A House committee is investigating whether the coal industry's largest influence group failed to accurately report its lobbying spending to Congress.
The Select Committee on Energy Independence and Global Warming has expanded its investigation into forged letters sent to lawmakers and their ties to the American Coalition for Clean Coal Electricity, according to documents viewed by E&E.
In an Oct. 21 letter, Chairman Ed Markey (D-Mass.) asked ACCCE whether its lobbying disclosure for 2008 and the first half of 2009 should have included work conducted by the Hawthorn Group, a public relations firm hired in part to coordinate efforts to fight the House climate bill.
Markey directed ACCCE to detail how much of the $10 million it paid Hawthorn Group during that 18-month period went toward work aimed at influencing U.S. climate legislation. ACCCE paid Hawthorn Group more than $7 million in 2008 and nearly $3 million in the first half of 2009, according to documents it gave the committee.
"It does raise some questions," said Markey spokesman Eben Burnham-Snyder. "What are these activities? They're to influence a member of Congress to vote a certain way."
The committee will hold a hearing Thursday on forged letters that came from ACCCE subcontractor Bonner & Associates. The hearing also could delve into the issue of ACCCE's lobbying spending. ACCCE was told to answer Markey's questions by Thursday.
Lawmakers received at least 199 letters and more than 4,000 phone calls on the House climate bill because of work by Bonner & Associates and fellow Hawthorn Group subcontractor Lincoln Strategies LLC, according to documents ACCCE gave the committee. Some of those letters urged House members to vote against the bill crafted by Energy and Commerce Chairman Henry Waxman (D-Calif.) and Markey.
At least 12 of those letters were fraudulent, purporting to be from groups opposed to the bill. ACCCE has blamed that on one Bonner & Associates employee. The committee's letter also seeks more information surrounding the fraudulent letters.
An alliance of coal companies, utilities and railroads that ship coal, ACCCE is one of the best-funded trade groups in the energy sector.
Asked about Markey's inquiry, ACCCE said Friday that it is keeping private all communications with the committee. Hawthorn Group did not respond to a request for comment.
But in an interview last week on ACCCE's lobbying disclosures, Ronald Jacobs, an attorney with Venable LLP who works for ACCCE, said the letter-writing campaign by Hawthorn Group's subcontractors does not count as lobbying under the congressional definition in the Lobbying Disclosure Act, which passed in 1995. Another law passed in 2007 beefed up disclosure rules but also exempts grassroots efforts, he said. ACCCE considers the Hawthorn Group-driven letter writing in that category.
"A letter by a third party is not a letter from ACCCE," Jacobs said, "even if the work to create (that letter) is paid for by ACCCE."
ACCCE's lobbyist "was not walking that letter up to members of Congress and delivering it," said ACCCE spokeswoman Lisa Camooso Miller. "That was not how we delivered our message."
Others versed in lobbying law disagreed with ACCCE's view. Hawthorn Group should have filed paperwork listing itself as a lobbying shop and detailing ACCCE as a client, said Lee Mason, director of nonprofit speech rights with OMB Watch, a government watchdog organization. Any attempt to influence a lawmaker's vote, Mason said "would be considered lobbying.
"If they're telling them to take some very specific action, once you tell Congress to take a position on it, you have actively engaged in a lobbying activity," Mason said.
Talking with, writing or otherwise contacting lawmakers and their aides when it exceeds 20 percent of a person's work time in general is considered lobbying and must be reported to Congress.
Grassroots activity is work that is more general, Mason said, like educating people about an industry and its connection to federal laws and regulations. "When you actively engage with telling people to call their congressman, that's lobbying and should be reported," he said.
The Center for Public Integrity, a nonprofit investigative group, agreed. Spokesman Steve Carpinelli said even though the letter writing and phone calls were driven by a third party, they are lobbying and by law should have been detailed in a report to the Senate.
What was spent
Markey's letter asks ACCCE for both 2008 and the first half of 2009 whether Hawthorn Group work funded by the trade group should count as lobbying under the law. If ACCCE believes otherwise, the letter said, it needs to explain its reasoning.
ACCCE in the second quarter of this year paid Hawthorn Group $975,000 for work related to Waxman-Markey, it has told Markey's committee. In its second quarter lobbying report it listed total spending of $544,853. That period covers the key months before the June vote on the bill.
In 2008, ACCCE reported $9.9 million in lobbying spending. That same year, according to documents it filed with Markey's committee, it paid Hawthorn Group more than $7 million.
ACCCE's 2008 spending reports show a far higher number because it used a different accounting format that year to report its lobbying expenses.
Congress allows groups and businesses that lobby to use one of three methods to disclose their spending. Method A is an estimate of spending on all "direct contact" with lawmakers and aides and certain members of the administration. It also includes work to support that activity, such as preparing statements or presentations. It excludes grassroots lobbying and state and local work. Method B and C use the IRS definition of lobbying, which includes all state and local efforts and grassroots activities. Nonprofits use method B and for-profit groups use method C.
ACCCE used method C in 2008 and switched to method A in 2009. The move came because ACCCE felt media reports were unfairly comparing its spending to groups that used method A, the less expansive requirement, said ACCCE spokeswoman Miller.
"In order for a fair comparison we decided to file the way other organizations in our area were filing," Miller said.
Markey's letter also asks ACCCE to explain why it has twice this year corrected lobbying reports it filed with Congress. ACCCE in its disclosure covering the second quarter of 2009 initially reported $11.3 million in lobbying expenses. It then submitted an amended report changing the total to $544,853 for the same period.
ACCCE at the time in a statement said "an administrative error resulted in the previously incorrect data being provided."
In its third-quarter filing made public this month, ACCCE first reported spending $246,093. Then it filed another report with an amended $302,704 total. Miller said the change was made to add additional spending that should have been included.
Forged letters probe
Markey is also seeking more information on the forged letters.
ACCCE previously has told the committee that Hawthorn Group work led to 4,082 calls to lawmakers from June 24 through June 26, the day that the House voted on Waxman-Markey. According to what ACCCE told the committee in August, none of the prepared scripts used in those calls referenced the existence of the fraudulent letters.
The committee now wants copies of scripts used in those calls, as well as an accounting of whether ACCCE or one of the firms it hired caused the calls to be made.
Bonner & Associates previously told the committee that they gave the Hawthorn Group a list of organizations that could be targeted as sources of letters to lawmakers in opposition to the Waxman-Markey bill. The committee in its new inquiry asked ACCCE whether it saw that list. The committee also asked for the list.
Forged letters hearing, take two
Thursday's hearing will mark the first time representatives from the various lobbying groups will appear before a congressional panel to discuss the forged letters.
The hearing was originally slated to take place two weeks ago, but it was postponed after committee ranking member James Sensenbrenner (R-Wis.) complained that the majority failed to follow a committee rule that requires that lawmakers receive testimony at least 48 hours prior to the start of the hearing. Markey convened the hearing only to immediately announce that it would be postponed in order to give committee members more time.
Among the witnesses slated to appear before the committee are top officials from two of the main groups involved in the forged letters controversy -- Jack Bonner, president of Bonner & Associates; and Steve Miller, president and CEO of ACCCE.
Documents submitted by Bonner to the committee state that the letters were the work of a single temporary employee, who created the forged letters during his first day on the job. Indeed, Bonner wrote that the individual "obtained temporary employment at B&A for the purpose, and with pre-determined intent, of engaging in fraudulent activity."
Additionally, the company says that it did not know that the employee forged the letters until it discovered the forgeries eight days after the employee was hired. At that point, according to Bonner, the employee was immediately fired and the matter has been referred to law enforcement.
Letters went to Reps. Tom Perriello (D-Va.), Chris Carney (D-Pa.) and Kathy Dahlkemper (D-Pa.). Perriello, whose office first publicly disclosed the forged letters, was the only one out of the three to vote in favor of the cap-and-trade bill.
Bonner says it has since implemented several policies to prevent similar actions in the future, though at one point it writes, "It is difficult to defend against a person bent on committing fraud."
Beyond just who is responsible for the forged letters, the committee also figures to examine exactly how and when all the relevant parties went about disclosing the forged letters to lawmakers and those whose names were on the letters.
The documents show that the Hawthorn Group hired Bonner on June 10 to generate the letters on the cap-and-trade bill. All told, Bonner generated a total of 58 letters, of which 12 were later determined to be fraudulent.
Bonner first discovered those forgeries around June 22, according to documents, and immediately informed Hawthorn. Separately, ACCCE says it was notified of the forged letters on June 24 by Hawthorn -- two days before the floor vote.
ACCCE says that it contacted Hawthorn on June 25 and gave it an "explicit order" to direct Bonner to contact the involved lawmakers about the forgeries.
But documents from Bonner show that it did not attempt to contact two of the three congressional offices, those of Perriello and Dahlkemper, until July 1 -- five days after House passage of the legislation. Bonner says those initials calls were not returned and the company did not successfully contact the two offices until July 13. Carney's office was not contacted at all due to a "communications error."
ACCCE said it did not discover that all of the relevant parties were not contacted until early-to-mid July and again told Hawthorn to relay to Bonner the importance of notifying both lawmakers and the advocacy groups involved. ACCCE says it was not until July 31 that it learned that not all contacts had been made and a couple days later ACCCE officials contacted each of the three congressional offices.
In the documents, ACCCE characterized Bonner's conduct as "inexcusable" and claimed it did not authorize or condone the fraudulent letters, had no knowledge of their existence until notified by Hawthorn and never said that notification of the fraudulent letters should be delayed.
Bonner billed Hawthorn for $43,500 for its work on the cap-and-trade bill -- an fee that ACCCE says it has instructed Hawthorn not to pay.
Schedule: The hearing is Thursday, Oct. 29, at 9:30 a.m. in location TBA.
Witnesses: Full witness list TBA, though it is expected to include representatives from ACCCE, Bonner and advocacy groups whose name were used on the letters.