After a bitter divorce, Schlossberg-Cassidy becomes Cassidy & Associates, and Gerald Cassidy takes the firm to dizzying new heights. But the main source of its business comes under fierce attack.
By Robert G. Kaiser
The name of the lobbying firm changed at the beginning of 1985: henceforth it would be Cassidy & Associates. It grew faster and faster, quickly becoming a money machine. In 1982, the firm had taken in $2.1 million in revenue; by 1987, this number would grow ninefold, to $18.8 million, and Cassidy was paying himself millions of dollars a year.
Clients were flowing to the firm in search of earmarked appropriations -- allocations for special interests from the federal treasury, appropriated directly by Congress. This was the big idea that Cassidy had helped pioneer. First it became popular, then it became controversial. In 1986, the controversy turned into a fight when the Senate tried to end the practice.
The fight was critical for Cassidy; losing could mean the end of his business. He was getting rich by helping second- and third-tier colleges and universities win earmarks, mostly to build new laboratories and buildings. This was popular among those who benefited, naturally, but many in the academic world, particularly in elite institutions, considered it political logrolling at the expense of academic integrity.
The controversy intensified as the practice grew; it grew largely because of the success of Cassidy & Associates. First came the basic technique: A school seeking federal funds for a new building, typically, hired Cassidy to prepare a formal proposal. Cassidy helped the school approach its congressman or senator with a plan. The member of Congress saw an opportunity to bring home some bacon. The member and the lobbyist then collaborated to build congressional support for the idea.
One reason the business grew was the system Cassidy fostered for finding new clients. He depended increasingly on "consultants" -- salesmen who worked for commissions of 10 percent of the fees that their clients paid to Cassidy. This was the model first exploited by William Cloherty, the fireplug from Medford, Mass., described in Chapter 6. It had many attractions, not least the fact that it could be copied again and again. James Fabiani, the detail man who had joined the firm in 1982 and became its principal marketer, recalled realizing that "you ought to be able to replicate this [relationship between university and lobbyist] the way McDonalds replicates its restaurants." But this required salesmanship, and then the manpower to look after the new clients.
Rose's stature among university presidents was a salesman's dream come true. Fabiani recalled trips he and Rose took around the country: "In less than a year we visited 20 campuses and signed 19 new clients." Rose reassured college presidents that aggressively seeking earmarks from Congress was entirely appropriate. He argued that earmarks helped the Davids of academia, ambitious, up-and-coming institutions, compete with the Goliaths, the big-name institutions that belonged to the old-boy network that dominated government-funded research. And he could persuade them that large fees to Cassidy & Associates were a good investment. Rose would have made a small fortune from these clients had he lived long enough to collect all his commissions, but his lung cancer killed him in February 1991.
Rose attracted several other former university presidents as collaborators, most importantly Elvis Stahr, former president of West Virginia and Indiana Universities, Secretary of the Army under John F. Kennedy, and for many years president of the National Audubon Society.
Rose and Stahr "were very important in making us credible, and also in making the case that it was appropriate for universities to go after direct funding from Congress," Cassidy recalled.
From the beginning Cassidy had a gift for knowing how much to charge. The fee did not have to reflect the actual number of hours he or his colleagues would spend on the client's appropriation. A monthly fee of $20,000 was not uncommon -- $240,000 a year. Nearly all contracts were for two years or longer. If the ultimate reward was $20 million or more in earmarks, this seemed like a bargain.
The need to "service" the growing number of clients prompted the hiring of new staff to the firm, young men who had worked as aides on Capitol Hill. The first addition was Frank Godfrey, who had worked for Tip O'Neill, the speaker of the House, and had befriended many members. Vincent Versage had worked for Sen. Spark Matsunaga (D-Hawaii) and had befriended other members of the Hawaiian Democratic cabal in Congress, including Sen. Daniel Inouye, an influential appropriator. Jonathan Orloff, an assistant to Sen. Edward M. Kennedy (D-Mass.), and George Ramonas, who had worked for an important Senate appropriator, Pete Domenici (R-N.M.), knew the Senate well. Don Smith was the first man hired who had worked on the staff of appropriations committees -- in his case, the House appropriations subcommittees on military construction and energy and water. Richard Pena was an assistant to Rep. Jim Wright (D-Tex.), O'Neill's successor as speaker. Elliott Fiedler came from the personal staff of Rep. David Obey (D-Wis.), a senior appropriator.
None of these men had independent stature in Washington; they were classic back-room players, aides who got the actual work done. Typically, Cassidy raised their Hill salaries by 50 percent or more when they joined the firm, then added annual bonuses. Overnight, their personal fortunes were transformed.
At Cassidy & Associates they performed multiple tasks: designing projects that might be good candidates for an earmark; introducing clients to key members of Congress and staff assistants; teaching both members and staff how to package and promote an earmarked appropriation; applying pressure to members and staff at important junctures to try to get a client's project into an appropriations bill, or into the report that accompanies nearly every bill. Cassidy and his colleagues often relied on "report language" to direct a federal agency to spend money on a specific project sought by a Cassidy client.
The 1983 earmark that benefited Columbia University [see Chapter 6] was the first to attract significant public criticism. The early critics included the Association of American Universities (AAU), the 50-member organization of leading research institutions, and the National Science Foundation (NSF), created by statute in 1950 to supervise government efforts to fund and enhance scientific research. The AAU and NSF were the old boys in the old-boy network.
In 1986, one of the leaders of the AAU was the venerable William Danforth, chancellor of Washington University in St. Louis. Danforth was the older brother of Missouri's Republican senator, John Danforth. The academic brother persuaded his senatorial sibling that the practice of earmarking appropriations for specific academic institutions threatened America's scientific preeminence by allowing politics to influence the allocation of money for science. The AAU thought earmarks were "anti-science," John Danforth recalled years later. "I thought it was very, very bad," William Danforth confirmed.
"What bothered us was, the money was being given without any competition at all. Someone had decided to give these people a gift," said a leading critic, Jerold Roschwalb, the long-time Washington lobbyist of the National Association of State Universities and Land Grant Colleges.
The earmarks went primarily for the construction of new facilities. Grants for facilities were not the same as grants for research, which were traditionally allocated by a system of "peer review." Scholars sitting on review committees for the NSF, the National Institutes of Health or for other government-sponsored entities chose the projects most worthy of federal support. But "peer review" produced a consistent result: most of the money went to a small number of distinguished institutions, mostly in the Northeast and California. Not surprisingly, most of the "peers," the senior scientists who sat on the committees that made the research grants, were professors at those same institutions.
This is what bothered Rose, Stahr, and other critics of peer review. One of the most articulate was John Silber of Boston University, an early Cassidy client and eventually one of the firm's most loyal and lucrative customers. Cassidy & Associates became a center of anti-peer-review agitation.
They argued the case as a matter of fairness: the great universities of the East and West coasts had been chosen by the government years earlier to host the leading federally-supported research institutions: The Lawrence Livermore Lab at Berkeley, the Plasma Physics Lab at Princeton, the Jet Propulsion Lab at Cal Tech, the Lincoln Lab at MIT -- 19 of them in all - brought billions of dollars to those favored institutions and left scraps for the rest.
But with political help, universities outside the elite could get a fresh chance. Most importantly, they could get money to build world-class research facilities. "Obviously," Silber testified to Congress in 1985, "such facilities attract outstanding research scientists," who in turn would attract the most grants for research.
Wealthy, blue-blooded WASPs like the Danforths (their family owned the Ralston Purina Co.) were natural foils for working-class upstarts like Cloherty, Cassidy and Silber, who happily cast the dispute as the entrenched elite against ordinary folks.
In June 1986, Sen. Danforth proposed an amendment on the Senate floor that brought this dispute to a head. He proposed killing earmarks for 10 universities worth $80.6 million. Two of the ten were Cassidy clients. These earmarks were included in an "Urgent Supplemental Appropriations Act" whose ostensible purpose was to fund critical government operations. Proponents of the earmarks argued that the academic facilities they would fund would enhance the national defense. Danforth disagreed: "The issue before the Senate is whether research money to be spent for university research [is] spent according to a competition process whereby scientists ..... make that decision on the basis of merit," or based on "political logrolling."
Danforth and his allies characterized the earmarked funds to be "research money" and thus above politics. But to the defenders of earmarks, this was unfair and hypocritical. As one of them, Sen. Alfonse D'Amato of New York, put it, the earmarks did not fund research but "construction and renovation" of research facilities. "There have been no funds whatsoever set aside for this," D'Amato said, accurately. The federal government once had funded construction projects for universities, but those programs all died in the stringent budgetary climate of the late 1970s.
D'Amato had an earmark in the bill -- $11 million for the Rochester Institute of Technology (RIT) to build a microelectronic engineering center. RIT was a Cassidy client. With such a facility, it hoped to compete for Pentagon research contracts and other contracts that were then beyond its reach. Eventually this argument proved accurate; when RIT later did receive a federal appropriation to build the microelectronic engineering center, it was able to attract millions of dollars of peer-reviewed research grants.
On the other hand, there was no competition involved in the allocation of earmarks, save perhaps among lobbyists and members of Congress. As Sen. Lloyd Bentsen (D-Tex.) pointed out in the debate, of the ten projects Danforth sought to kill, "not one has been requested by the Defense Department. Not one has been authorized by Congress. And not one would be subject to the established procedures for scientific competition." (Read the Congressional Record text of the debate [PDF].)
After a lively debate, the Danforth Amendment passed. The key recorded vote was 58-40. The Senate had emphatically rejected earmarks for universities of the kind Cassidy & Associates was promoting -- and exploiting to make a pile of money. The vote came as an unexpected shock to the firm.
"This was a great moment of truth, a turning point for the appropriations business," recalled Orloff, one of the young men Cassidy had hired to service his roster of new clients. With no time to spare, the Cassidy firm had to mobilize support for earmarking or face a devastating blow to its business.Washington Post research editor Alice Crites contributed to this report.
Tomorrow: Cassidy fights back.
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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