From the Washington Post:

Lobbying Firm Underreported Income
Some Clients Paid With Public or Tax-Exempt Funds in Bids for 'Earmarks'

By R. Jeffrey Smith
Washington Post Staff Writer
Thursday, July 6, 2006

A Washington lobbying firm at the center of a federal corruption probe failed to disclose at least $755,000 in income from 17 nonprofit organizations and governmental entities, and $635,000 from 18 other clients between 1998 and 2005, according to the firm's recently amended filings with the clerk of the House.

Lawyers for the Copeland Lowery Jacquez Denton & White firm say that the errors were inadvertent. But some experts have called them unusual and suggested that Copeland Lowery might have been trying to play down how much money it was paid by those who received federal grants the firm arranged, particularly the clients who paid its lobbying fees with tax-exempt or public funds.

Such payments to obtain "earmarks" -- a form of funding directed by language that lawmakers often insert in spending bills without hearings or competition -- have become increasingly common on Capitol Hill and increasingly controversial. Federal investigators have been probing whether there was a relationship between some of these earmarks and the campaign donations Copeland Lowery lobbyists made to House Appropriations Chairman Jerry Lewis (R-Calif.) and his committee colleagues.

The initial reporting errors had the effect of understating what Copeland Lowery received in lobbying fees from universities, health-care centers and municipal governments, among others. The reporting errors also understated what the lobbying firm received from private firms including ADCS Inc., owned by Brent R. Wilkes, a longtime Republican contributor also targeted in the federal probe.

Wilkes, who was close to former representative Randy "Duke" Cunningham (R-Calif.) before Cunningham's recent conviction for taking $2.4 million worth of bribes, was identified as co-conspirator No. 1 in court documents charging Cunningham, a former Appropriations Committee member. Lewis and Wilkes have denied wrongdoing.

The investigations so far have only focused on a small number of the estimated 13,000 congressional earmarks that added more than $67 billion to federal spending bills in the current fiscal year, a more than threefold increase from the 3,000 earmarks valued at $20 billion a decade ago, according to tallies by the Congressional Research Service.

Efforts by municipalities and other nonprofit entities to share in this splurge by spending tax-exempt or public funds on lobbyists have attracted particular criticism, but many of the entities involved have defended their spending as a wise investment that routinely reaps large rewards.

For example, the Institute for Human and Machine Cognition, affiliated with the Florida University system, received an earmark valued at $2.3 million to conduct research for the Navy after paying Copeland Lowery $60,000 last year, according to House records and a spokeswoman for the institute.

The Rochester Institute of Technology received six earmarks valued at $8.9 million after paying Copeland Lowery $440,000 from 2002 to 2005, according to House records and a tally by Taxpayers for Common Sense. The institute's lobbying payments during this period were initially understated in reports by $225,000.

The fees Copeland Lowery received from ADCS were similarly understated by at least $210,000. Lobbying fees paid by the Foundation for Improvement in Math and Science Education, an independent nonprofit formed to improve San Diego junior high school teaching, were understated by $220,000; and fees paid by the South Coast Air Quality Management District in California were understated by $210,000.

Copeland Lowery was founded by a former colleague of Lewis, former representative Bill Lowery (R-Calif.), who withdrew in 1992 from a primary race against Cunningham after House records showed Lowery had written 300 overdraft checks on his House banking account. Last month, the firm's Democratic partners resigned, and Lowery and the remaining Republican partners renamed the firm Innovative Federal Strategies, a spokesman said.

Between 1997 and 2006, Lowery and his clients gave Cunningham's political campaign committees $459,000 and Lewis's committees $917,000, according to a tally by the nonprofit Center for Responsive Politics.

Several lawyers specializing in congressional ethics said the initial misstatements may have been the result of sloppiness by the firm and lax enforcement. The underlying law was stripped of criminal sanctions or civil fines in the late 1990s, and the few Justice Department investigations since then have focused on lobbyists who failed to file, rather than those who filed incorrectly.

Stanley M. Brand, a former counsel for the House, said that "because the statute is so laxly enforced, people don't worry about it. Being precise . . . doesn't seem to matter" except in the current environment, when prosecutors are poring over "everything on the public record" involving firms implicated in their investigations.

Jan W. Baran, a former counsel to the Republican National Committee, said that while he has no information about the circumstances behind Copeland Lowery's reporting errors, another factor may also have been at work. Most Washington lobbying firms are boastful about their fees, Baran said, but advertising "payments by municipalities . . . can be counterproductive, if taxpayers get incensed about whether they should be hiring lobbyists."

A lawyer representing Copeland Lowery in the probe, Lanny A. Breuer, said the firm had amended its disclosures after an internal review was initiated because "regulators and the government are looking" at the fee declarations. Over the years, "there was a helluva lot of sloppiness in this reporting" about lobbying fees, Breuer said.

"I'm not saying our client shouldn't have been more careful," but the errors do not amount to acts punishable under a law that targets false statements to the government, he added.

A colleague, lawyer Robert K. Kelner, attributed the errors to confusion and inattention at the firm. Breuer acknowledged that the new filings were made after prosecutors in Southern California began sending subpoenas to some of Copeland Lowery's clients, seeking copies of their correspondence with the firm. The subpoenas appear to be aimed at learning what the partners in Copeland Lowery promised their clients they could obtain in earmarks, and particularly what they said about collaboration with Lewis.

Keith Ashdown, vice president of Taxpayers for Common Sense, said that "what we've seen by Copeland Lowery is highly unusual.

Lobby firms make amendments all the time, but we have never seen it at that level." He said that the reason for the misstatements is "a question the prosecutors are going to have to answer."

Researchers Madonna Lebling, Alice Crites and Derek Willis contributed to this report.