Think Tank's Ideas Shifted As Malaysia Ties Grew

Business Interests Overlapped Policy

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."

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.