Revolving door

How Obama failed to shut Washington's revolving door

He vowed to keep lobbyists out of his administration, but loopholes weakened his pledge.

By Josh Gerstein

“When I’m president of the United States, if you want to work for my administration, you can’t leave my administration and then go lobby.” — Barack Obama, campaigning in Iowa in August 2007

“The revolving door — the pattern of people going from industry to agency, back to industry — that will be closed in the Obama White House.” — Obama, in Iowa in December 2007

The vow of a novice Chicago senator to freeze out lobbyists and nail shut the revolving door was no throwaway line in Barack Obama’s stump speech. It was central to the narrative animating his 2008 campaign: a promise of wholesale change to business as usual in Washington. His presidency would be different.

Eight years later, here’s how different it looks: The top lobbyist for the private health insurance industry that continues to battle aspects of Obamacare is a former Health and Human Services official who played a powerful role in implementing the legislation. The head of the software industry’s lobbying group is a former Obama White House appointee who oversaw the negotiation and enforcement of the intellectual property rules essential to that business. And an Obama aide deeply involved in crafting the White House’s broadband Internet policy now serves as the chief lawyer for the telecom industry group seeking to legally overturn those same rules.

All presidents back away from some of their most dramatic campaign promises. But seven years into Obama’s presidency, the revolving door shuttling officials out of his administration is spinning at a rapid clip, and Obama has seen his campaign promise founder against the deeply ingrained culture of selling government expertise in Washington. “They were overpromising on something they could never deliver,” said Melanie Sloan, former executive director of the watchdog group Citizens for Responsibility and Ethics in Washington. “It’s worse than doing nothing.”

There’s no doubt grand promises were made. Just one week after Obama’s sweeping victory, transition chief John Podesta declared that the president-elect made a commitment “he intends to enforce in his government, so that the undue influence of Washington lobbyists and the revolving door of Washington ceases to exist.” On his first full day in office, Obama underscored the issue's personal significance by signing what the White House billed as an “historic” executive order to bar his appointees from lobbying their former administration colleagues for two years after leaving the government.

What happened instead?

The Obama administration has hired more than 70 previously registered lobbyists, according to a 2014 POLITICO review, and watched many officials circle through that revolving door, as Obama’s lobbying policy was weakened by major loopholes and a loss of focus over time. What’s more, the current laws around lobbying, which the administration measures were built on, simply ignore many instances observers would regard as lobbying — and the White House never pressed for changes to those laws.

Obama’s promises on lobbying received considerable media attention in his first months in office but interest waned. Ethics experts say the last year or two have tested the policy like never before as some Obama appointees jump to take highly paid K Street posts before the policy knowledge and connections they made inside the administration run the risk of being devalued if a Republican wins the White House.

“It’s a big problem because people want to sort of cash in towards the end of the president’s term,” said Richard Painter, a White House ethics lawyer under President George W. Bush. “Things get sort of loosey-goosey the last two years. … Everybody’s looking for lucrative opportunities in the private sector.”

White House spokesperson Brandi Hoffine contended that Obama "has done more in the past six years to close the revolving door of special interest influence than any other president, namely by prohibiting executive branch appointees from accepting gifts from lobbyists, prohibiting former lobbyists from working on issues on which they lobbied, and by preventing appointees from lobbying the White House after working here.

"Our goal has been to reduce the influence of special interests in Washington. The pledge does not bar everyone with prior lobbying experience from serving in this administration. In fact, we welcome individuals with a range of experience in both the public and private sector, consistent with requirements the president has put into place to reduce special-interest influence in government,” she said.

There’s no issue more central to Obama’s legacy than Obamacare. And as head of the Center for Medicare and Medicaid Services since 2011, Marilyn Tavenner played a vital role in crafting the rules, regulations and systems the federal government now uses to try to deliver on the promises in the Affordable Care Act.

But in February of this year, Tavenner quit the government, and in July, she surfaced as the new president and CEO of the powerful trade group for health insurers, America’s Health Insurance Plans — a group that spent more than $100 million to defeat Obama’s landmark health care reform bill before it passed in 2010. The insurance industry has largely made peace with Obamacare, but in November, Tavenner ripped the administration for its handling of insurance exchanges, a clear signal her allegiance had shifted.

"Looking at the drop in uninsured is amazing," Tavenner said. "But we still have work to do with accessibility and the cost side." Those were priorities when she was in the administration and they remain priorities now, she said.

Tavenner registered this summer as a federal lobbyist, but she says she scrupulously complies with the requirements of the Obama ethics pledge. “I have not entered (Health and Human Services),” she told POLITICO, adding that she also keeps social contact with her former colleagues to a minimum to avoid even the appearance of violating the lobbying ban.

Tavenner said much of her work now involves meeting with members of Congress, as well as strategizing with other AHIP personnel who can make the direct contacts with the administration that she can’t. That kind of advice, and the bipartisan goodwill Tavenner earned from key lawmakers, appears to be valuable to the health insurance industry. AHIP won’t say how much Tavenner is being paid, but her predecessor made about $2 million in salary and bonuses in 2014, and was considered one of the most influential figures in the American health care debate.

By keeping her distance and having others lobby directly, Tavenner seems to be satisfying the letter of the Obama ethics pledge. But one reform advocate who slammed that as a loophole just a few years ago was none other than Sen. Barack Obama. “Real reform means ensuring that a ban on lobbying after members of Congress leave office is real, and includes the behind-the-scenes coordination and supervision activities now used to skirt the ban,” he said during a 2006 Senate debate on lobbying reform legislation.

It’s a loophole he didn’t close in his own ethics policy. Nor did he deal with the narrowness of the rules’ language, which allows plenty of room for ex-officials to maneuver. The executive order he signed in 2009 declared: “‘Lobby’ and ‘lobbied’ shall mean to act or have acted as a registered lobbyist.” Because the registration requirement kicks in only when a person spends 20 percent or more of his or her time directly lobbying, many people whose jobs involve trying to influence public policy — but who don’t technically “lobby” for most of that time — manage not to register.

“That actually is a huge loophole. It’s a Mack truck,” says Kathleen Clark, a law professor at Washington University in St. Louis who specializes in government ethics.

And, in fact, the number of registered lobbyists has dropped from 14,173 when Obama took office to 11,165 in October, continuing a trend that began in 2007, according to the Center for Responsive Politics. Experts attribute the trend to several factors, including the Jack Abramoff lobbying scandal late in the George W. Bush administration and Obama policies aimed at officially declared “lobbyists.”

Another loophole Obama didn’t close is that the “cooling off” periods between government and lobbying work apply only to the agency where an ex-official used to work. Except for the most senior officials in government, contact with other agencies in that time is fair game.

Until August 2013, Victoria Espinel was the Obama administration’s intellectual property enforcement czar, working closely with the Commerce Department in a new White House post overseeing efforts to enforce the copyright, trademark and patent protections on which some of America’s biggest industries depend. Within weeks of leaving the administration, she took over as president and CEO of the Business Software Alliance, advancing the agenda of tech firms who want the U.S. government to ride herd against piracy and the use of unlicensed software around the world. The job earned her $1.2 million last year, according to newly filed tax forms. And by January 2014, Espinel was reaching out to the Commerce Department on behalf of the software industry, advising the government on how to combat posting of pirated software online.

Asked about her work, Espinel said in a statement: “I was happy to carefully follow the terms of President Obama’s ethics pledge following my departure from my appointed position with the Administration.” A BSA spokeswoman said those rules limited her contact with the Executive Office of the president — so, she’s complying with the rules by ignoring the White House and going straight to the department most closely involved with the policies she used to guide.

“I think the rules ultimately need to be tightened up,” Painter said. “White House staff really shouldn’t be representing back to the agencies they supervised.”

As Espinel spun out of the revolving door, the blur on the other side was her predecessor at the Business Software Alliance, Robert Holleyman. Holleyman, who was registered as a lobbyist for the group through 2009 and left there in April 2013. Less than a year later, Obama nominated him as a deputy U.S. trade representative.

Some of Obama’s actions also fuel doubts about how committed the White House is to the letter and spirit of the ethics pledge. Just 14 months after Espinel left the administration, Obama appointed her to a panel advising the administration on trade policy. The post appeared to require Espinel to advise some of the very officials she was still barred from contacting.

A spokeswoman for Espinel said she didn’t take part in any meetings of the board until “after her restriction period expired.” Just a few weeks later, she turned up in a coveted seat — right next to Obama — as he touted business leaders’ support for the TransPacific Partnership trade deal.

Obama’s rules build on federal ethics laws that bar former officials from advocating to agencies on “particular matters” handled while in office. But that term includes procurements and enforcement actions involving specific parties — and not regulations.

So, Tom Power, who as deputy chief technology officer at the White House was involved in numerous discussions about new broadband net neutrality rules, is free to advocate against those rules in his new job as the top lawyer for the mobile-phone industry’s trade group, CTIA The Wireless Association. Indeed, after Power joined CTIA in January, the group filed a lawsuit in April to block those rules from taking effect.

CTIA said that Power, who has not registered as a lobbyist, complies with all applicable ethics regulations — including the Obama ethics pledge that bars him from doing business with the White House or the Commerce Department's National Telecommunications and Information Administration through December 2016. He did meet with Obama in the Oval Office on Feb. 26 — the day the Federal Communications Commission approved its net neutrality rules — according to White House visitor records; that was for a ceremonial departure photo, according to a source familiar with the meeting.

The rules, however, do not block him from dealing with the FCC, where he is well-known by officials he previously collaborated with while in government. He has met with FCC staff in person at least twice this year, and held at least one telephone meeting, according to agency filings. Separately, he filed numerous comments and petitions on behalf of the nation’s major wireless carriers.

Power's name is not on the legal briefs in the CTIA lawsuit, which was filed by the group's outside counsel. Still, his transition worries some ethics experts.

“Skilled workers are entitled to work, and prior public service should not disqualify them from future employment,” Center for Responsibility and Ethics in Washington Executive Director Noah Bookbinder. “However, it can be concerning when the people in charge of policing industries or developing policy leave and immediately join groups or industries working to get around regulations they helped to write or enforce, or take positions where they help lobby their former employer.”

Power took pains during his government service to abide by conflict-of-interest rules. During the 2013 government shutdown, he took up bartending at Gypsy Sally’s in Georgetown, where he refused tips from telecom lawyers to avoid running afoul of ethics policies.

Power is hardly the first telecom expert to spin through the revolving door. Former FCC Chairman Michael Powell now heads the National Cable and Telecommunications Association, and Power’s boss at CTIA, Meredith Atwell-Baker, is herself a former FCC commissioner. The agency’s current chairman, Tom Wheeler, once served as the leader of both of those trade groups.

Another glaring gap in Obama's anti-lobbying drive: His executive order doesn’t reach the vast majority of the 2.6 million federal employees, even senior ones in the regulatory sphere. It only applies to political appointees. As a result, many key officials can move freely in and out of the revolving door.

A case in point: After serving as acting CEO and vice president of global government and scientific affairs for the dietary supplement industry trade group — the Natural Products Association — scientist Daniel Fabricant landed a job in 2011 as director of the Division of Dietary Supplement Programs at the Food and Drug Administration. In 2014, he emerged from the agency and returned to the trade group as its CEO and executive director.

Fabricant's acting replacement at the FDA, Cara Welch, followed a nearly identical path. She arrived from the same trade group to serve as Fabricant's deputy at FDA shortly before he left.

Fabricant, who didn't respond to several requests for comment, now pleads with Welch to fend off FDA enforcement actions. In September, he challenged her over an effort to crack down on sale of powdered caffeine, which can cause heart attacks.

The revolving-door saga at FDA stunned some agency critics.

“Why is this kosher?” asks Pietor Cohen, associate professor at Harvard Medical School. “It makes the whole thing seem ridiculous. ... It means this lobbying group has info about not just what’s being discussed now at FDA but plans for the next several years. It absolutely is not in the consumers’ best interest to have this happen, even if the person is not a political appointee.”

Other high-ranking officials, particularly lawyers, have managed to pass through the revolving door despite the laws and policies already on the books.

Just weeks after Obama took office as president in 2009, Robert Khuzami joined the Securities and Exchange Commission as head of its enforcement division. Few grumbled at the time that his previous employer, Deutsche Bank AG, was at the center of the global financial collapse.

Khuzami’s tenure as the SEC’s top cop received mixed reviews. Many on Wall Street thought he was too aggressive. The SEC went after several major banks for fraud, including Goldman Sachs, which settled for $550 million. However, consumer advocates complained that the agency wasn’t tough enough with big financial players whose deceptive practices helped cause the Great Recession and that the settlements amounted to "tolls" that wouldn't alter behavior on Wall Street.

Khuzami's ties to Deutsche Bank may have fueled suspicion in some quarters that he was being too friendly toward defense lawyers for Wall Street firms and executives. Sen. Chuck Grassley (R-Iowa) said in 2011 some of Khuzami’s comments at the SEC should “sound the alarm for anyone concerned about the SEC being overly cozy with those it should be investigating.”

Deutsche Bank was ultimately charged not with fraud, but with releasing inaccurate financial statements. Khuzami was walled off from that investigation. The bank settled with the SEC for $55 million two years after Khuzami left the agency.

“Deutsche Bank was as dirty as anyone else,” said Gary Aguirre, a former SEC lawyer fired by the agency who settled a wrongful-termination lawsuit in 2010 and worked at the SEC before Khuzami.

When Khuzami left in 2013, he headed for law firm Kirkland & Ellis. The SEC news release announcing his departure noted his 11 years as a federal prosecutor, but omitted his five years as general counsel at Deutsche Bank.

Publicly available federal court records show Khuzami has represented only one corporate client in litigation since he left the SEC: Deutsche Bank. The cases don’t involve the SEC.

“What Robert Khuzami is doing is really an abuse of the revolving door,” said Craig Holman of Public Citizen. “Someone like Khuzami who leaves government service is so valuable with his experience at the SEC. One has to worry about the official actions these revolvers took when they were in office. Were they being influenced into taking any particular action with the promise of lucrative employment after government service?”

Asked by POLITICO about revolving-door concerns, Khuzami said he doesn’t think the term describes him.

“I have had the high honor to spend the majority of my career in public service, and that has always included the duty to observe all ethical rules and obligations,” he said in an email.

Since he was not a political appointee, Khuzami wasn’t covered by Obama’s ethics pledge and its two-year limit on contacts with an employee’s former agency, but he was covered by a similar provision in federal law that applies to highly paid officials.

However, some lawmakers still believe the revolving-door limits on financial regulators are too lax. In July, Sen. Tammy Baldwin (D-Wis.) and Rep. Elijah Cummings (D-Md.) introduced a bill to put broader ethics restrictions on staffers at financial agencies like the SEC and the Treasury Department, including a two-year ban on contacts with an employee’s former agency.

“Even if there isn’t any quid pro quo, it’s important to address the appearance of corruption and the opportunities of undue influence,” said Holman, who helped draft the bill.

Asked about the measure, an official who asked not to be named said: “The administration remains open to additional proposals to further the president’s goal of reducing special interest influence.” The White House also pointed to Obama’s signing in 2012 of the STOCK Act, a law aimed at preventing insider trading by members of Congress. The bill tweaked ethics laws for the executive branch, requiring disclosure on job negotiations and limiting access to initial public offerings of stock.

However, Obama signed a partial repeal of that law the following year, scaling back a provision that called for online release of financial disclosures.

Obama’s anti-lobbying drive also met resistance from both liberal groups and reformers. Liberal environmental and human rights groups bitterly complained that their staffers were blocked from administration jobs because they had gone out of their way to comply with existing law by registering as lobbyists. And advocates for business interests went to court to fight Obama’s policy keeping registered lobbyists off federal advisory panels.

In 2014, a federal appeals court revived the lawsuit arguing that the Obama ban on lobbyists serving on advisory committees appeared to violate the First Amendment. The judges suggested there was no obvious explanation for why corporate executives could sit on government boards but the lobbyists for those companies could not.
Returning the case to a lower court, D.C. Circuit Judge David Tatel suggested Obama’s populist rhetoric in the crusade against lobbyists had gotten the better of him.

“The court may also want to ask the government to explain how banning lobbyists from committees composed of representatives of the likes of Boeing and General Electric protects the ‘voices of ordinary Americans,’” Tatel declared, quoting from a formal memo Obama issued enshrining the policy in 2010.

After mulling the issue for several months, the White House relaxed the ban — allowing lobbyists back on government advisory panels to represent specific industries.

The net result: Aside from Obama’s ethics pledge, nearly seven years into Obama’s presidency, there’s been no change to the core of the revolving-door provisions in federal law and no effort to extend that pledge to a larger swath of the executive branch.

So, was the anti-lobbying push a real attempt to change Washington, or just the right thing to say at the time? The White House defends its record by arguing that Obama took “historic steps” to rein in the influence of money over government policy. “President Obama has done more in the past six years to close the revolving door of special interest influence than any president before him,” Hoffine, the White House spokeswoman said.

Indeed, the White House has been stingy in waiving the rules to hire former lobbyists: Of more than 7,000 political appointees since 2009, only four have gotten waivers to join the administration after lobbying the hiring agency in the preceding two years. One of those — for deputy secretary of Defense nominee Bill Lynn —came just a day after Obama signed his executive order and undercut perceptions of its credibility. Lynn had been defense contractor Raytheon's top lobbyist.

About six months after leaving the Pentagon in 2011, Lynn was named CEO of the U.S. branch of contractor Finmeccanica, which last year did $366 million in Pentagon business.

Other waivers of the core lobbying-ban provision went to White House Director of Intergovernmental Affairs Cecilia Munoz, who had lobbied for the National Council for La Raza, first lady Michelle Obama's policy aide Jocelyn Frye, formerly a lobbyist for the National Partnership for Women & Families, and White House Senate liaison Marty Paone, who had worked for lobbying firm Prime Policy Group.

Despite the limits on lobbyists entering the administration, some reform advocates say the Obama team's interest in broader lobbying reform has faded over time. They credit a hard-charging lawyer who served in the White House counsel's office, Norman Eisen, with pressing that issue and others like transparency and campaign-finance reform early in Obama's tenure.

After Eisen became ambassador to the Czech Republic in 2011, his portfolio was parceled out to other staffers. There's been little movement on those issues since. He declined to be interviewed.

"As soon as Norm Eisen left, the Obama administration never changed its executive order or internal ethics policies. It no longer pursued strengthening any of the ethics positions," Holman said. "It is distressing."

Others say the White House never saw any political dividend from the ethics actions Obama touted so prominently as a candidate in 2008. "The president just didn't get the bump he thought he would out of the idea of clean government," Sloan declared.

More broadly, the record seems clear that a president who promised to nail shut the revolving door wasn’t looking to bring a complete end to the exchange of government personnel with the corporate sector and even the lobbying world.

“There’s a perception among at least the elite that there are benefits from that fluidity. … What it doesn’t address is the problem a lot of people perceive about capture” of regulators by the industries they oversee, Washington University’s Clark said.

In the end, she said, the change Obama delivered on the lobbying front, like so many others, was more incremental than fundamental.

“It gives the appearance of really doing something about entrenched interests in without actually impairing the relationships between moneyed interests and government.”