Politics & Policy

Friends in High Places

David Axelrod's old firm is getting lots of business from health-care-advocacy groups.

It’s good to be David Axelrod.

Axelrod, senior adviser to President Obama, left AKPD, the powerful Chicago-based media-consulting firm he founded, late last year for the West Wing. Why leave the private sector for a gig with the federal government? Why not? Axelrod could afford the downgrade. In 2008, ABC News reports, AKPD pocketed millions for its work on the Obama presidential campaign. Now, Politico reports, AKPD owes Axelrod $2 million more. He shouldn’t worry about getting his cash.

In fact, he’ll be mailed a hefty check quite soon. Over the next four years, according to his personal financial report, Axelrod will receive regular payments, starting with $350,000 on December 31. Of course, those payouts to the old boss won’t make much of a dent in AKPD’s checkbook. Its business is booming.

According to a Bloomberg report, AKPD and GMMB — a firm founded by Jim Margolis, another former Obama strategist — have received $12 million in advertising business from lobbying groups working with the White House to pass health-care reform legislation. Altogether, according to AP, interest groups working with the Obama team have ladled $24 million into consultants’ coffers.

Maybe someone should e-mail flag@whitehouse.gov. Axelrod’s former firm, it turns out, was hired by umbrella organizations with deep Obama ties — Americans for Stable Quality Care (ASQC) and its predecessor, Healthy Economy Now (HEN). The former’s spokesman, Phil Singer, tells NRO that hiring AKPD and GMMB was a “no-brainer,” since they’re “among the best in the business.” You be the judge. Here’s the latest ad from ASQC.

Here’s another commercial that ran this summer, sponsored by HEN.

One wonders whether the health-care industry groups that paid for these clips are asking why the Democratic operatives pooling their money to make ad buys gave millions to a firm effectively in debt to a senior White House staffer. The leader of one advocacy group directly involved admitted that, “given the way this has unfolded, having that information about [Axelrod] to consider upfront would have been helpful.” Others aren’t so worried.

ASQC, as Mike Allen of Politico reports, is largely funded by the pharmaceutical industry, though it also includes a hodgepodge of other groups, including the American Medical Association, FamiliesUSA, and SEIU, the service employees union.

PhRMA, the group representing pharmaceutical companies, struck an $80 billion deal this summer with the Obama White House to support health-care reform. (What PhRMA received in return remains an area of intense speculation.) It is also the key member of ASQC. Part of its deal, reports the New York Times, involved PhRMA authorizing its lobbyists to spend as much as $150 million on television commercials supporting Obama’s plan. The millions already spent this summer are just the start. With its cozy relationships with senior Obama officials, AKPD executives only stand to gain.

Axelrod, of course, says the White House has nothing to do with this sudden good fortune for his former firm. Ben LaBolt, a White House spokesman, says that Axelrod has had no communications with any of the advocacy groups paying AKPD and that AKPD’s payments to Axelrod have nothing to do with the fresh pile of dough from the firms new ad contracts. LaBolt also told AP that Axelrod’s son, an AKPD employee, doesn’t “stand to benefit” from the millions currently being poured into promoting Obamacare. Even so, Ken Johnson, PhRMA’s senior vice president, says, We could do without the distraction right now, although he adds that PhRMA is “not unhappy with the work” done by ASQC and HEN.

Just because PhRMA is content with the Axelrod/ASQC/AKPD connection doesn’t mean it’s kosher. Michael Steel, an adviser to House Republican leader John Boehner, says that “in this situation, the burden of proof is on the White House. What steps have they taken to ensure that the President’s chief political operative is free from a conflict of interest?”

Indeed. Why would the White House, knowing full well about the $2 million AKPD owes Axelrod, not raise a red flag when its friends running the umbrella groups hired his old firm? Dr. Sidney M. Wolfe, director of the Health Research Group at Public Citizen, the Naderite public-interest advocacy group, says that even if “Axelrod has no financial ties, and didn’t have the $2 million owed to him, it’s just the idea that he knows the firm” that raises eyebrows. “All of these entities seem to be in cahoots with each other,” he adds.

Kenneth A. Gross, a lobbying-ethics expert at Skadden, Arps, Slate, Meagher & Flom, notes that there is no smoking gun: “The only conceivable way I could see this being an issue is if AKPD’s viability depended on the health-care coalition’s funds, thereby preventing a default on the money AKPD owes to Axelrod,” he said.

Other friends of Axelrod are busy downplaying the potential conflict of interest. “I’ve known Axelrod for many years, and he has the strongest ethical compass I’ve come across in the political consulting business,” says Paul Begala, a Democratic political consultant who was an adviser to President Clinton. “He gave up a fortune and left the city he loves to take a high-risk, low-paying government job. He severed ties with the firm. I’m sure the buyers have to pay Ax the same price no matter whether profits go up or down, so he has no direct interest in the firm. I don’t know what more the guy can do. I realize the House GOP conference is pushing this issue, but let me give my Republican friends some advice: Whether the target was Atwater or Carville or Rove, attacking the adviser has never been successful. Always better to attack the organ grinder than the monkey.”

In a press conference on Tuesday, Robert Gibbs, Obama’s press secretary, also tried to deflect the issue, saying that Axelrod’s situation is an example of good, old American values. “An agreement,” Gibbs said, “was made because David started and owned the firm. He left the firm and, if I’m not mistaken, is being paid for the fact that he created it and sold it, which I think is somewhat based on the free market.”

Of course, the wagons wouldnt need circling if the Obama administration had avoided the appearance of impropriety. On January 21, one day into his presidency, President Obama issued Executive Order 13490, which outlined new ethics commitments for executivebranch personnel. Section 1, part 2, states that every staffer must pledge, for a period of two years, not to “participate in any particular matter involving specific parties that is directly and substantially related” to his or her former employer. The problem is that this administration has pledged to do things differently, with higher standards,” says Sheila Krumholz, executive director of the Center for Responsive Politics. “People will judge them on a different set of expectations. That said, their ethics reforms have mostly been focused on lobbyists and the revolving door, not on consultants.”

Lobbyists, consultants — whatever. This is all just business as usual in Washington. Julius W. Hobson Jr. — a senior policy adviser at Bryan Cave LLP, who teaches lobbying at George Washington University — says that “when entities want to ally with the administration, they often pick the firms who help to elect the president, to get closer to the White House. You see people automatically gravitate towards the gurus who helped put the president in there.”

However the coalition groups came to settle on AKPD and GMMB over countless other choices — and regardless of the steps Axelrod took to separate himself from AKPD — any payments to his old firm from groups aligned with the White House seem like just the kind of politics that Obama campaigned against in 2008. We were told that we could expect better from the most ethical administration in American history.

Nonetheless, it’s good to be David Axelrod. He’s the president’s best friend, and getting richer by the day.

— Robert Costa is the William F. Buckley Jr. Fellow at the National Review Institute.

Robert Costa — Robert Costa is National Review's Washington editor and a CNBC political analyst. He manages NR's Capitol Hill bureau and covers the White House, Congress, and national campaigns. ...

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