By Megan R. Wilson - 07/16/14 06:00 AM EDT
Washington’s lobby shops jealously guard an elite tier of big-money contracts that are in constant danger of being stolen away by rivals.
The “crown jewel” contracts of the industry are major sources of revenue for the firms that hold them, providing enough cash to sustain some boutique shops for an entire year.
One of the biggest contracts, with Lorillard Tobacco Co., appears to be up for grabs; the company recently parted ways with Dickstein Shapiro. The contract had been valued at $2.7 million in 2013 — the second largest in the entire influence industry. Reynolds American on Tuesday announced it is buying Lorillard in a $25 billion deal.
It’s mainly K Street behemoths, such as Squire Patton Boggs, K&L Gates and McGuireWoods, that have what it takes to compete for the biggest deals, because they are able to serve as a one-stop shop for lobbying and legal services.
PricewaterhouseCoopers — a big player but not typically a name associated with K Street — has a $1.7 million contract, for example, with a coalition of blue-chip corporations called the Alliance for Competitive Taxation.
Sometimes “a major industry player is hiring a law and lobby firm because of the depth of their bench,” said Joshua Ian Rosenstein, a partner at Sandler Reiff Lamb Rosenstein & Birkenstock who specializes in compliance. “They want to be able to call upon anyone [in any area of the firm] at any given time — and that costs more.”
Akin Gump Strauss Hauer & Feld, Washington’s second largest firm by revenue, recorded earning more than $1 million each last year from three different clients. A fourth, the U.S. Chamber of Commerce, paid the firm $990,000. Overall, Akin made $33.8 million from its lobbying operation in 2013.
“Our client mix will always fluctuate because of the fluctuating agenda of Congress and the administration,” Don Pongrace, the head of public law and policy practice at Akin Gump, told The Hill in a statement. “What doesn’t change is our focus on effective advocacy for our clients in whatever forum their issues may arise.”
Akin took the prize for largest contract in 2013: the Gila River Indian Community, a reservation in Arizona that has been a client for nearly two decades, paid the firm $2.83 million last year for lobbying services.
Lobbying experts say that big-dollar clients tend to fall into two categories: corporations or special interests dealing with an important regulatory or legislative issues, and large trade groups with many members or subsidiaries that span a range of policy areas.
Outside of Dickstein’s Lorillard deal, Samsung appears as the largest corporate contract spender, dishing out $2.73 million in lobbying fees — also to Akin Gump.
A high-rolling K Street clientele can be a double-edged sword for firms, Rosenstein said.
“It’s always nice to have a marquee client to keep you busy, but having a large percentage of your firm’s revenue come from a single source creates risks for your company,” he said.
“Lobbying is a personal business,” Rosenstein added. “Lobby firms want to protect their client base because [the lobbyists] can move across the street.”
The dizzying number of defections and lateral moves in the lobbying world in recent years has put some firms in a tough spot financially. While departures are common, losing millions of dollars in clients can be tough to swallow.
That’s what has happened at Squire Patton Boggs, which lost a slew of lawyers and lobbyists after its recent merger — and along with them more than $5 million in business.
The firm still has one of the most lucrative client sheets on K Street, however, representing the Wholesale Markets Brokers’ Association for about $1.2 million per year.
Some nonprofit clients can also be heavy hitters for lobby shops.
Azerbaijan America Alliance has been represented by Fabiani & Co. since 2011, and paid the firm $1.8 million in 2013.
Covington & Burling represents Qualcomm in an arrangement that was worth $2.24 million in 2013. The value of the contract boosted more than 30 percent over the previous year, as patent and copyright policy legislation was debated on Capitol Hill.
“Over the last 18 months, you’ve seen a variety of [intellectual property] IP issues,” said Dan Bryant, the chairman of Covington’s public policy and government affairs practice group, noting that he couldn’t get into the details of specific client work. “There will be a variety of ongoing IP issues before Congress and the executive branch.”
Covington has another top-dollar client: Kosmos Energy, which spent $1.19 million on the firm’s advocacy services.
The highest retainer on K Street has consistently hovered around $3 million, with the exception of prominent legislative and policy battles that have garnered some firms between $5 million to $10 million from a single client in a year.
The numbers compiled by the Center for Responsive Politics show that even the big-dollar clients have cut back on their spending.
That drop reflects a shift to legal and regulatory work, much of which falls outside lobbying disclosure rules and is not publicly disclosed.
“It’s not that legal fees generally have dropped in recent years, but the historic rate of increase of legal fees has reduced some,” Bryant said. “You have a much reported-on, much-observed downward pressure on outside expenses, including in the lobbying area.”
Companies can also cut their K Street expenses by bringing lobbying services in-house.
That’s what happened in 2012, when lobbyist Wayne Berman left Ogilvy Government Relations to work for his lucrative private equity client the Blackstone Group. The contract with Ogilvy, which had been worth up to $5 million per year, was canceled after his departure.
Last year, Blackstone’s K Street spending dropped to $750,000.