Anticipating a Republican victory in the congressional elections of 1994, Gerald Cassidy, a lifelong Democrat, acquires a GOP lobbying firm. This shrewd move, however, is not enough to compensate for the loss in business that ensued.
By Robert G. Kaiser
Gerald Cassidy's ability to sense shifting winds in Washington is legendary among his colleagues. A memorable example came in 1994.
For years Cassidy had employed Fraser Barron, a quirky character who had worked on Robert F. Kennedy's presidential campaign, as the firm's director of research. In June 1994, Cassidy and several of his colleagues remember, Barron announced that the Republicans would regain control of the House and Senate in November. Cassidy found the prediction credible, he said years later. But his Democratic friends on Capitol Hill did not.
Characteristically, Cassidy decided he had to take Barron's prediction seriously. He approached two Republican lawyer-lobbyists, Peter Madigan and Michael Boland, both with good personal ties to the George H.W. Bush branch of the GOP. Boland and Madigan had gone into business together as lobbyists, and were doing pretty well. Cassidy offered to acquire them using company shares in a tax-free reorganization of the firm. Cassidy also proposed "to double the considerable money we were paying ourselves," as Madigan put it in an interview.
By October 1994, they had worked out details of a deal. The final papers were signed shortly after the thumping Republican victory that November. Most of the Cassidy firm was still Democratic, and the prospect of the first Republican Congress since 1953 unhinged an office that had traded on its Democratic connections. Cassidy's colleagues realized that he had taken an important precautionary step:
"People were impressed!" remembered Dale Leibach, then with Cassidy & Associates. "Gerry had in his drawer the most brilliant insurance policy! Boland and Madigan were players, and they were very smart."
Boland & Madigan was highly profitable and immediately made a significant contribution to Cassidy's cash flow -- $2.3 million in 1995, $3.4 million in 1996. Nearly half of its earnings were profits.
In hours of interviews for this series, Cassidy struck a modest pose, rarely taking credit and almost never bragging, but when it was suggested to him that lining up Boland & Madigan so fortuitously must have made him feel "pretty smart," he allowed himself a smidgeon of self-congratulation:
"Yeah, I was pretty pleased with that."
Still, the Republican sweep was an unwelcome event for a lobbying business founded by Democrats that had long relied on Democratic leaders in the House and Senate to win favors for its clients. James Fabiani, Cassidy's chief operating officer (and himself a Republican), remembered the 1994 election as one of several developments that knocked the firm off the smoothly ascending growth curve it had been on.
Increased competition; large investments in Powell Tate, the firm's new public relations arm; and a significant loss of business after the election -- Fabiani remembered losing $6 million in revenue by mid-1995 -- forced Cassidy into "a pretty substantial reorganization, including layoffs." In one difficult 30-day period in 1995, Fabiani recalled, "we fired 27 people," about one fourth of the staff. The salaries of those who remained were frozen. Fabiani remembered that he and Cassidy both worked for a year without a salary; Cassidy's recollection is that they worked for a reduced salary and took no bonus.
Grass-roots lobbying got the firm into hot water in 1995. A coalition of the big long-distance companies including AT&T and MCI hired Cassidy's new affiliate, Beckel-Cowan (now renamed BBA), to generate telegrams and mailgrams from voters to their members of Congress recommending defeat of a bill they thought favored the regional "Baby Bell" phone companies. Half a million mailgrams were produced by a telemarketing firm that BBA hired, but it soon emerged that most of them were bogus. Some came from dead people; many came from individuals who said they had never authorized use of their names. The coalition had to apologize profusely for the screw-up. Bob Beckel, who ran BBA, took responsibility for it, while blaming the telemarketing firm for the mistakes. The episode gave grass-roots lobbying a very black eye.
Buying Beckel-Cowan "was a major miscalculation on my part," said Cassidy years later. He tried to keep the firm going -- "another mistake" -- but dissolved it in 1998. Frederick Schneiders didn't work out either. The firm "did wonderful work," but Cassidy couldn't find paying customers who would commission the polls and focus groups it did. Cassidy had trumpeted the potential for collaboration among the various units he had assembled, but in the words of Greg Schneiders, "the much ballyhooed synergy" never really materialized.
Though Powell Tate did well at first, its revenues peaked in 1996, and the firm's big payroll then became a drag on overall earnings.
Even so, the numbers were much bigger than Cassidy and his colleagues could have imagined just a few years earlier. As it turned out, $6 million in lost revenue could be made up with aggressive marketing, long a specialty of the firm. By using outside "consultants" who acted as salesmen bringing in clients, and by approaching institutions that had never thought of hiring a lobbyist with ideas for how to extract money from Washington, Cassidy & Associates had a steady stream of new customers. By the end of 1995, the firm's billings were expanding again and totaled about $36.5 million.
But the ups and downs of the mid-90s took a toll on many of the old-timers who preferred life in the boutique firm that existed before 1989, when money began to dominate life at Cassidy & Associates.
"The company went from 'work hard, do good work for good people,' to just greed," said Elliott Fiedler, one of the early employees who came to Cassidy from the staff of Rep. David Obey (D-Wis.), a senior member of the appropriations committee.
Cassidy wouldn't use a term like greed, but he never tried to deny his interest in making more money. Wealth was always his preferred defense against the vagaries of life, to which he had been over-exposed as a boy. Employees like Fiedler loved the money they made at Cassidy & Associates, but they didn't share the proprietor's restless ambition for the really big bucks. Lobbying was the end for many of them; for Cassidy it was always a means -- a means to get rich.
So he repeatedly turned information gleaned in his lobbying work into investment ideas. Some never panned out, but some were remarkably successful. For example, he saw the opportunity created by the Reagan administration's Caribbean Basin Initiative, which allowed goods produced in favored Central American nations to be imported duty-free into the United States. One beneficiary was Costa Rica, where Cassidy invested $1 million in 1986 in a company that made circuit boards. He sold his interest in 1990 for $4.4 million.
Similarly, Cassidy saw the potential for cellular telephones when the government first allocated licenses by lottery to build the first cellphone systems. "I was part of a group that won one of the cellular phone licenses, and we built a cellular phone company down in North Carolina," he recalled. His original investment was $206,000; after a few years he cashed out for $3.1 million.
Over the years, Cassidy has often responded to ideas put before him by others. One such was brought to him by David Ifshin, a charismatic lawyer and financial executive prominent in Democratic and Jewish circles in Washington. Ifshin was impressed by the accomplishments of David Rubinstein, a young White House aide in the Carter administration who had made millions through the Carlyle Group, a global private equity or investment fund.
By 1995, Gerry Cassidy's own imagination was ranging far beyond the lobbying business when Ifshin suggested that they launch an equity fund of their own. "Gerry was very intrigued," recalled Lester G. "Ruff" Fant, Cassidy's lawyer at the time. Cassidy persuaded Fant to join the new enterprise, which Ifshin named Galway Partners LLC for the county in Ireland from which Cassidys had emigrated to America. Fant gave up his partnership in the Washington office of Sidley & Austin, a huge Chicago-based law firm, eventually joining Cassidy full time.
Ifshin thought they could exploit their personal connections to "raise large amounts of money, invest them in companies and get something for doing it," Fant recalled. "We know so many important . . . and rich people," Fant quoted Ifshin saying. "Through Gerry, we're one phone call away from everyone on the planet. There ought to be a way we can make some money on this." Fant said he wasn't sure this was a real business plan, but Ifshin pursued it by talking to a lot of rich people, offering to put them into future deals.
But no good opportunities had been identified, and no deals made, when Ifshin suddenly fell ill with renal cell cancer and died in April 1996. Galway hired a staff -- it grew to five or six people -- and did help launch an investment advisory firm called Columbia Partners, which has prospered for a dozen years. But Galway never had a real payday. Cassidy & Associates paid its costs, including rent in the building at 700 13th St. NW where the Cassidy firm had moved in 1991, and the salaries and expenses of all of Galway's employees.
Those outlays became a bone of contention within the lobbying firm, since, as Fant put it, a dollar spent on a Galway expense "was a dollar that was not available to be paid as a bonus to a lobbyist." Had Galway made money, Cassidy & Associates would have received 44 percent of its profits, Fant explained -- that was its share of the ownership. Galway was also committed to repaying its costs to Cassidy when it made some money -- but it never did. It eventually ate up several million dollars.
One Cassidy employee who worked on Galway was retired Gen. P. X. Kelley, former commandant of the Marine Corps, whom Cassidy had recruited to help diversify the firm's business. Kelley said he had many contacts in corporate America and was able to introduce some of them to Cassidy as possible clients. He only agreed to work for Cassidy on the condition that he never be asked to lobby Congress or the Pentagon.
When Cassidy asked him to work on Galway, Kelley said, he agreed without really knowing what he was getting into. "It never really got off the ground," he said. "I'm not sure I knew what was going on, and that was my problem. . . . You kind of lose interest when nothing is happening."
Cassidy was easily tempted by new ideas for making money, Beckel said. "There was always this urge to drift off into other businesses that were quicker money makers than actually going out to work."
No matter -- Cassidy's determination to expand his reach, increase the size of his firm and get still richer only intensified. So he would next try, audaciously, to sell stock in his company to investors -- to "go public," something no lobbying firm had ever done.
Washington Post research editor Alice Crites contributed to this report.
Tomorrow: The stock market isn't interested.
Key Related Materials
An overview of Gerald Cassidy's life and career.
A "cast of characters" in the life and career of Gerald Cassidy.
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