Foreign Lobbies Took the Guise Of Nonprofits

By James V. Grimaldi and Susan Schmidt
Washington Post Staff Writers
Friday, November 3, 2006

Early last year, two little-known nonprofit groups paid for Rep. John T. Doolittle (R-Calif.) and his 12-year-old daughter to travel to South Korea and Malaysia. Their last stop was the Berjaya Beach & Spa Resort on the Malaysian island of Langkawi, where they bunked at an oceanfront chalet staffed with a personal butler, got massages and rode water scooters on Burau Bay.

Doolittle's junket, which cost $29,400, was among the most expensive privately sponsored trips by members of Congress in recent years. The two groups that split the bills were not ordinary nonprofits. They were fronts for vigorous lobbying campaigns bankrolled by foreign entities and were operated by a Washington lobbying firm, Alexander Strategy Group, according to public records and people who worked with the firm.

For five years beginning in 2001, the Korea-U.S. Exchange Council and the U.S.-Malaysia Exchange Association treated 12 members of Congress and 31 Capitol Hill staffers and their relatives to nearly $500,000 in trips that included stops at U.S. and overseas resorts, records show.

The two nonprofits and the lobbying firm behind them have drawn the attention of the FBI. People associated with Alexander Strategy, who spoke on the condition of anonymity, said federal investigators have asked them whether the groups were conduits for a foreign government and a foreign corporation to finance congressional junkets.

Records show that the Korea-U.S. Exchange Council was funded by the Hanwha Group, a South Korean conglomerate. The stated goal was to enhance the influence of Hanwha's chairman, Seung Youn Kim, a controversial figure once jailed for violating Korean financial law in his purchase of Sylvester Stallone's Hollywood mansion. Lobbyists for the U.S.-Malaysia Exchange Association filed reports stating that their funds came from a Malaysian energy firm and that the work was "on behalf of the government of Malaysia."

Federal law prohibits members of Congress from knowingly accepting overseas travel from foreign governments except as part of a cultural interchange program approved by the State Department. The travel in this case was not part of such a program, government officials said. House rules ban members from taking trips paid for by lobbyists or foreign agents. Nonprofits and their officers are prohibited under federal tax law from using a charitable organization for private commercial gain.

Once a major lobbying firm, Alexander Strategy Group closed down early this year. Its owner, Edwin A. Buckham, former chief of staff to now-departed House majority leader Tom DeLay, is under investigation in the Jack Abramoff lobbying scandal, according to lawyers and witnesses with knowledge of the probe. Authorities are also reviewing Buckham's use in the 1990s of another nonprofit, the U.S. Family Network, the sources said.

The Korean and Malaysian nonprofits were created in 2001. Their combined budgets of more than $2.5 million, as well as their checkbooks and operations, were controlled by Alexander Strategy, according to people affiliated with the firm at the time. Records show that Alexander Strategy took in $620,000 in fees for its work on the Malaysia account. A Hanwha subsidiary in the United States, Universal Bearings Inc., paid the lobbyists $940,000 for the Korea work.

The nonprofit groups, on the strength of Buckham's GOP connections, sponsored trips for Republican House members DeLay; Doolittle; Ileana Ros-Lehtinen, Ander Crenshaw and Tom Feeney of Florida; John Carter of Texas; Scott Garrett of New Jersey; and Roger Wicker of Mississippi.

Buckham had a strategic alliance with a Democratic lobbying firm, the Harbour Group, located in the same building on K Street. Harbour received about $500,000 in fees from the two nonprofits, according to tax and lobbying disclosure records. The firm arranged for trips taken by Democrats including Rep. Earl Pomeroy of North Dakota, Rep. Jim McDermott of Washington, Rep. Mike Honda of California and Del. Eni F. H. Faleomavaega of American Samoa. Harbour also arranged for former president Bill Clinton, who was on his own Asian trip, to meet with Hanwha officials in Seoul and Beijing.

Some of the lawmakers on the trips were in positions to help other Alexander Strategy clients. Doolittle, who serves on the House Appropriations Committee, told The Washington Post this year that from 2002 to 2005 he sponsored $37 million in spending-bill earmarks that went to a firm controlled by a key Alexander Strategy client. The client, Brent R. Wilkes, is a target of the federal investigation stemming from the bribery case and guilty plea of former representative Randy "Duke" Cunningham (R-Calif.). Doolittle's wife, Julie Doolittle, was hired by Alexander Strategy to help keep the books for the Korean nonprofit.

Buckham and Edward Stewart, who had been his top associate at Alexander Strategy, declined to be interviewed for this article.

Joel Johnson, a former senior adviser in the Clinton White House who ran Harbour Group at the time, said he was a subcontractor to Buckham's firm and thought of the work as lobbying for business interests behind the nonprofits.

Johnson said he relied on Buckham's assurance that the groups were proper. "This did not look like a fly-by-night operation, because it had very respected, prominent people on board," he said.

Doolittle spokeswoman Laura Blackann said last week that the congressman believed that his trip to Asia, in February 2005, was proper and that it had nothing to do with the earmarks. He said he paid out of his own pocket for some of the activities on Langkawi, such as the massages and watercraft rentals.

Other members of Congress said they did not know the source of funding for the nonprofits. Said Mike DeCesare, spokesman for McDermott, "Obviously if Congressman McDermott knew, he wouldn't have taken the trip."

Helping Chairman Kim

During its five years of existence, the Korea-U.S. Exchange Council described itself in its tax returns as an educational group that spent nothing on lobbying.

But its filings with the Justice Department contradicted those returns. The council registered with Justice as a foreign agent, saying that it was financed by Hanwha Group and that Kim chaired its board of directors. It filed a plan detailing Alexander Strategy's lobbying campaign for Kim, which promised him extensive contacts with Washington lawmakers and policymakers.

The plan stated that the purpose was "to define Chairman Kim of the Hanwha Group as the leading Korean business statesman in U.S.-Korea relations" and to strengthen "Hanwha's global position." A 2002 audit of the nonprofit by the accounting firm Gelman, Rosenberg and Freedman said "approximately 99.9 percent" of its revenue came from one organization.

While the Korea council was filing as a foreign agent with the Justice Department, its lobbyists were declaring in their filings to Congress that the nonprofit had no significant foreign ownership.

"What they were telling the Department of Justice and what they were telling the IRS suggests you can't trust either set of documents," said Marcus Owens, a Washington tax lawyer and former Internal Revenue Service nonprofit chief who reviewed hundreds of the group's records compiled by The Post. "The reality is the organization was designed to provide a conduit for influence."

Alexander Strategy and Harbour lobbyists directed a steady stream of U.S. lawmakers and staffers of both parties to Seoul, where Kim squired them to meetings with top government officials. Kim traveled several times to Washington, where, according to the reports to the Justice Department, he met with prominent politicians and lawmakers.

Former president Clinton traveled to Beijing and Seoul at the invitation of the Korea council in November 2003. He appeared with Kim at the opening of the Beijing office of Korea Life Insurance Co., a Hanwha subsidiary, then traveled to Seoul for golf with Kim and meetings with political leaders.

Clinton's representatives did not respond to requests for comment on the visit.

The publicity provided a counterweight to Kim's troubles at home. He and other executives at Hanwha were under criminal investigation for allegedly bribing politicians in the company's 2002 takeover of state-controlled Korea Life. Within weeks of Clinton's visit, Kim and other Hanwha executives were barred from leaving Korea. One was later convicted in a bribery scheme. In February 2005, Kim was questioned by prosecutors but not charged.

The fact that the Korea council was a registered foreign agent was revealed in a March 2005 Post article. Some Congress members and aides who went on the trips said they had not known about the registration.

Former secretary of state Henry A. Kissinger, the best-known member of the Korea council's board, resigned, telling aides he had not known it was a lobbying operation.

A Scant Paper Trail

Like the Korea council, the U.S.-Malaysia Exchange Association sponsored trips by members of Congress and staffers. Some began with a meeting with Kim in Korea and finished with beach time in Langkawi courtesy of the Malaysia association.

The lawmakers and aides said they believed their travel was a legitimate function of a nonprofit group. In fact, the group's work was carried out on behalf of the Malaysian government and was funded by Malaysian business interests, both of which sought to improve the Islamic nation's image with U.S. politicians, according to public records and people familiar with the operation of the lobbying firms.

Much remains unknown about the U.S.-Malaysia Exchange Association because the only public documents are its incorporation papers and the biannual reports it filed with the District. On its board of directors were two Malaysian ruling-party officials, Jamaludin Jarjis and Megat Junid; former Wyoming senator Malcolm Wallop (R); and Stewart of Alexander Strategy.

According to the IRS, the group never filed a tax return. The IRS said the association was granted nonprofit status, but the agency could not locate the application.

The congressional trips were organized by and billed to Alexander Strategy, according to people familiar with the operation of the lobbying firm. Alexander Strategy received $620,000 in fees that originated with Malaysian business interests and was routed through a Hong Kong firm called Belle Haven Consultants, according to documents filed by Alexander Strategy with the Justice Department. Belle Haven also paid the Harbour Group $240,000, records show.

Wallop, who was hired to lobby for Belle Haven, said in an interview this summer that the Hong Kong firm got its money from P.K. Baru Energy in Malaysia. That company, he said, was one of the businesses that wanted to improve the nation's image in the United States after a disastrous 1998 visit by Vice President Al Gore, who walked out of a banquet to protest alleged human rights violations and anti-Semitic comments by Prime Minister Mahathir Mohamad.

"They wanted to make it known that it was a more civilized and courtly place than that," Wallop said. "A way to achieve that was to meet members of Congress." Some lawmakers who went on the trips received briefings from Belle Haven executives about Malaysia's strategic importance.

In their last two years of filings, Belle Haven's U.S. lobbyists reported that the Hong Kong firm was doing its work on behalf of the Malaysian government.

In 2002, the lobbyists took large delegations to Malaysia and Langkawi, including staffers to Rep. J. Dennis Hastert (R-Ill.), Sen. Harry M. Reid (D-Nev.), Rep. Richard K. Armey (R-Tex.) and Rep. Gregory Meeks (D-N.Y.). Meeks himself and Rep. Pete Sessions (R-Tex.), both on the House Financial Services Committee, went on one of the trips and met with officials of Malaysia's Islamic banks; the lawmakers' expenses were paid by a Malaysian think tank.

When Mahathir arrived that spring for a visit with President Bush, he was welcomed on Capitol Hill. The prime minister met with then-Senate Majority Leader Thomas A. Daschle (D-S.D.), DeLay and Hastert, among others. And Meeks and Sessions announced the creation of a congressional caucus on Malaysia Trade, Security and Economic Cooperation.

Amid Scandal, One Last Trip

By the beginning of 2006, Alexander Strategy Group had shut down the Korea and Malaysia nonprofits -- just before the lobbying firm itself went out of business because of its links to the Abramoff scandal. Buckham is referenced in the plea agreement of his former colleague, Tony Rudy, who admitted to corruption charges stemming from his work as a lobbyist and as deputy chief of staff to DeLay.

The FBI has questioned witnesses in recent months about Alexander Strategy's use of nonprofits and its hiring of congressional spouses, including Julie Doolittle and Christine DeLay, wife of the former House majority leader.

Alexander Strategy paid Julie Doolittle about $30,000 to do bookkeeping for the Korea nonprofit. Other contracting work by Julie Doolittle, for one of Abramoff's charities, has led investigators in the Abramoff probe to scrutinize John Doolittle's activities, sources have told The Post.

Blackann, John Doolittle's spokeswoman, did not respond to a question about whether the congressman knew that the Korea nonprofit, which helped pay for his February 2005 trip to Asia, was funded by a foreign corporation.

The Doolittle trip was the last one sponsored by the nonprofits as a wave of controversy about overseas junkets and lobbying abuses swept the Capitol. Also on the trip, which cost more than $80,000, were congressmen Wicker and Pomeroy, Wicker's wife, and a Wicker aide.

The contingent spent four days in Korea before flying to Kuala Lumpur for two days, where they met the Malaysian prime minister. Pomeroy flew home, and Doolittle and his daughter, Wicker and his wife, and the aide spent three days at a resort hotel in Langkawi, an island whose beaches are rated among the world's 10 best by a National Geographic Society publication.

Accompanying the congressmen were three Belle Haven representatives, Malaysia politician Jarjis and three lobbyists -- Wallop, Alexander Strategy's Stewart and Johnson, who by then had moved from the Harbour Group to the Glover Park Group.

Doolittle, Wicker and Pomeroy said the trip had been approved in advance by the ethics committee. But House ethics rules leave it up to individual members to determine whether a trip meets the standard of official duties.

"I was disappointed to learn -- upon returning -- that the groups in question had failed to properly file their status," Pomeroy said in a statement. "Knowing what I know now, I would not have gone on these trips."

Doolittle spokeswoman Blackann said that the first six days involved official meetings and briefings and that Doolittle paid for the recreational activities, which took place on the weekend. Doolittle declined to make available the receipts, kept in Washington, because he was campaigning in California.

Blackann also said Doolittle returned gifts received on the trip, which people familiar with the details of the trip said included a hand-tailored Korean suit for the congressman and a stylish equestrian outfit for his daughter from the Royal Polo Club in Kuala Lampur.

The spokeswoman said the congressmen also took a boat ride "to visit areas that had been ravaged by the tsunami" that had hit the South Pacific two months earlier.

A news report days after the tidal wave said Langkawi received comparatively minimal damage and "remained normal with hordes of tourists going about their holiday without any worry."

Wicker, in an interview, acknowledged that the island visit was meant for relaxation. He said he and his wife also got massages.

The itinerary for Langkawi was to look at tsunami damage and "to have a little downtime," Wicker said. "But the logistics of getting to the tsunami became a problem. It did become a couple of days of downtime."

Research editor Alice Crites contributed to this report.

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