Nov. 18 (Bloomberg) -- When U.S. House Republican leaders in 2003 were short of votes to pass a $395 billion Medicare prescription drug benefit, they recruited former House Speaker Newt Gingrich for help.
In a hushed room on Capitol Hill, Gingrich told his former Republican colleagues that if he could endorse the measure, they should be comfortable with it, too, said two former senior House aides who attended the closed-door session.
Two days later, after a vote was held open for three hours as leaders corralled the final ayes, the measure passed and was eventually signed into law by President George W. Bush.
What Gingrich didn’t mention during the Republican caucus meeting was that he was also building a for-profit, health-care research company and seeking financing from drugmakers, which were investing $128.6 million in lobbying for passage of the new benefit for seniors.
His founding of the Center for Health Transformation in 2003 was a critical step in Gingrich’s formation of a set of private companies that traded on his name and made him millions. The health-care policy center collected at least $37 million, the Washington Post reported.
“It undercuts his message that he’s a ‘change agent,’” said John Pitney, a former Republican Party strategist who teaches political science at Claremont McKenna College in Claremont, California. “It’s not that he necessarily did anything unethical, but it cements his image as a Washington insider. That’s not illegal, it’s just politically very unpopular.”
Rise in Polls
Gingrich’s rise in such public opinion polls as a Bloomberg News Nov. 10-12 survey that put him in a four-way tie for first place in Iowa, where the first contest will be held Jan. 3, is also elevating scrutiny of his consulting firm, The Gingrich Group, and other private companies.
The former Georgia congressman reported assets in 1997 of between $197,000 and $606,000, according to his last House personal financial disclosure report, which permits lawmakers to record their wealth in broad ranges. According to his 2011 presidential disclosure report, the Republican primary candidate today is worth between $7.3 million and $31 million.
“If you somehow made it illegal or untenable for former members of Congress or former administration officials to trade on their previous associations, the national unemployment rate would go up to 10 percent,” said Rich Galen, a former Gingrich adviser.
Gingrich wasn’t paid to lobby the Republican caucus.
He said yesterday that his intellect and congressional experience were magnets for corporate clients.
“If you just take what people say about me in the debates and say to yourself, ‘Gee, is that a person somebody might have hired for advice?’ I think it’s hard to argue that they should have hired somebody that is truly dumb,” he said at a campaign stop in Jacksonville, Florida.
R.C. Hammond, Gingrich’s campaign spokesman, said in an interview that “companies came to him because of what he thought. He didn’t mold his thoughts around what companies wanted.”
As a businessman, Gingrich at times did stray from his party’s conservative orthodoxy. Many of the Republican voters he’s now courting are critical of the drug-benefit program because it drove up the deficit. Gingrich’s advocacy of ethanol subsidies, which attracted a client to his consulting company in 2009, separates him today from such presidential rivals as former Massachusetts Governor Mitt Romney, Texas Governor Rick Perry and Texas Representative Ron Paul, who oppose them.
The Gingrich Group
Gingrich’s private industry career began soon after he left office in January 1999 and started The Gingrich Group with offices in Atlanta and Washington. In April 1999, he announced a strategic alliance with PriceWaterhouseCoopers LLP and landed Freddie Mac, the government-backed mortgage-financing company, as a client in May.
“He was completely accessible by the phone,” said Mitchell Delk, who was Freddie Mac’s chief lobbyist, in an interview. For the monthly retainer of $25,000 to $30,000, “you could just call up and throw an idea off of him,” Delk said.
The Gingrich Group focused primarily on policy issues, said Nancy Desmond, one of the firm’s original employees and now the head of the Center for Health Transformation. She remembers helping one company figure out how more children could get access to computers.
“It was usually about bringing various people in the room and talking about various solutions,” Desmond said.
A year later, the former speaker opened Gingrich Communications, which managed among other things his speaking engagements, according to Hammond. Gingrich was paid as much as $50,000 for a speech appearance, the Atlanta Journal-Constitution reported in November 1999.
In September 2002, Gingrich began planning for the new health-research center. The center was established in 2003 to study industry trends, propose overhauls, and make the former speaker available to corporate boards and executives for brainstorming and other strategic advice.
Companies could pay membership fees of $20,000 to $200,000, gaining various levels of staff attention, access to white papers and time with Gingrich. The center’s site lists three levels, from “premium” to “charter” memberships. Those paying more than $100,000 a year, could get Gingrich to speak to a private event, according to two people familiar with the arrangements.
Among the member companies were drugmaker Johnson & Johnson and health insurer Blue Cross and Blue Shield Association, according to an Aug. 26 press release. Officials at both firms didn’t respond to requests for comment yesterday.
WellPoint Inc., the nation’s largest insurer by revenue, was a member of the center for five years, spokeswoman Kristin Binns said in an e-mail to Bloomberg. It was “a way to network with various stakeholders on the best emerging ideas for improving the delivery of health care,” Binns said.
The U.K. drugmaker AstraZeneca Plc also was a member of the center, according to spokesman Tony Jewell, who declined to give further details.
Pfizer Inc., the world’s largest drugmaker, had consulting contracts with Gingrich, according to two people familiar with the arrangements. Pfizer spokesman Ray Kerins didn’t respond to requests for comment.
The Pharmaceutical Research and Manufacturers of America, the industry’s trade group, was also a client. His firm “was retained by the PhRMA general counsel’s office at one time to provide advice on a positioning project,” the group said.
The Gingrich Group had “about a half dozen” employees to start and, as the center grew, it employed an average of 40, including support staff, Hammond said.
In addition to his work with the center, Gingrich continued to accept private retainers from health-care companies and others.
In 2006, Freddie Mac officials met with Gingrich in his Washington office on K Street to discuss a renewal of his consulting services, according to people familiar with the meeting.
Freddie Mac didn’t want him to lobby in the traditional sense. With the company facing new regulations from Congress, a high-profile, supportive Republican leader would provide indirect benefits, they said.
Gingrich agreed to work with Freddie Mac for an annual fee of $300,000 for two years, according to people familiar with the agreement. He downplayed the amount this week, saying on Nov. 15: “It wasn’t paid to me. Gingrich Group was a consulting firm that had lots of people doing things and we offered strategic advice.”
Around the same time, Gingrich joined an advisory board created by Pfizer that also included Andy Stern, former president of the Service Employees International Union, according to two people familiar with the group. Pfizer would organize meetings with about 15 people in its New York offices or the Ritz-Carlton in McLean, Virginia, to discuss policy initiatives in Washington.
Gingrich’s clients were big and small.
Growth Energy, an ethanol industry lobbying group formed in late-2008 by a group of producers of the corn-based fuel, paid Gingrich $575,000 between 2009 and 2011 for advice.
“Growth Energy reached out to Speaker Gingrich and hired him because we know of his record in Congress in support of ethanol,” Chris Thorne, a spokesman for Growth Energy, said in a statement. “He’s smart, engaging, and his time as a leader here is helpful to folks who are puzzling through how this town works.”
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