The fog of con­gres­sional trans­parency

The Washington Times Weekly - - Politics - BY JERRY SEPER AND JIM MCELHATTON

The phar­ma­ceu­ti­cal in­dus­try that long has ben­e­fited from Sen. Or­rin G. Hatch’s leg­isla­tive ef­forts has di­rected large sums of money to a char­ity he helped found — and still raises money for — while also hir­ing the Repub­li­can law­maker’s son as a lob­by­ist.

Though Congress boasts that it is more trans­par­ent af­ter pass­ing new dis­clo­sure rules, Amer­i­cans have had no way of know­ing about the drug­mak­ers’ largesse to the char­ity, Utah Fam­i­lies Foun­da­tion. No way, that is, un­til a nor­mally con­fi­den­tial tax fil­ing was mis­tak­enly re­leased by the In­ter­nal Rev­enue Ser­vice to a non­profit data­base last year.

The tax form, ob­tained by The Wash­ing­ton Times, shows that five phar­ma­ceu­ti­cal com­pa­nies and the in­dus­try’s main lob­by­ing group wrote checks in 2007 to the Utah Fam­i­lies Foun­da­tion — some as large as $40,000 — that far ex­ceed what they could give pub­licly to Mr. Hatch’s cam­paigns.

The do­na­tions, $172,500 in all, came at the same time that the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica (PhRMA) was pay­ing one of Mr. Hatch’s sons, Scott, to be its lob­by­ist in Congress.

And if that weren’t enough po­lit­i­cal in­trigue, the tax-ex­empt char­i­ta­ble foun­da­tion, which the se­na­tor from Utah helped start in the 1990s and still vig­or­ously sup­ports, has been delin­quent for nearly a decade in fil­ing its re­quired an­nual re­ports with Utah state of­fi­cials, a Times re­view found.

The tale of the Utah Fam­i­lies Foun­da­tion pro­vides fresh ev­i­dence that the cam­paign-fi­nance lim­its and trans­parency re­forms that Pres­i­dent Obama de­manded and that Congress en­acted still leave av­enues for in­ter­ests to route large sums of money to law­mak­ers’ fa­vorite causes without dis­clo­sure.

“This could be more com­mon than we know,” said Me­lanie Sloan, a for­mer fed­eral pros­e­cu­tor who now heads the po­lit­i­cal watch­dog group Cit­i­zens for Re­spon­si­bil­ity and Ethics in Wash­ing­ton, which first spot­ted the er­rantly re­leased tax form.

“When com­pa­nies need a mem­ber of Congress and they’ve al­ready do­nated to their cam­paigns, they can make very large con­tri­bu­tions to mem­bers’ foun­da­tions,” she said. “It’s an­other way to curry fa­vor with a mem­ber of Congress.”

Fam­ily ties

Un­der the law, com­pa­nies lob­by­ing Congress have to re­port do­na­tions to char­i­ties “es­tab­lished, fi­nanced, main­tained or con­trolled” by a mem­ber of Con- gress. Mr. Hatch helped start the or­ga­ni­za­tion and serves as a host at its fundrais­ers, but he’s not on its board of direc­tors.

Mr. Hatch, one of the most in­flu­en­tial law­mak­ers in Congress, is among sev­eral politi­cians in the past decade to found or help raise money for fa­vored char­i­ta­ble or­ga­ni­za­tions that could still fall out­side fed­eral dis­clo­sure re­quire­ments. Oth­ers in­clude for­mer Pres­i­dent Bill Clin­ton, who is an of­fi­cer of the pri­vate Clin­ton Fam­ily Foun­da­tion, and for­mer Sen. Ted Stevens, an Alaska Repub­li­can who was con­victed of cor­rup­tion charges.

Ques­tions were raised when Hil­lary Rod­ham Clin­ton be­came a can­di­date for sec­re­tary of state and it was dis­closed that the foun­da­tion had raised about a half-bil­lion dol­lars since 1997, in­clud­ing tens of mil­lions from for­eign gov­ern­ments and other over­seas sources.

In a state­ment to The Times, Mr. Hatch con­firmed his role in rais­ing money for the Utah Fam­i­lies Foun­da­tion and his son’s lob­by­ing for the very drug in­dus­try that en­riched the char­ity. But he in­sisted there was no blur­ring of eth­i­cal lines.

“My son, Scott, does not lobby me or any­one in my of­fice. He is a very moral and eth­i­cal per­son,” Mr. Hatch said. “As for the Utah Fam­i­lies Foun­da­tions, my lim­ited in­volve­ment con­sists mainly of at­tend­ing their events. As with most ser­vice op­por­tu­ni­ties, I find even th­ese small ges­tures are very grat­i­fy­ing ways to vol­un­teer my time and give to those less for­tu­nate in our com­mu­nity.

“Giv­ing char­i­ta­ble con­tri­bu­tions of time or money to good causes is some­thing I be­lieve ev­ery in­di­vid­ual and or­ga­ni­za­tion should try to do,” he said. “Or­ga­ni­za­tions choos­ing to do­nate to the Utah Fam­i­lies Foun­da­tion are giv­ing re­sources to help Utah’s fam­i­lies in need from all cor­ners of our state and that is very ad­mirable.”

Mr. Hatch has sought to dis­tance him­self from the foun­da­tion’s day-to-day op­er­a­tions, with his staff not­ing that the char­ity is run by an in­de­pen­dent board. How­ever, Mr. Hatch serves as an “honorary host” for the char­ity’s an­nual fundrais­ing golf tour­na­ment, and he touted the char­ity on the Se­nate floor in June 2005.

The se­na­tor “does not ben­e­fit in any way” from the do­na­tions, and “there is an in­de­pen­dent board who makes the de­ci­sions as to which char­i­ties re­ceive do­na­tions and for what spe­cific projects,” Hatch spokes­woman Heather Bar­ney said.

Scott Hatch also has de­nied any wrong­do­ing, stead­fastly main­tain­ing that he doesn’t lobby his fa­ther, even when paid to lobby on leg­is­la­tion with which the se­na­tor is in­volved.

Hatch ‘seal of ap­proval’

The drug­mak­ers said that they’ve been do­nat­ing to the char­ity for years, well be­fore the 2007 tax form mis­tak­enly got re­leased, and that they make no se­cret that Mr. Hatch’s con­nec­tion to the char­ity in­flu­enced their de­ci­sion to sup­port what they said was a worth­while cause.

Any char­i­ta­ble cause backed by Mr. Hatch “au­to­mat­i­cally car­ries the gold seal of ap­proval,” said Ken John­son, se­nior vice pres­i­dent at PhRMA, which be­gan do­nat­ing to the group in 2000.

“There’s not a more honor­able per­son than Se­na­tor Hatch,” Mr. John­son said, down­play­ing any sug­ges­tion of ties be­tween the com­pany’s do­na­tions to the foun­da­tion and PhRMA’s busi­ness in Congress.

Joe Kel­ley, vice pres­i­dent of gov­ern­ment and pub­lic af­fairs at drug­maker Eli Lilly, which has been do­nat­ing to the char­ity for about a decade, said the com­pany gives to the Utah Fam­i­lies Foun­da­tion be­cause of its help for abused women and other worth­while causes.

“I per­son­ally be­lieve that if some­one has a pro­file and is in a po­si­tion to help peo­ple out, then that’s a pos­i­tive thing,” Mr. Kel­ley said.

The drug­mak­ers’ do­na­tions to Utah Fam­i­lies Foun­da­tion were part of the $1.1 mil­lion that the char­ity raised in 2007. About $726,000 of that was do­nated to com­mu­nity groups, hos­pi­tals, well­ness cen­ters, youth and fam­ily sup­port groups, and food banks. The re­main­ing $375,000 went for salaries and op­er­at­ing ex­penses,

ac­cord­ing to the IRS re­port.

Pub­lic mis­take

The foun­da­tion’s of­fi­cers in­clude prom­i­nent Utah po­lit­i­cal fig­ures and Hatch sup­port­ers, such as for­mer Govs. Nor­man Bangerter and Olene Walker, and for­mer Repub­li­can Sen. Jake Garn, ac­cord­ing to tax records.

Phar­ma­ceu­ti­cal and health prod­uct com­pa­nies al­ready rank at the top of Mr. Hatch’s po­lit­i­cal sup­port­ers, do­nat­ing more than $1.25 mil­lion to his cam­paigns since 1998. Those do­na­tions are dis­closed to the Fed­eral Elec­tion Com­mis­sion.

But as a tax-ex­empt 501(c)(3)

group, the Utah Fam­i­lies Foun­da­tion doesn’t have to release its list of donors, mak­ing the release of the 2007 tax form so rare.

In a Feb. 18, 2008, re­port to the IRS list­ing its 2007 rev­enue and ex­penses, the Utah foun­da­tion said Eli Lilly and Co. gave the char­ity $25,000; med­i­cal sup­ply com­pany Bec­ton Dick­er­son con­trib­uted $25,000; Barr Phar­ma­ceu­ti­cals, $30,000; As­traZeneca Pharm LP, $25,000; drug­maker Sepra­cor, $27,500; and PhRMA, the ma­jor health care lob­by­ing group, gave $40,000.

The donor in­for­ma­tion had been avail­able on Guides­, a non­profit or­ga­ni­za­tion that gets pub­lic tax fil­ings from the IRS and char­i­ties and then posts the in­for­ma­tion on­line. How­ever, the com­pany re­moved the Utah foun­da­tion’s donor in­for­ma­tion im­me­di­ately af­ter be­ing con­tacted by The Times.

“The IRS is sup­posed to with­hold that in­for­ma­tion,” said Guides­tar spokes­woman Suzanne Coff­man. “It’s an er­ror. I’m as­sum­ing the er­ror was with the IRS. It’s a mis­take we take se­ri­ously. It’s a mis­take that hap­pens very, very rarely.”

The IRS did not re­turn mes- sages con­cer ning foun­da­tion.

the Utah

The man in Congress

At the time of the PhRMA do­na­tion to the Utah char­ity, Scott Hatch was named a part­ner and reg­is­tered lob­by­ist at Walker, Martin & Hatch LLC, a Wash­ing­ton lob­by­ing firm that was paid $120,000 by PhRMA to lobby Congress on pend­ing Food and Drug Ad­min­is­tra­tion (FDA) leg­is­la­tion.

PhRMA, which both do­nated to the char­ity and hired the se­na­tor’s son, said it has never asked Scott Hatch to dis­cuss any is­sues with his fa­ther.

“Clearly, Scott’s a very bright guy,” Mr. John­son said. “He pro­vides strate­gic ad­vice.”

Walker, Martin & Hatch was formed as a part­ner­ship in 2001. Jack Martin was a staff aide to Mr. Hatch in Utah for six years, and H. Laird Walker has been de­scribed as a close as­so­ciate of the se­na­tor. The Los An­ge­les Times quoted the elder Mr. Hatch in 2003 as say­ing that the firm was formed with his “per­sonal en­cour­age­ment” and that he saw no con­flict of in­ter­est in cham­pi­oning is­sues that ben­e­fit his son’s clients.

Nei­ther Se­nate rules nor fed­eral laws for­bid rel­a­tives from lob­by­ing mem­bers of Congress.

The elder Mr. Hatch was a mem­ber of the Se­nate Health, Ed- uca­tion, La­bor and Pen­sions Com­mit­tee when the Walker, Martin & Hatch con­tract with PhRMA was signed. The com­mit­tee over­sees the FDA, among other agen­cies.

Walker, Martin & Hatch has been paid more than $1.5 mil­lion by phar­ma­ceu­ti­cal and med­i­cal com­pa­nies since 2001, ac­cord­ing to Se­nate lob­by­ing records.

Since 1998, Mr. Hatch also has been a se­nior mem­ber of the Se­nate Ju­di­ciary Com­mit­tee, where he plays a key role in in­flu­enc­ing patent dis­putes, and the Se­nate Com­mit­tee on Fi­nance, whose ju­ris­dic­tion in­cludes health pro­grams un­der the So­cial Se­cur ity Act and health pro­grams fi­nanced by a spe­cific tax or trust fund.

He has been one of the big­gest re­cip­i­ents of po­lit­i­cal fund­ing from the na­tion’s health in­dus­try and phar­ma­ceu­ti­cal giants. He has of­ten been crit­i­cized for his close ties to the in­dus­try.

Dur ing a speech to the Generic Phar­ma­ceu­ti­cal As­so­ci­a­tion in 2005, Mr. Hatch de­scribed him­self “as one of your good friends in the Se­nate,” urg­ing those in at­ten­dance to “get on the Congress’ radar screen,” and adding that, “I will do ev­ery­thing I can to help you.” In ad­di­tion:

Mr. Hatch cast the only dis­sent­ing vote in the Se­nate in 2003 on an amend­ment that would re­duce pro­tec­tions that the phar­ma­ceu­ti­cal com­pa­nies used to block generic drugs from en­ter­ing the mar­ket.

The Cen­ter for Pub­lic In­tegrity (CPI), a non­profit gov­ern­ment watch­dog or­ga­ni­za­tion, said that in 2006, Mr. Hatch took seven trips cost­ing a to­tal of $12,000 spon­sored by Pfizer and Glax­oSmithK­line, as well as two in­dus­try trade groups, the Cal­i­for­nia Health­care In­sti­tute and the Health­care Lead­er­ship Coun­cil. At the time, he held $18,000 worth of stock in Pfizer and No­var­tis, the Swiss-based man­u­fac­turer of Ri­talin, the drug that treats at­ten­tion-deficit (hy­per­ac­tiv­ity) dis­or­der.

Mr. Hatch co-spon­sored a Medi­care bill while hold­ing shares in Pfizer and No­var­tis, ac­cord­ing to his 2003 fi­nan­cial dis­clo­sure forms. In a state­ment at the time to CPI, Mr. Hatch de­fended the stock hold­ings, say­ing they rep­re­sented a small per­cent­age of his in­vest­ment port­fo­lio. He also char­ac­ter­ized his travel as “le­git­i­mate ac­tiv­ity un­der Se­nate rules,” adding that he “likes to have open com­mu­ni­ca­tion with in­dus­try leaders.”

Af­ter us­ing a com­pli­men­tary Gulf­stream ex­ec­u­tive jet pro­vided by drug­maker Scher­ing-Plough Corp. for his long-shot pres­i­den­tial cam­paign in 2000, he drafted leg­is­la­tion ex­tend­ing the drug com­pany’s patent on the drug Clar­itin.

An ‘over­sight’

Ac­cord­ing to fil­ings with the Utah Sec­re­tary of State’s of­fice, the Utah Fam­i­lies Foun­da­tion has been delin­quent for years in fil­ing its re­quired an­nual re­ports.

Guy Mor­ris, the foun­da­tion’s ac­coun­tant, said the pa­per­work is be­ing up­dated and called the fail­ure to file “a very in­no­cent sit­u­a­tion” that likely hap­pened when the or­ga­ni­za­tion switched ad­dresses.

“It was just an over­sight,” he said. “They do a ton of good work. I wish all of the peo­ple I do­nate to were as ef­fi­cient as Utah Fam­i­lies Foun­da­tion.”

Fred Wertheimer, pres­i­dent of Democ­racy 21, a non­par­ti­san cam­paign fi­nance watch­dog group, said he doesn’t doubt that char­i­ties run or founded by mem­bers of Congress of­ten put their money to good uses. But he said the do­na­tions none­the­less can help pro­vide spe­cial in­ter­est groups with im­por­tant ac­cess to law­mak­ers.

“There are any num­ber of ways in which in­di­vid­u­als and in­ter­ests looking to in­flu­ence Congress can pro­vide fi­nan­cial help to mem­bers,” he said. “And con­tribut­ing to a foun­da­tion is cer­tainly one of those ways.”


Su­gar the pill: Sen. Or­rin G. Hatch helped found the Utah Fam­i­lies Foun­da­tion, which re­ceived large sums of money from drug­mak­ers.

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