The Smoke Filled Room

A Washington insider's best stories about how lobbying really works in America.

By Tim Carney,  November 14, 2008

In a rural Southern county shortly after prohibition ended, a local businessman approached an aspiring politician with a proposal. “You need two things, my friend: money and votes,” he said. “I can help you with both.”

The politician knew this man—as everyone in the county did—as the most prolific bootlegger in three states. Throughout prohibition the bootlegger had made a killing by dodging the feds, bribing the local police, and stocking the shelves of the general store’s back room or selling straight out of his truck.

“I imagine you could contribute to my campaign, sir, and I appreciate every dime,” the politician responded, “but how could you deliver me votes in this county, where the Baptist Ladies’ Temperance Club is the most active organization of voters?”

The bootlegger didn’t miss a beat.

“Those Baptists have 100 members who can endorse you, knock on doors, and register your supporters to vote,” the bootlegger explained. “All you need to do is promise to turn this county dry if elected.”

“You’d fund a man looking to turn the county dry?” the politician asked skeptically.

“Look around, friend,” the bootlegger answered. “Who needs me anymore? The general store just buys from the distributor, and the men can just go to the bar. Outlaw the stuff, and it’s like old times again! You’re the best investment I could make. And if you need to, abuse me a bit—call me a merchant of death. Just put those bars and law-abiding liquor stores out of business, please.”

The story of the Baptists and the bootlegger is apocryphal, but it’s crucial to understanding how lobbying works. And understanding lobbying is necessary if you want to understand politics and policy. Many people think business and special-interest lobbying is an occasional or peripheral factor in lawmaking. In fact, lobbying is the engine of government.

Companies spent $1.5 billion lobbying the federal government in the first half of 2008—that’s $8.3 million per day counting weekends and holidays. At that pace there’s going to be $200 million more in lobbying spending than last year, and efforts to steer bailout money to various corporate interests may well make the total far higher than even the industry’s 9.2 percent annual growth rate.

I’ve covered the lobbying game as a reporter, author, and columnist since coming to Washington DC. In addition to a greater understanding of the whole process, I’ve picked up some pretty good stories. Here I offer a few that entertain and capture the essence of lobbying, so that you, too, can understand what goes on in the proverbial smoke-filled room.

Casinos against Gambling

Jack Abramoff, the jailed super-lobbyist, did a lot of bad things, but the most devious involved Indian tribe casinos in the Delta region. The “bootleggers” here were the Louisiana Coushatta tribe of Indians, who ran a casino in Kinder, Louisiana that reportedly took in $300 million a year.

The Coushatta had a problem: the Jena Band of Choctaw Indians. In 2002 the latter tribe won state approval to open a new casino in Vinton, Louisiana, about 50 miles to the east. In a free market, if you get new competition, you fight for customers, offering specials and making your business more attractive, whereas in the lobbying world, you call on Washington to exterminate your competitor—and Indian tribes are fully submerged in the lobbying world, having boosted their lobbying efforts from $6.5 million in 1998 to $18.8 million in 2001.

That’s no surprise. Because Indian tribes are basically autonomous from their states, the law treats each differently—government benefits and special exemptions vary from tribe to tribe (and within each tribe, often from band to band). Lobbyists thrive on flexibility. If the system is rigid, there’s only so much lobbying you can do. With Indian tribes, nothing was set in stone.

For that reason, Jack Abramoff brought more and more Indian tribes to K Street.


The Coushatta lobbyists, including Abramoff and his colleagues at Greenberg Traurig, were well connected, enabling them access to top lawmakers, whom they asked to kill the compact that Louisiana had made with the Jena band. A new casino would dry up Coushatta profits--and much of the Coushatta profits turned into campaign contributions. The other tribe paying Abramoff to block the Jena pact was the Mississippi Band of Choctaws, and between the two tribes, they gave more than $650,000 to candidates for federal office in 2001 and 2002.

Of course, asking a favor and giving campaign cash isn’t enough to get your way. Think about the position that puts the lawmaker in. You need to arm the politician with a reason to take your side, and it should be a high-minded one. To save the Coushatta casino, you would need to launch an anti-gambling crusade. To do this believably, you would need to call Ralph Reed.

Moral Authority

Ralph Reed is the former head of the Christian Coalition, and in 2001 and 2002, he was one of the country’s most well known moral crusaders. It turns out that he was also one of the most effective lobbyists for the casino interests of the Coushatta and Mississippi Choctaws.

Reed says he pocketed about $4 million lobbying on behalf of those two tribes. He maintains that he didn’t know it was gambling money paying his bills. But the tribes paid Abramoff to block the Jena casino, and Abramoff paid Reed to be his “Baptist.”

Three years earlier, after a failed stint as a campaign consultant, Reed had e-mailed Abramoff asking him for work. “Hey, now that I’m done with the electoral politics,” Reed wrote, “I need to start humping in corporate accounts! I’m counting on you to help me with some contacts.”

The Abramoff-Reed friendship went back to 1981, when Reed was Abramoff’s intern at the College Republican National Committee, where Abramoff was chairman. Now Abramoff had the perfect job for Reed: The Committee Against Gambling Expansion, which Reed created, bragging in one e-mail that it got “over 50 pastors mobilized” against the Jena casino.

He also called on conservative lawmakers with anti-gambling constituencies, and asked them to take action to block the casino—the spread of sinful gambling needed to be stopped. At one point, when Abramoff was upset with Reed’s progress in stirring up Christian opposition to the Jena casino, he wrote an e-mail to his partner Michael Scanlon: “I know you (we!) hate him [Reed], but it does give us good cover and patter….”

In the end, Reed delivered for Abramoff and the Coushatta. He roped in influential evangelical leader James Dobson, head of Focus on the Family. Dobson (who says he didn’t know gambling money was behind this) agreed to mobilize his huge radio audience against the new casino. This struck fear into the heart of officials at the Interior Department, which had ultimate authority over the casino. After hundreds of thousands of campaign dollars flowed from the Coushatta and the Mississippi Choctaws to key lawmakers, Interior ruled that the casino agreement between the state and the Jena would be illegal.

Ralph Reed and anti-gambling forces had won a victory for the casinos.

The Lobbying Game

Lobbying is becoming more important, and it will continue to become more important, until government starts getting smaller—which means never. Most lobbying tales aren’t as fun as the Ralph Reed story above, but there are a few that compare. There was the nearly identical story in Texas, for example, with an extra twist: Abramoff and Reed lobbied Texas to close a casino, and then, on behalf of the newly out-of-business tribe, lobbied Washington to reopen it.

However, the most spectacular lobbying ploy ever carried out may have happened in the spring of 1975.


Meet Ed Daly, president of World Airlines. Under gunfire, Daly flew two flights of refugees out of besieged Vietnam cities after the U.S. government had abandoned the country to the Viet Cong. This remarkable stunt opened some important doors, allowing Daly’s lawyers to earn a meeting with the federal Civilian Air Board—a meeting he had been requesting for nearly a decade. Daly wanted to fly customers from New York to California for less than $100 each way. You see, the CAB at the time controlled flight schedules and prices so strictly that Daly simply couldn’t do business without CAB’s approval. His stunt at least got CAB’s attention.

A good recent story is the one of Sylvania and GE lobbying last year to ban the light bulb.

Congress recently outlawed regular incandescent light bulbs in the name of energy conservation, and the two light-bulb makers brag about writing the bill. As it happens, both companies are on the verge of unveiling energy-saving bulbs that work much better than the current fluorescents (and cost much more than regular incandescent). The energy savings apparently weren’t enough to convince consumers to buy these light bulbs, and so Congress (in the name of the environment, of course) mandated them.

Making the Right Friends

Of course, no account of corporate campaign contributions and lobbying would be complete without a story of the Clintons. There are plenty to choose from, but my personal favorite involves diesel engines and the tech bubble of 2000. Corning Inc. is known as a glassmaker and as the maker of your casserole dishes. In truth, they are a high-tech company. One of their strongest businesses today is their manufacturing of emissions scrubbers for diesel vehicles.

At the beginning of this decade, however, their emphasis was on fiber optics. That emphasis would soon switch, along with the company’s political loyalties. On Monday, October 23, 2000, when Corning issued third-quarter profits nearly twice the previous year’s and higher than market expectations, Corning was still a Republican company. The company’s champion in Washington was Republican congressman Amo Houghton, Corning’s former CEO and great-grandson of Corning’s founder.

The company’s campaign contributions tilted heavily Republican. In the U.S. Senate race that year, for example, the company’s employees had given $23,000 the campaign of Republican Rick Lazio, and Corning’s political action committee (PAC) had contributed $9,000 to Lazio, according to Federal Election Commission (FEC) filings. In contrast, Corning employees had donated only $3,250 to Hillary’s campaign for Senate, and the PAC hadn’t given Clinton a dime.

But on Tuesday evening that week, things changed. Nortel networks released its earnings—a 45% increase from the previous year, powered by a 90% increase in fiber optic sales. That sounds good, but analysts, seeing fiber optics as the next big thing, had expected even more growth. Wall Street had to rethink fiber optics. “The revenue shortfall,” reported one CNN analyst, “sparked fears that the spectacular growth in fiber may have been unsustainable.”

Luck would have it that Corning had just that week completed its purchase of the optical components division of Pirelli. The venerable glassmaker had put its eggs in the fiber-optics basket, and Wall Street had just smashed that basket. Stocks on Wednesday plummeted, on their way to a 28.3% loss for the week. The company was in trouble. It needed a lifeline. It needed to lobby.

October 25, the Wednesday when Corning’s stock dropped $13 per share, was also the day Corning became a Hillary Clinton booster. That day, the company’s PAC cut a $3,000 check to Friends of Hillary. The next Tuesday, Halloween, seventeen different Corning employees made campaign contributions to Clinton, totaling $14,750. Donors included Corning’s top lobbyist, Debra Waggoner, and Senior Vice President Larry Aiello. Most of these donors had never given to a Democrat before in their lives.

That really bad week on Wall Street had convinced this Upstate New York company that it needed a friend in Washington, but they weren’t necessarily thinking of Hillary—Lazio was actually slightly ahead of Clinton in the polls. Hillary, of course, would win, but Corning would reap the benefits of its Hillary support even before she became a U.S. Senator.

On Christmas Eve, 2000, Larry Wilson of the Elmira Star-Gazette’s Corning bureau led his “Corning Watch” column with this declaration: “Only a month before he is scheduled to leave office, President Clinton has dropped a big Christmas present in the lap of Corning Inc.” Wilson was referring to new federal regulations requiring all new diesel vehicles to be built with catalytic converters that could reduce emissions by 90 percent.

It just so happened that the leading manufacturer of devices to reduce diesel-engine emissions by 90 percent was one Corning, Inc. After Bill delivered this Christmas present to Corning, Hillary would take up the company’s cause in Washington so well that CFO James Flaws said, “The Clinton-Corning partnership is very rewarding for both of us.”

In her time as a Senator, she has directed hundreds of millions in taxpayer money to retrofitting old school buses and trucks with these converters and filters. She also passed a law requiring state highway authorities to favor road-building companies that use these emission-reduction technologies. (Her press release even cited the “market opportunities” this regulation handed Corning.) She authorized $1 billion for state governments to put these devices on their state vehicles—and passed a mandate that states do so.

In return, this formerly Republican company has filled her campaign coffers: employees have given her campaigns about $200,000 and Corning’s PAC has contributed $20,000 to her. It’s a win-win situation, unless you’re a taxpayer or a trucking company paying for these subsidies or mandates.

Lobbying Reform

Don’t get me wrong: some of my best friends are lobbyists. More importantly, lobbying, at its heart, is nothing more than free speech. In fact, the right to petition one’s government is arguably the most important protection in the First Amendment. Efforts to “reform” lobbying—like efforts to “reform” campaign finance—usually end up restricting speech while not fixing any corruption.

The only way to end these conflicts of interest and tales of corruption would be to limit the government’s control over our lives and our money—the very free-market policies that get derided as “excessive capitalism” by the big-government types. With neither party really interested in such a reform, it doesn’t look like the game will get cleaned up any time soon, but at least we’ll keep getting good stories.