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Think Tank's Ideas Shifted As Malaysia Ties Grew

Business Interests Overlapped Policy

By Thomas B. Edsall
Washington Post Staff Writer
Sunday, April 17, 2005; Page A01

For years, the Heritage Foundation sharply criticized the autocratic rule of former Malaysian prime minister Mahathir Mohamad, denouncing his anti-Semitism, his jailing of political opponents and his "anti-free market currency controls."

Then, late in the summer of 2001, the conservative nonprofit Washington think tank began to change its assessment: Heritage financed an Aug. 30-Sept. 4, 2001, trip to Malaysia for three House members and their spouses. Heritage put on briefings for the congressional delegation titled "Malaysia: Standing Up for Democracy" and "U.S. and Malaysia: Ways to Cooperate in Order to Influence Peace and Stability in Southeast Asia."

Then-Malaysian prime minister Mahathir Mohamad was assailed by the Heritage Foundation but later honored by its president. (Andy Wong -- AP)

Heritage's new, pro-Malaysian outlook emerged at the same time a Hong Kong consulting firm co-founded by Edwin J. Feulner, Heritage's president, began representing Malaysian business interests. The for-profit firm, called Belle Haven Consultants, retains Feulner's wife, Linda Feulner, as a "senior adviser." And Belle Haven's chief operating officer, Ken Sheffer, is the former head of Heritage's Asia office and is still on Heritage's payroll as a $75,000-a-year consultant.

On Sept. 27, 2001, Belle Haven hired Alexander Strategy Group, a Washington lobby firm run by Edwin A. Buckham, a former chief of staff to House Majority Leader Tom DeLay (R-Tex.), to help represent Malaysian clients. Linda Feulner works as a consultant for Alexander Strategy Group as well as for Belle Haven. Experts say that the relationship between one of Washington's most influential conservative think tanks and a network of lobbying firms collecting fees from Malaysian business interests -- well in excess of $1 million over two years -- could pose a problem for Heritage's tax status as a nonprofit group. The fees were disclosed in reports filed with Congress and the Justice Department.

Bruce R. Hopkins, a lawyer and an expert on nonprofit, tax-exempt organizations, said Heritage and Feulner are "on the edge here." Hopkins said that a court or the Internal Revenue Service would have to determine whether "the assets [of Heritage] are being used in a way that confers some form of undue or unwarranted benefit on a [Heritage] insider." He said both Feulner and his wife are "insiders" under tax law. The key question, he said, is whether "it could be shown that the charity is doing this to provide benefits to her clients. Then there could be a problem. . . . The question just has to be, 'Are the resources of the charity being deliberately shifted so that some sort of private benefit is being conferred?' "

In a statement issued last week, Heritage defended its activities and the integrity of its extensive work evaluating foreign countries:

"The Heritage Foundation has and always will call it like we see it. Neither Linda Feulner's work with Belle Haven and ASG [Alexander Strategy Group] nor Edwin Feulner's relationship with Belle Haven influenced any of the policy recommendations or analysis of The Heritage Foundation. . . . The Heritage Foundation is organized under IRC [Internal Revenue Code] Section 501(c)(3) of the tax code and as such is engaged only in educational activities, not lobbying."

The overlapping work of Heritage and top lobbying firms in support of the Malaysian government and Malaysian business interests is a case study in the largely unseen creation of a favorable climate for a controversial country through careful targeting of Washington elites.

The close relationships between the think tank and lobbying interests were apparent on the 2001 trip to Malaysia. Heritage paid expenses for DeLay, Reps. Ileana Ros-Lehtinen and Ander Crenshaw, both Republicans from Florida, and their spouses; Edwin and Linda Feulner, and Sheffer. Joining them on the trip but paying his own way, according to Edwin Feulner, was Buckham, the former DeLay aide and chairman of the Alexander Strategy Group.

At the center of the web is Edwin Feulner, a leading conservative who helped found Heritage in 1973. With 207 senior managers, executives, professional staff members and fellows, and a $30 million-plus annual budget, Heritage produces papers and policy statements that have influenced Republican administrations and the Republican congressional majority.

In 1997, Feulner was a founding partner in Belle Haven with Sheffer. Heritage said Feulner withdrew from the partnership in 1999, when his wife became a partner, serving as such until 2001. After 2001, Linda Feulner became a paid senior adviser to Belle Haven and a paid consultant with Alexander Strategy Group. Her compensation, according to Heritage, "is not public information."

Heritage issued statements by e-mail on behalf of Edwin Feulner, his wife and the foundation in response to Washington Post inquiries. Principals of Belle Haven and ASG, including Linda Feulner, declined to be interviewed for this story. The Post interviewed Sheffer a year ago on this subject, but he did not respond to requests for comment during the past two weeks.

Before the terrorist attacks of Sept. 11, 2001, Malaysia faced major hurdles in its dealings with the United States. Prime Minister Mahathir Mohamad had trampled human rights, jailed political opponents and made repeated anti-Semitic comments. On a visit to the country, Vice President Al Gore in 1998 pointedly praised government dissidents and walked out of a banquet in protest of Mahathir's policies.

In a 1998 paper, "Standing Up For Democracy and Economic Reform in Malaysia," Heritage researcher John T. Dori wrote that the Clinton administration "should be prepared to speak out strongly against Mahathir's actions."

In February 1999, Feulner praised Gore for criticizing Mahathir, saying the vice president "made an impressive defense of freedom in Malaysia."

The 9/11 attacks opened the door to improved U.S.-Malaysia relations. Immediately after the attacks, the Malaysian government offered to cooperate with the United States in the war on terrorism, including allowing increased U.S. overflights and continued U.S. jungle-training programs.

Malaysian business interests had hired Belle Haven before 9/11 to conduct a campaign to improve relations with the United States. "There was this horrible relationship," said Sheffer in an interview with The Post last year. "These guys wanted to hire some people to figure out how can we start to improve our relationship with the U.S."

The Heritage statement said 9/11 shifted the foundation's view of Malaysia. The Heritage-financed trip to Malaysia took place before the attacks.

In 2002, Heritage hosted speeches by high-ranking Malaysian public officials. An Oct. 4, 2002, talk by then-Deputy Prime Minister Abdullah Ahmad Badawi was called "Strengthening the U.S.-Malaysia Friendship." On May 3, 2002, Defense Minister Najib Razak spoke on "U.S.-Malaysia Defense Cooperation: A Solid Success Story."

In May 2002, when Mahathir visited the United States, Edwin Feulner hosted a dinner honoring the prime minister at Washington's Metropolitan Club. According to news accounts, it was attended by prominent foreign-policy opinion leaders, including Lawrence S. Eagleburger, former secretary of state; Charlene Barshefsky, the former U.S. trade representative; former U.S. ambassador to the United Nations Jeane J. Kirkpatrick; and retired Lt. Gen. Brent Scowcroft, former national security adviser.

Gerald P. O'Driscoll Jr., former editor of the annual Index of Economic Freedom, published by Heritage and the Wall Street Journal, said that in 2002 Feulner pressed him to give Malaysia a better ranking. When the staff objected, Feulner backed off on changing the ranking, O'Driscoll said, but changed the text to make it more positive.

Heritage said O'Driscoll's account "is incorrect. . . . If Dr. Feulner had any concerns about the Malaysia score, his name would not be on the book."

ASG started working for Belle Haven on Sept. 27, 2001, on behalf of unspecified Malaysian business interests seeking to present a positive image of their country in the United States, according to lobbying records filed with the U.S. Senate. Over two years, Belle Haven paid ASG $620,000, the records show. ASG did not register as a foreign agent during this period. Over the same two years, Belle Haven paid three other lobbying firms doing Malaysian-related work -- including the Harbour Group, which often works with ASG, and Western Strategy Group, run by former senator Malcolm Wallop (R-Wyo.) -- another $640,000, the records indicated.

In October and November 2004, Belle Haven signed a new contract with ASG. In this case, ASG filed as a foreign agent with the U.S. Justice Department, because Belle Haven had begun to explicitly represent the government of Malaysia, according to records at the Justice Department. The contract requires Belle Haven to pay ASG a total of $840,000 over 10 months.

In addition to Buckham, two other former aides to DeLay, Tony Rudy and Karl Gallant, are ASG partners.

During the same period as the Heritage-funded Malaysia trip, Jack Abramoff, a former Republican lobbying powerhouse who was close to DeLay and to Alexander Strategy Group lobbyists, was indirectly paid by the government of Malaysia, according to documents and accounts from two former Abramoff associates.

The funds were paid to Greenberg Traurig, Abramoff's former law firm, through an advocacy group set up by Michael Scanlon, a former DeLay aide who did public affairs work with Indian tribes who were Abramoff's lobbying clients.

Abramoff's lobbying for Indian tribes is now the subject of investigations by the Justice Department and the Senate Indian Affairs Committee.

Greenberg Traurig received $1.2 million from the American International Center, the Rehoboth Beach think tank Scanlon has said he set up.

Tribes represented by Abramoff have said he directed them to make payments to AIC, and the Indian Affairs Committee last fall released a check it had uncovered showing that the Embassy of Malaysia gave AIC a check for $300,000 dated March 6, 2002.

The two former Abramoff associates, who did not want to be identified because of the ongoing investigations, said that AIC was a front created in part to hide Abramoff's representation of Malaysia. Neither Abramoff nor his firm registered as a foreign agent.

Andrew Blum, a spokesman for Abramoff's legal team, said yesterday he would have no comment on AIC or the money from Malaysia.

Staff writer Susan Schmidt and researcher Lucy Shackelford contributed to this report.

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