employees, taking care of the environment and their local area as well, investing back in the community."
By these standards, Peabody Energy, the world's largest private coal company and the firm's first registered client, was a bizarre choice. Palmer, a senior vice president with the company, had helped to run the Greening Earth Society, a defunct industry front-group specializing in climate change denial, famously adopting as its motto "CO2 is beneficial to humankind and all of nature." Describing their environmental record as "horrendous," Bruce Nilles, director of the Sierra Club's National Coal Campaign, told me in a recent interview that Peabody's "goal is to burn as much coal as possible."
In an apparent attempt to counter this reputation, Peabody and Gephardt signed on to pushes for "clean coal"--something many environmentalists consider an oxymoron at best. In July Gephardt served as keynote speaker for the Clean Coal Technology Conference in Hope, Arkansas. All the big industry players were there, but several environmental groups, like the Sierra Club, were denied invitations. One speaker complained about excessive environmental regulation, while Mike Ross, the Blue Dog representative now famous for giving the White House daily headaches on healthcare, dropped by to reassure with platitudes like "coal is part of the solution to America's energy problems."
Then there is Peabody's labor record. According to a July 2006 report prepared by Religious Leaders for Coalfield Justice and Interfaith Worker Justice, the company worked hard to strip its mines of unionized workers, with CEO Greg Boyce saying in 2005, "We have reduced the intensity of our unionization, and we would continue on that path." The Rev. Theodore Erickson, a veteran of several coal-country labor disputes, told me that Peabody has been "aggressively decimating its unions" since the 1990s by closing unionized mines and opening new facilities nearby as a minority stakeholder. "Once the mine is fully staffed with nonunion people," Erickson explained, "Peabody will buy the remainder...and the mine is forever nonunion." The Sierra Club has joined union organizers at several recent St. Louis shareholder meetings in joint protests over Peabody's environmental and labor policies. "They're vehemently antiunion," says Nilles.
In March, when Harper's reporter Ken Silverstein noted that Gephardt had signed up the US Chamber of Commerce as a client, a spokeswoman for the Gephardt Group claimed their work was "not by any means anti-labor" because they were not registered to lobby the issue for any of their customers. It's an academic distinction that Gephardt's firm recently repeated as its sole comment in response to a series of detailed questions from The Nation. However, the firm did note one new exception. In July, the National Association of Professional Employer Organizations (NAPEO) retained Gephardt's services to lobby labor, healthcare and tax issues, according to disclosure filings. Professional employer organizations (PEOs) are a $68 billion industry that provides outsourced human resource departments to their clients, which take care of health benefits, workers' compensation and payroll administration. For some small businesses, they provide a cheap and convenient service; but mostly, sources involved with the labor movement told me, PEOs are a buffer between employee and employer, with the PEOs assuming the legal role of employer for entire segments of a company's workforce. After decades spent working to deregulate state labor laws, PEOs are making a renewed attempt to do the same at the federal level, with Gephardt as front man. Flying mostly under the radar--unions have been slow to recognize the threat they represent--PEOs are in a perfect position to make an entry into the legislative process. Under the Bush administration, PEOs had an ally in the White House, and an NLRB ruling was overturned that had allowed employees working in the same office for different employers to organize as a single bargaining unit. According to David West, director of the Center for a Changing Workforce, it will take some time for the matter to come before the Obama administration's NLRB, and PEOs and similar industries are seeking to push their advantage in Congress. "It used to be that they had Republican lobbyists working on this stuff for them, but I think they've realized, particularly in this administration, that they've got to go a whole different way," says West.
When I mentioned Gephardt's new contract with NAPEO during an interview, one prominent labor lawyer paused before saying, "Oh, God. That's kind of creepy." A spokesperson for NAPEO declined to discuss concerns raised by labor about PEOs, but NAPEO's executive vice president, Milan Yager, told The Nation in a subsequent interview that his industry shares goals with the labor movement, such as workplace safety, benefits and compliance with employment law. With regard to Gephardt, Yager offered a glowing review. "He is a man of incredible credibility and ethics and is well regarded in this city," he said, adding that NAPEO was "looking for someone to open doors and help us establish a dialogue [with labor], and there's no better person than Dick Gephardt."
The area where Gephardt has provided his new paymasters the broadest range of services has been healthcare. Lobbying is a patchwork of tasks, as James Thurber, a professor at American University, explained in a recent interview. Most of them require no registration, like marketing; running associations and nonprofits; doing grassroots, toproots and astroturfing; serving as media experts; and joining think tanks. "The $3.1 billion that's recorded spent by federal registered lobbyists is just the tip of the iceberg," Thurber said, before estimating that as many as 90,000 people are involved in Washington's advocacy business.While many firms will contract and subcontract to cover these responsibilities, Gephardt's has served as a one-stop shop, providing all these services to clients in the pharmaceutical and health insurance industries.
With Tom Daschle, Gephardt has advised UnitedHealth Group, one of America's largest private insurers, which has waged a strong campaign against a public option. Since 2007 Gephardt has served on the advisory board of Extend Health, another insurance company, graduating to the board of directors earlier this year. However, his biggest involvement has been with the pharmaceutical industry.
In addition to a large lobbying contract with the Medicines Company, Gephardt serves as chair of the Council for American Medical Innovation (CAMI), formed by and affiliated with PhRMA. It debuted in March, and in this capacity he has hired his own firm to lobby for the organization, to push "the innovation agenda," according to lobbying reports. The phrase is lobby-speak for attempts by the pharmaceutical industry to extend patents and block cheaper generic drugs from the market. On CAMI's behalf, Gephardt has jetted around the country, participating in forums and giving speeches. Before CAMI's founding, he was doing similar work directly for PhRMA, like attending last December's "Best and Brightest" forum in Philadelphia, where he and two prominent Pennsylvania politicians called for a federal "bailout for the pharmaceutical industry." On its website, Gephardt Group's Government Affairs division describes its work for CAMI as a "success story," claiming "our firm identified and recruited members to form a council...developing public forums and providing Mr. Gephardt's participation as a spokesperson and expert."
In the role of expert, Gephardt told the New York Times in April--before the healthcare battle had even commenced--that universal healthcare legislation was dead for the year and that Democrats should instead try for incremental reform. The article appeared just days after its author had moderated a panel discussion on healthcare reform that Gephardt and executives from several of his lobbying clients participated in.
When I first contacted his firm to set up an interview in late July, I was told that Gephardt's schedule was "unfortunately pretty booked up in the mad rush before recess." With all the lobbying he's been up to, this was hardly a surprise. In fact, the past few years have been one long, mad rush, really: since registering its first client in March 2007, Gephardt Group has consistently padded its cash haul quarter to quarter, pulling in $2.4 million from January to June this year alone--50 percent more than it made during all of 2008. More, these figures represent a fraction of the firm's earnings, since only its twenty-seven federally registered clients are disclosed in lobbying reports, leaving unreported the cash made from advocacy and advisory services provided to other customers.
Taken as a whole, Gephardt's success represents two distinct problems. For Democrats, it raises the legitimate question of whether his ideological shift from progressive populist to big business champion is indicative of where the entire party is headed after two successive electoral victories. For Washington, it exposes the rot at the core and the insidious manner in which Gephardt has harnessed his media-anointed, colleague-respected role as an expert on issues of labor and universal healthcare to work against reforms for both.
While it is well within Gephardt's rights to make money representing every anti-labor, anti-environmental, anti-universal healthcare client he can find, the former Congressman cannot have it both ways. Neither can the Democratic Party. In 2006 the top issue for voters was Washington's "culture of corruption," epitomized by Tom DeLay's K Street Project and Jack Abramoff's illegal excesses. Then, as in the 2008 campaign, Democrats were happy to decry the influence of lobbyists and special interests at every turn. As an electoral strategy, it worked brilliantly, but there has been little real reform to match the rhetoric. So it is hardly surprising that men like Gephardt continue to be welcome in polite progressive company, to be treated as statesmen by the media and their Congressional colleagues, and to serve as ostensibly neutral experts on issues they are heavily invested in on behalf of their new employers. Progressives would be fooling themselves to think the Gephardts of the Beltway are any different from their Republican predecessors. In fact, when it comes to cynically exploiting his reputation to profit his new employers, Gephardt is worse.