Robert Brodsky stories from The Center for Public Integrity

Howard Rich’s Tight-Lipped Donors

2012-05-30T15:31:24-04:00

The biggest donors to Howard Rich’s network of “grass-roots” organizations have a few things in common.

Most are deep-pocketed philanthropists, business executives, or tax-exempt organizations that appear to subscribe to Rich’s libertarian views on school choice, term limits, and limited government.

The donors have one other common characteristic: They’re not talking.

In the past week, the Center for Public Integrity attempted to contact 22 contributors to five of Rich’s tax-exempt organization: Legislative Education Action Drive, LEAD Foundation (now known as Parents in Charge Foundation), America at its Best, U.S. Term Limits, and U.S. Term Limits Foundation. The donors gave a combined total of more than $6.7 million to the five organizations.

All but four of the Center’s calls or e-mails went unreturned. Only one donor, the American Education Reform Foundation in Milwaukee, answered each of the Center’s questions about the nature and purpose of its contribution.

The Center was able to identify 11 individuals who in 2004 contributed a total of more than $1.5 million to tax-exempt organizations headed by or otherwise connected with Rich. Only Paul R. Farago, a chiropractor who was heading a campaign to reinstate term limits in Oregon, responded to the Center’s request for comment.

In an October 26 e-mail, Farago confirmed making a contribution to U.S. Term Limits but refused to answer questions about the purpose of the donation. Farago’s e-mail also included a threat of legal action against the Center for possession of what he called “proprietary information.”

At least nine tax-exempt organizations, a revocable trust, and a for-profit business also contributed to Rich’s network of organizations, giving a combined total of more than $5.2 million.

Roughly 70 percent of those funds – $3.6 million – came from Americans for Limited Government, Inc., which Rich chairs. The organization has been the driving force behind this year’s regulatory-takings and eminent-domain ballot initiatives in the West. Neither Rich nor John Tillman, the president of Americans for Limited Government, responded to a request for comment about its seven-figure contribution to America At Its Best, another organization connected to Rich.

Nearly all of the foundations and other tax-exempt organizations that have given to Rich’s groups declined to provide information or answer questions about their contributions. Only the American Education Reform Foundation (see above) and the Indianapolis-based Milton and Rose D. Friedman Foundation provided any additional information about their contributions.

A spokesman for the National Taxpayers Union, in Alexandria, Virginia, which gave $620,000 to Legislative Education Action Drive and $100,000 to America At Its Best, told the Center that the organization had “partnered with numerous organizations” but did not directly answer the Center’s questions about its contributions.

Howard Rich’s Dot-Com Deal

2012-05-30T15:55:16-04:00

Howard Rich, the libertarian political activist in New York City who’s been a driving force behind this year’s eminent-domain and regulatory-takings ballot initiatives in the West, describes himself as “an entrepreneur in real estate and business since 1965.”

News accounts and government records provide some insight into the real-estate side of Rich’s career, which has been mostly as an owner in apartment buildings. In a five-month period in 1986, for example, Rich sold two contiguous apartment buildings in Manhattan and five other properties, all owned by an irrevocable trust that he had established in 1978 for the benefit of his two sons, according to New York tax records. (Rich had designated his wife as trustee, and the Riches managed the properties on behalf of the trust.) Other public records show that Rich has owned other apartment buildings in New York City as well as in North Carolina and Texas.

The side of Rich’s career that isn’t related to real estate is much less well-known, with perhaps a single exception: his ownership of Votenet Solutions, Inc., a Web-based voting software and systems firm that he acquired in early 2001.

The venture, which Rich scooped up in the wake of the big dot-com boom, began with much promise. But within two years, Votenet Solutions was embroiled in a federal embezzlement investigation that ultimately sent the company’s chief financial officer to prison and marked what Rich called in a letter to the judge “the most painful period of my business life.”

Events stemming from the company’s financial crisis, which Rich has said ultimately cost him $2.5 million, offer a rare glimpse into Rich’s business dealings.

On February 6, 2001, Rich formed Rich Acquisitions, a limited liability company, with his two sons holding a majority interest. Two days later, Rich Acquisitions paid Medinex Systems, Inc., of Post Falls, Idaho – which was bleeding money – more than $800,000 for a 70 percent interest in Votenet. The remainder of the $1.15 million purchase price came from three investors: Eric O’Keefe, a colleague of Rich’s in assorted political and business ventures; Glen Hughlette, the chief executive officer of Votenet under Medinex’s ownership; and Mitchell Reisberg, a Votenet sales manager.

Following the sale, Hughlette stayed on as Votenet’s CEO and president; Reisberg became the firm’s chief financial officer. Through that year and much of 2002, according to court documents, Rich and O’Keefe played a relatively small role in the company’s day-to-day operations.

In the meantime, Rich continued to pour money into Votenet, investing an additional $525,000 in the company by the end of 2002.

Among other products and services, Votenet published a congressional directory, provided voter software products to political and nonprofit organizations, and managed an online program that allowed donors to make contributions to Votenet’s clients, including the Cancer Treatment Research Foundation and America’s Second Harvest, a hunger relief group.

But Votenet’s financial condition worsened in early 2003. Michael Glessner, an accountant who was hired to review Votenet’s books, discovered serious accounting problems. Glessner later told Rich, according to court documents, that he believed Hughlette and Reisberg were stealing from Votenet.

O’Keefe was dispatched to the company’s Washington, D.C. offices, where, as Rich later told it, “he determined that Votenet’s financial reports had been complete fabrications.” Hughlette and Reisberg were fired.

Reisberg was charged with, and later pleaded guilty to, multiple counts of interstate transportation of stolen property, as well as wire, bank, and mail fraud.

Federal investigators charged that Reisberg and Hughlette – who, with a warrant out for his arrest, remains a fugitive – stole more than $370,000 from Votenet to pay for personal expenses such as jewelry, artwork, and plane tickets.

In a letter to U.S. District Judge James Robertson before Reisberg’s sentencing, Rich wrote that Votenet owed roughly $1.5 million to customers, vendors, employees, the Internal Revenue Service, and other government agencies.

“An accountant and an attorney recommended to Mr. O’Keefe that we file for bankruptcy and shut down the company as soon as possible,” Rich wrote. “However, we decided otherwise largely based on the nature of the liabilities.”

Rich provided the $1.5 million needed to erase the debts and invested another $1 million to cover the company’s operating losses. During the course of the bailout, Rich wrote, Rich Acquisitions came to own 100 percent of Votenet because “other shareholders declined to invest to save the company.”

Rich also wrote of the personal impact of Reisberg’s transgressions:

“The Votenet transition was the most painful period of my business life. It was painful enough to be betrayed by an employee, and to lose $2,500,000 because of the betrayal. But our investigation uncovered repeated reports of abuse by Mr. Reisberg of Votenet’s employees, customers, and vendors. He broke agreements with them, took their money and lied to them, and then refused to return phone calls after they discovered his frauds. It was disgusting and disgraceful.”

Reisberg was sentenced in August 2005 to four years in prison and forfeited more than $370,000 in proceeds.

Votenet is still in business. According to its Web site, the company provides “voting software and election consulting to private organizations, including trade associations, award shows, realtor organizations, universities, K-12 schools, law firms, homeowner associations, and other types of organizations.”

Michael Tuteur, Votenet’s chief executive officer, did not return a call seeking information about Rich’s current involvement with the firm.

Following The Money (Part 4): U.S. Term Limits

2012-05-30T16:01:48-04:00

On August 3, 2006, U.S. Term Limits, a tax-exempt advocacy group in New York City, gave $50,000 to a Missouri organization that was seeking to get two initiatives on the state’s ballot this November 7.

The initiatives, neither of which made it onto the ballot, were aimed at capping state spending and taxation and requiring government to compensate landowners for “regulatory takings.”

Why would a term-limits organization use money from its donors for such unrelated causes?

Documents obtained by the Center for Public Integrity show that the unexplained largess isn’t unusual. The founder and president of U.S. Term Limits, which seeks to “rally Americans to restore citizen control of government by limiting the terms of politicians,” is Howard Rich, a political activist from New York City who has spearheaded efforts this year to pass takings initiatives in eight states. Rich’s various tax-exempt organizations — there are at least 11 of them — have aroused considerable interest this year for shifting funds from one to another before the money ends up at its ultimate destination.

Like all the other Rich-backed organizations, U.S. Term Limits does not publicly identify its donors. Records obtained by the Center, however, show that the organization and its affiliate, the U.S. Term Limits Foundation, collected contributions of $25,000 or more in 2004 from nine donors:

$500,000 from Robert Wilson, a philanthropist in New York City who made a $25 million gift in 2004 to the New York Public Library.
$120,000 from Jackson T. Stephens, Jr., the chairman of Exoxemis, Inc., a biopharmaceutical research and development company in Little Rock, Arkansas. Along with Rich, Stephens is one of the four directors of the Club for Growth, which advocates free-market economic policies.
$50,000 from Joseph Stillwell, an investment manager in New York City.
$50,000 from Virginia Manheimer, a philanthropist in Lambertville, New Jersey, who is a member of the Club for Growth’s leadership council.
$30,000 from Excited States, LLC, a biotech company in Little Rock, Arkansas. The firm’s chairman is Jackson T. Stephens, Jr. (see above).
$25,000 from John Whitehead, a former co-chairman of the investment banking firm Goldman, Sachs & Company in New York City, deputy secretary of state during Ronald Reagan’s presidency, and the chairman of the Lower Manhattan Development Corporation. (Whitehead has also been a donor to the Center for Public Integrity.)
$25,000 from Paul Farago, a chiropractor and term-limits advocate in Portland, Oregon.
$25,000 from Peter Farago, a retired businessman and philanthropist who lives in Little Compton, Rhode Island. He is the father of Paul Farago (see above).
$25,000 from Warren A. Stephens, the chairman and chief executive officer of Stephens, Inc., an investment banking firm in Little Rock, Arkansas. He is the brother of Jackson T. Stephens, Jr. (see above).
At least six other donors made contributions ranging from $5,000 to $13,000.

The Center contacted all nine donors listed above; only one offered comment.

“I have in fact made contributions to U.S. Term Limits,” Paul Farago wrote in an October 26 e-mail to the Center. “But by asking about specific amounts you clearly have come into possession of proprietary information. Either you stole it or it was illegally given to you by someone in the IRS. Either way, you have raised the prospect of a criminal act of your own part. I intend to refer this matter to my attorney and will recommend to U.S. Term Limits that they likewise seek redress.”

The Center for Public Integrity obtained the documents in question from a government agency. They were furnished in response to a public-records request made by the Center.

Following The Money (Part 2)

Illinois,United States — 2012-05-30T16:19:27-04:00

In 2004, the Americans for Limited Government Foundation, a charitable organization in Illinois that says it “is committed to promoting individual liberty, free markets, and the principles of the U.S. Constitution,” received two donations totaling $650,000.

The donations accounted for more than 96 percent of all contributions to the ALG Foundation that year, according to a federal tax return signed by Howard Rich, one of the organization’s directors. Rich and the foundation’s affiliate, Americans for Limited Government, Inc., have been widely identified as the driving forces behind this year’s eminent-domain and regulatory-takings ballot initiatives in the West.

The two donations to the ALG Foundation, as it turned out, came from a single donor: the LEAD Foundation, a charitable organization in Illinois that says it’s dedicated to “the ultimate purpose of improving the academic performance of schoolchildren.” The $650,000 in donations accounted for more than 92 percent of all grants and other contributions that the LEAD Foundation made in 2004, according to a federal tax return signed by the organization’s chairman — also Howard Rich.

In their federal tax returns for 2004, both foundations listed the same address in Glenview, Illinois. The ALG Foundation has since moved to Chicago; the LEAD Foundation, renamed Parents in Charge Foundation, is now in Madison, Wisconsin.

Neither the ALG Foundation nor the LEAD Foundation has publicly disclosed its donors. The Center for Public Integrity, however, has identified the major individual and institutional donors in 2004 to both tax-exempt organizations.

Records show that the LEAD Foundation received $405,000 in grants or other contributions from five tax-exempt organizations:

$125,000 from the Alliance for School Choice, Inc., of Phoenix, for undisclosed purposes. The organization describes itself as “the nation’s vanguard organization for promoting, implementing and enhancing K-12 educational choice.”
$100,000 from the Kern Family Foundation, of Waukesha, Wisconsin, for “general support.” The foundation was established by Robert D. Kern, who until recently was the chairman and chief executive officer of Waukesha-based Generac Power Systems, Inc., a manufacturer of generators and small engines. It awards grants for “systemic solutions in education at the K-12 level” and other projects.
$80,000 from the Milton and Rose D. Friedman Foundation, of Indianapolis, for undisclosed purposes. The Friedman Foundation was established by Milton Friedman, the economist known for his advocacy of laissez-faire capitalism and support of various libertarian policies. The foundation says that it “strives to educate parents, public policy makers, and organizations about the desperate need for a shift of power to the disenfranchised parents of America who have limited choices and voices in the education of their children.” Rich is a long-time member of the foundation’s board of directors.
$50,000 from the Doug and Kaisa Levine Family Support Foundation, of Bloomfield Hills, Michigan, “to support education.” The foundation was established by Douglas Levine, an entrepreneur who sold his chain of Crunch Fitness centers to Bally and now runs an online fitness business.
$50,000 from the Lynde and Harry Bradley Foundation, of Milwaukee, “to support the South Carolina [school] choice project.” The Bradley Foundation says that it supports limited government and is “devoted to strengthening American democratic capitalism and the institutions, principles, and values that sustain and nurture it.” The Bradley Foundation’s chairman, Thomas L. Rhodes, is a director of Club for Growth State Action, a tax-exempt organization that in 2004 was located at the same Illinois address as the ALG Foundation and the LEAD Foundation. Rich is the president of Club for Growth State Action.

In preparing this story, the Center sought additional information and comment from all five donor organizations for this story, but none responded to the requests.

In other financial records for 2004 reviewed by the Center, the ALG Foundation notes, through its accounting firm, that it “shares common management” with eight other tax-exempt organizations, including Americans for Limited Government, Inc. (its noncharitable tax-exempt counterpart, which Rich chairs), Legislative Education Action Drive (a noncharitable tax-exempt organization that Rich founded in 2000), and the LEAD Foundation. The ALG Foundation, one document says, “is performing management functions for all of the organizations and allocating expenses among the organizations for performing such services.”

As it turned out, the LEAD Foundation’s gifts of $650,000 to the ALG Foundation may have stretched it a bit too thin. On the last day of 2004 it borrowed $59,138 of the money back from the ALG Foundation.

Following The Money (Part 1)

2012-05-30T16:37:39-04:00

Americans for Limited Government, Inc., the driving force behind this year’s eminent-domain and regulatory-takings ballot initiatives in the West, calls itself a grass-roots organization.

“ALG’s funding comes from thousands of Americans all over the country,” John Tillman, the president of the Chicago-based tax-exempt organization, told the Center for Public Integrity in an October 24 e-mail.

The Center’s review of public records from 2004, however, shows that the operations of Americans for Limited Government and its affiliated foundation were financed almost entirely that year by a handful of large donors, as were the operations of other tax-exempt organizations led by or otherwise connected to ALG’s chairman, New York real estate investor Howard Rich.
A review of these documents by the Center shows that the Rich-connected organizations, whose stated missions have little in common, appear to have operated essentially as interrelated bank accounts, collecting money from donors and sharing it among themselves.

In 2004, for example, Legislation Education Action Drive, a tax-exempt organization that Rich founded to promote vouchers and tuition tax credits, collected more than $1.35 million for “research and public education of the developments in school choice initiatives,” according to its federal tax returns.

Records show that 99 percent of LEAD’s funds came from just five donors:

$620,000 from the National Taxpayers Union, a tax-exempt organization in Alexandria, Virginia. The group claims 350,000 members and favors, among other things, “repeal of existing taxes,” according to a spokesman.
$450,000 from Patrick M. Byrne, the chairman and chief executive officer of Overstock.com, the Salt Lake City-based Internet retailer. Byrne is also the general partner of High Plains Investments in Park City, Utah, and the founder of First Class Education, a tax-exempt organization that promotes what it calls “the 65 percent solution” — compelling public school districts to spend at least that portion of their operating budgets on classroom instruction.
$225,000 from Jeffrey Yass, a co-founder and managing director of Susquehanna International Group, an options and market-making firm in Bala Cynwd, Pennsylvania. Yass, a former professional poker player, is on the board of directors of the libertarian Cato Institute, as is Rich. He is also a director of the Susquehanna Foundation, as is Eric Brooks (see below).
$36,500 from the American Education Reform Foundation, a tax-exempt organization in Milwaukee. The organization, which supported school-voucher campaigns, is now part of the Alliance for School Choice, a Phoenix-based group that describes itself as “the nation’s leading advocacy organization for school choice.”
$25,000 from Eric Brooks, a co-founder and former managing director of Susquehanna International Group (see above). Brooks is a director of the Decision Education Foundation in Palo Alto, California; the biographical sketch of him on the organization’s Web site says that his “particular area of interest is the furtherance of education and educationally-based programs at the K-12 level.” It also notes that he has been “a member of the board of trustees for the Legislative Education Action Drive.” Brooks is also a director of the Susquehanna Foundation.

The Center sought comment from all five donors; two responded.

Susan Mitchell, who in 2004 ran the American Education Reform Foundation and its sister organization, the American Education Reform Council, told the Center in a telephone interview that she did not recall specifics about the contribution to Legislative Education Action Drive and did not know how the money ultimately was spent. She said, however, that the foundation only made donations in support of education initiatives.

“Any contribution we made was designed only for school choice,” Mitchell said. “We had a policy of not doing pass-throughs.”

Pete Sepp, a spokesman for the National Taxpayers Union, did not directly answer the Center’s questions about its contributions to Rich-connected groups but noted in an e-mail that NTU has “partnered with numerous organizations, which would include everything from coalition-building to financial contributions.”

Even as money came in to Legislative Education Action Drive, money was also going out in the form of loans, to Rich-connected organizations.

On the last day of 2004, records show, Legislative Education Action Drive made loans totaling about $530,000 to four other Rich organizations: LEAD Foundation ($255,000), Americans for Limited Government ($100,000), Americans for Limited Government Foundation ($159,678), and U.S. Term Limits ($20,000).

Rich is the chairman of LEAD Foundation (which has since been renamed Parents in Charge Foundation), the chairman of Americans for Limited Government and a director of its affiliated foundation, and the founder and president of U.S. Term Limits.

In 2004, the records show, Rich himself did not make a single contribution of $5,000 or more to any of the organizations.

Consultant profile: Bob Shrum (Shrum, Devine & Donilon)

2011-11-29T09:47:18-05:00

For nearly four decades, political consultant Bob Shrum has been one the most influential voices of the Democratic Party and a populist icon for his campaigns that stressed a "people vs. the powerful" message.

"I believe that the essence of being a Democrat is about standing up for the people," Shrum told the Boston Globe in April 2004. "You can come up with any variation of words to convey it, but from the beginning, that is what the Democratic Party is fundamentally about."

Shrum, who retired from consulting in early 2005, has worked with practically every major Democratic figure — from George McGovern to Al Gore, from Ted Kennedy to John Kerry. But, despite crafting successful media campaigns for dozens of U.S. senators, governors and big-city mayors, he has failed to help elevate a candidate to the Oval Office.

Shrum has been a speechwriter or principal media advisor on several presidential campaigns, his last being John Kerry's unsuccessful 2004 run. His firm, Shrum, Devine & Donilon, worked on the campaign's media and advertising strategy, receiving payments worth almost $2.5 million according to the Center for Public Integrity's analysis of 2003 and 2004 Federal Election Commission records.

Shrum and another Kerry media adviser, Jim Margolis of the political consulting firm GMMB, were also involved in the formation of a consortium they named Riverfront Media, created exclusively for the campaign to produce most of Kerry's television ads and to make the media buys. Riverfront received more than $150 million in payments from the Kerry campaign and the Democratic National Committee, the Center found.

In the spring of 2004, Shrum and his partners had a dispute with Margolis regarding how they would be paid by the Kerry campaign, according to Joe Klein's book, Politics Lost. There had been a handshake agreement to split the profits evenly. But, when the Kerry campaign reduced the 9 percent commission the consultants would receive from television buys, there was trouble. Shrum and his partners reportedly wanted more than half of the final cut. According to media accounts, Margolis wouldn't agree to that, and in the end, his firm ceased its involvement in creating Kerry's ads, but continued to purchase media time.

Such behind-the-scenes drama involving Shrum — communications director Chris Lehane, speechwriter Andrei Cherny and campaign manager Jim Jordan reportedly also left the Kerry campaign after feuding with the consultant — has been a running storyline in his career.

Shrum graduated from Harvard Law School, but never took the bar exam or practiced law. Instead he took a job writing speeches for New York City Mayor John Lindsay and worked on his 1972 presidential campaign. In that same primary season, he later worked as a speechwriter for Maine Sen. Edmund Muskie's presidential campaign. But, when Muskie dropped out of the race, Shrum signed on with his opponent, Democratic nominee George McGovern, composing the South Dakota senator's famous "Come Home, America" acceptance speech.

Four years later, Shrum joined Jimmy Carter's presidential campaign. But he quit less than two weeks later, resigning in a tersely worded letter to the future 39th President recounted in Jules Witcover's book, Marathon: The Pursuit of the Presidency 1972-1976: "I am not sure what you believe in, other than yourself," Shrum wrote.

His next presidential defeat, in 1980, led to the signature moment of Shrum's career, penning client Edward Kennedy's concession speech for the Democratic Convention in New York City. The memorable speech concludes, "For all those whose cares have been our concern, the work goes on, the cause endures, the hope still lives, and the dream shall never die." He went on to work as the senator's speechwriter and press secretary for the next few years.

In 1985, Shrum formed his first media consulting firm with Patrick Caddell and David Doak. The group split less than a year later, though, when Caddell alleged that his partners had kept money they owed him. Doak and Shrum worked together for another decade, helping get Barbara Mikulski of Maryland and Alan Cranston of California elected to the Senate and David Dinkins as mayor of New York City.

However, the "Shrum Curse," as it's become known, continued unabated. Shrum worked on the failed presidential campaigns of Richard Gephardt and Michael Dukakis in 1988, Bob Kerrey in 1992, and Al Gore in 2000.

Shrum's firm was responsible for one of the more infamous presidential ads — a Kerrey campaign spot that depicted the Nebraska senator as a hockey goalie denouncing foreign imports. The ad closely mirrored a spot Doak and Shrum had produced for Gephardt's presidential campaign, both in its message and its tag line. More problematic, though, was that the ad seemed to conflict with Kerrey's earlier support for free trade. Kerrey later called the ad "lousy" during a debate with his Democratic rivals and told the Wall Street Journal in July 2004 that he faulted himself for approving it.

Shrum's ads have occasionally taken on a negative tone. While working on the failed Texas gubernatorial campaign of Jim Mattox, his firm created a commercial that questioned whether Mattox's opponent, Ann Richards, had ever used cocaine. "What illegal drugs did Richards use as a 47-year-old officeholder?" the ad asked. "Did she use marijuana? Or something worse, like cocaine? Not as a college kid, but as a 47-year-old elected official sworn to uphold the law."

Another controversial Shrum-produced ad aired during Maryland Gov. Paris Glendening's 1998 successful re-election campaign. It criticized his Republican opponent Ellen Sauerbrey's record on civil rights, citing her vote against a 1992 bill that died in the Democrat-controlled Maryland General Assembly. Though Sauerbrey claimed the ad misrepresented her record, Shrum told the Baltimore Sun in March 2000 that he stood by his work on the Glendening campaign. Campaigns & Elections magazine cited the ad as the "most brutally effective attack spot of 1998."

Doak, Shrum, and Associates Inc. broke up in 1995, and Shrum continued his consulting business with Tad Devine; Mike Donilon joined the firm later that year. Shrum had a wealth of success with the Senate campaigns of John Edwards of North Carolina, Jon Corzine of New Jersey and Herb Kohl of Wisconsin, along with the re-election campaigns of Washington, D.C., Mayor Tony Williams and Los Angeles Mayor Tom Bradley.

But one of Shrum's biggest non-presidential disappointments was the 1998 California gubernatorial primary loss of Alfred Checchi. The former Northwest Airlines co-chairman spent roughly $40 million of his own money on the campaign — then a record — but won only 13 percent of the vote. The Washington Post reported that Shrum's firm was paid "as much as $2 million," not including expenses, although Shrum has disputed the figure.

Shrum did eventually help lead a candidate to the California governor's mansion, assisting on the 2003 campaign of Arnold Schwarzenegger. A 2004 report in Ireland's Sunday Business Post speculated that the Republican turning to Shrum was likely a reflection of his close relationship with the Kennedy family.

And, although he was not involved in either of Bill Clinton's presidential campaigns, Shrum helped draft several of his State of the Union addresses. However, the most famous speech Shrum ever wrote for Clinton was never used. Shortly after the Monica Lewinsky affair was exposed, Shrum was asked to compose an apology to the American public. The speech, which was abandoned in favor of a more defiant text, began, "No one who is not in my position can understand the remorse I feel today. I have fallen short of what you should expect from a president."

Shrum, Devine & Donilon also has had an international impact. The firm has helped candidates win elections in Ireland, Great Britain, Bolivia and Colombia, and has done consulting work for former Israeli Prime Minister Ehud Barak and former German Chancellor Gerhard Schroeder.

The firm also dabbled in the corporate sector, working with MCI on a campaign that called for opening local telephone service to greater competition and with Pizza Hut to create two spots that targeted rival pizza chain, Papa John's. Shrum once also reportedly participated in a strategy session for New Coke.

Following Kerry's defeat in 2004 Shrum left his consulting business, although his firm did work on Jon Corzine's successful race for New Jersey governor in 2005. The firm has been renamed D&D Media.

In February 2005, Shrum joined New York University as a senior fellow and professor. The longtime strategist is also involved with Democracy Corps, a nonprofit political advocacy organization he founded with consultants James Carville and Stanley Greenberg, and is a frequent guest on MSNBC's Hardball with Chris Matthews.

Consultant profile: Olsen & Shuvalov

Texas,United States — 2011-09-16T15:44:08-04:00

Just days before the 2004 presidential election, a chilling political advertisement arrived in the mailboxes of voters in the key swing state of Pennsylvania.

Directly below a darkened image of the Democratic nominee, the front of the brochure carried the question: "How Can John Kerry Lead America In A Time Of War?" It charged Kerry with "changing positions," "cutting defense" and "slashing intelligence," and featured images of the front pages of nine newspapers, each with a photo of the World Trade Center ablaze and billowing smoke. Another image of the smoldering towers appeared on an inside page, detailing the charges against Kerry's record on defense and intelligence.

The award-winning brochure — the ad was honored with a "Pollie" by the American Association of Political Consultants — was funded by the Republican National Committee, but was the work of Olsen & Shuvalov, an Austin, Texas-based consulting firm that traces its roots to Karl Rove, President Bush's senior adviser.

The company that would go on to become Olsen & Shuvalov was formed in 1999 when Rove sold the assets of his direct mail firm, Karl Rove & Co., to Todd Olsen and Ted Delisi, two of his former employees. Now run by Olsen and another longtime Republican consultant, Heather Shuvalov, the outfit specializes in direct mail campaigns and fundraising. A subsidiary group, Praxis List Co., manages and rents out the mailing lists of potential GOP donors.

Over the last seven years, the firm has crafted political messages for candidates in more than 31 states, according to its Web site. Olsen & Shuvalov's client list reads like a who's who of Texas politics, including the state Republican Party and prominent Republicans Gov. Rick Perry, Attorney General Greg Abbott, Sen. John Cornyn and Rep. Tom DeLay. Clients during 2006 election cycle also include Pro Football Hall of Famer Lynn Swann, a GOP candidate for Pennsylvania governor, and Maryland Lieutenant Gov. Michael Steele, a Republican running for U.S. Senate.

However, the company's highest-profile — and best-paying — client has been the Bush-Cheney re-election campaign. Olsen & Shuvalov and its affiliated companies received more than $42 million during the 2004 election cycle, with almost $35 million of the funds coming from various Bush re-election committees, according to the Center for Public Integrity's analysis of 2003 and 2004 campaign filings. The firm's total also includes just under $7 million from the Republican National Committee.

Olsen said that the figure, though, is not pure profit because the total includes the costs of expenses for postage and shipping.

Olsen & Shuvalov's circuitous route to the center of the Bush re-election campaign started with Rove more than two decades earlier. While directing a political action committee for George H.W. Bush's 1980 presidential campaign, Rove began to hone his acumen for using political mail to raise money and drive home a candidate's message — both rarely used practices at the time.

Authors Carl M. Cannon, Lou Dubose and Jan Reid described Rove's early campaigning techniques in their biography, Boy Genius: "He crafted letters with underlined zingers that fired up partisans to get involved, sign up, and write fat checks," the authors wrote. "Just as important, he had an instinctive and highly-developed gift for knowing to whom to send those letters."

Rove began to build a master list of Texas political donors, sometimes through unorthodox tactics. "He would go to the secretary of state's office and get the reports on everybody who contributed to any race in Texas," political consultant Royal Masset told PBS' FRONTLINE in 2005. "And this was before computers, and there would be somebody there with their own Xerox machine. Nobody else had a Xerox machine. It was weird. You would go into the office, and this was Karl Rove's machine in the secretary of state's office."

In 1978, Rove began building the foundation for his political consulting business, helping Dallas oil tycoon Bill Clements become the first Republican governor of Texas since Reconstruction. After serving as an independent political consultant and later, Clements' chief of staff, he branched off on his own in 1981, opening Rove & Co.

His firm had a number of early successes in Texas congressional races. But, Rove's prized client was George W. Bush. He guided Bush's 1994 Texas gubernatorial campaign, ousting popular Democrat Ann Richards by focusing on four issues: education, criminal justice, welfare and tort reform.

In addition to using a mailing list of past political donors, Karl Rove & Co. pioneered in targeting contributors by focusing on the consumer habits of likely Republican voters. For example, it acquired the mailing list of subscribers to Economist magazine and solicited contributions from its readers. (A similar strategy was used by Republican firms such as TargetPoint Consultants and National Media, Inc. during the 2004 presidential campaign.)

Rove explained his strategy, telling a reporter from the Christian Science Monitor in 1994 that the key to direct mail is having "the right list, with the right message, at the right time. It has to grab attention, and it has to be based in fact and need."

Although Rove exercised great influence, he did not join Bush's gubernatorial staff. But when the governor began his presidential campaign, he told Rove that he wanted his undivided attention and asked him to sell his company.

"Bush doesn't want my focus diluted," Rove told the Associated Press in March 1999, shortly after completing the sale. "If he's going to make the run, he'd like to have me available."

Federal financial disclosure documents Rove filed in 2001 indicate that the sale's proceeds were paid in installments during 1999 and 2000, reported as $579,000 in "payroll distrib[ution]" and $108,156 in "attributed income." Asked about the sale, Olsen refused to specify whether this was all that was paid for the Karl Rove & Co. assets.

Olsen & Delisi opened shop in February 1999. The two operatives had worked with Rove & Co. for several years, with Olsen serving as the company's executive vice president. Almost immediately, Olsen & Delisi began working on the Bush presidential campaign, garnering direct mail contracts worth millions of dollars.

Olsen & Delisi also worked alongside Rove during the Florida presidential recount, receiving an additional $161,000 from the Bush-Cheney campaign, according to IRS records. In late 1999, Delisi was criticized for accepting funds from the Bush presidential campaign while also serving as press spokesman for Cornyn, then Texas' attorney general. Two months after the relationship was reported by the Austin Chronicle, Delisi resigned from Cornyn's staff.

Delisi left the consulting firm in February 2003 to become chief executive officer of HillCo Direct LLP, an Austin-based company that focuses exclusively on grassroots campaigns. He also runs Delisi Communications, a direct mail firm whose client list includes Texas' Perry and the Volunteer Political Action Committee, a fundraising group affiliated with Sen. Bill Frist, R-Tenn., and his possible run for the presidency in 2008.

According to its Web site, the company now known as Olsen & Shuvalov has ten employees, half of them holdovers from the Karl Rove & Co. era. The site includes an e-mail contact for Praxis List Co., and documents filed with the Texas Secretary of State's Office indicate at least two other business names associated with Olsen & Shuvalov. The firm's most recent franchise tax certification lists four managers: Olsen, Shuvalov, Robert Thomas and Rod Richburg.

Shuvalov had worked for Rove & Co. for ten years as account executive, production manager and later executive vice president.

Thomas is the president of Thomas Graphics, a printing and graphics company that worked on Bush's 2000 campaign.

Richburg, meanwhile, is the president of RSD Advertising Design, an Austin business that printed promotional material for the 2004 Bush-Cheney campaign. The company's Web site lists Olsen & Shuvalov as the client for at least two of those campaign projects.

Although Karl Rove & Co. was completely liquidated as of Sept. 1, 2001, the political guru's business still exists, at least on paper. Despite the company's half decade of inactivity, Rove has continued to pay the franchise tax on his old consulting firm, essentially keeping the company — and its prospects for a rebirth after Bush leaves office in 2009 — alive. The most recent business activity by Karl Rove & Co. was in November 2003 when Rove relinquished his role as the firm's registered agent to David Herndon, who served as treasurer of the Bush-Cheney 2000 campaign committee.

In addition to Rove, the only other name to appear on recent Karl Rove & Co. corporation papers is Harry M. Whittington, the company's secretary and a director. Whittington, who also filed the certificate of incorporation in September 1981, is better known to the world as the man Vice President Dick Cheney accidentally shot during a quail hunting trip last February.