Reprinted by permission from Barron's Weekly of March 19, 1979
The Federal Trade Commission was another area where I developed some damned good inside sources, some pipelines. Take the XXX merger with XXX. The Justice Department refused to oppose the merger, so it wound up with the FTC fighting it. Well, when the decision came, I had it two days in advance, even before my client's law firm could get it. In fact, I furnished it to the lawyers, and this was one of the best Federal Trade law firms in Washington. And this happened in connection with that merger three times, because the thing went on, oh, six years, I guess.
-Reminiscenses of a corporate intelligence operative.
The intelligence agent quoted above refuses to be identified or to name his client. Anonymity is his price for talking at all; to say more would end or impair his career in a highly competitive, sometimes almost shadowy Washington profession: gathering straight, inside information about the government and flashing it to clients.
So great is the impact of federal decisions on the business world thatmajor corporations can scarcely refrain from playing the Potomac intelligence game. Indeed, Washington is laced with an information network that spews out thousands of words daily by telephone, telegraph or even the mail.
Directly or indirectly, corporations deloy hundreds (thousands, by some estimates) of agents with widely divergent backgrounds and contrasting methods of operation. Here will be a Ph. D. preparing a scholarly analysis of long-range policy trends based on private talks with government specialists. There will be a young free-lance lawyer with a phone-answering machine for an office hustling to make it not so much as a lawyer but as a Washington operator. Here a former newspaper reporter worming advance information or an unreleased document out of a carefully cultivated souce-but for a private client now, not the reading public. And, of course, the high-prestige types-large law firms, well-established information-gathering companies and the official Washington representatives (often bnearing a vice president's title) of the nation's major corporations.
These agents see nothing sinister in what they do, and Washington seems to accept their activities as just part of the way this town works. "It's a way of life here," says a spokesman for the AFL-CIO. "It's been going on for one hell of a long time."
Knowing what the Senate Finance Committee is thinking of doing in a tax bill, for example, can enable a corporation to manipulate its assets before legislation is passed so that the corporation either gets a tax break or protects itself against a higher tax bite, the union spokesman said.
But these are the sorts of things that go on in this town.
Many agents point out that they're doing the same things that newspaper reporters proudly do, and they are using the same techniques. The end use of the product is the only difference.
At any level, friendships and social contacts in the right places are the lifeblood of any good intelligence operative-contacts with government sources and with agents from other corporations. Particularly among the Washington "rep" (their term) of major corporations, both kinds of contacts are pursued passionately, albeit quietly. Two Fridays every month, about 25 Washington reps of the best-known corporations meet for breakfast at the Army & Navy Club in downtown Washington. Sam Pickard, Monsanto's Washington vice president, serves as informal chairman. Pickard can look around the breakfast table and see reps from such firms as U.S. Steel, Standard Oil of Indiana, For Motor, Chrysler, Republic Steel, Bethlehem Steel, Anaconda, Santa Fe, Procter & Gamble, Sears Roebuck, Philips Petroleum, ITT so on.
What do they do there? Says Dilton "Dixie" Davis of the U.S. Chamber of Commerce: "We just wing it. We kick around whatever seems to be on somebody's mind and exchange intelligence." That exchange is vital. A Washington rep with a piece of information of no direct value to his own corporation may pass it on to another Washington rep to whom it is highly significant. One day, he will get something important in return. Information-trading makes the network go.
Then there's the Carlton Club, a comfortable hideaway where the elite of the Washington reps meet and entertain. Members will not divulge the names of other members or even how many belong, except to say that membership is "small and select." The club's manager will say only that "it's a private men's club; you better talk to the president," who is Philip Buckminster, Chrysler's Washington vice president; a phone message left at Buckminster's office brings no return call.
The club's quarters is Suite No. 350 in the Sheraton-Carlton Hotel; a metal plate on the door says "Carlton Club." What goes on inside? Not much, club members say. Some days there might be only three or four Washington reps lunching there quickly, getting away from the world. On other days, a dozen or so show up, with guests. "We might chat about anything from the state of the union to dirty jokes," one member explains casually. "It's a place to relax, have a drink and eat lunch with friends."
Members can lease the club for private dinner entertaining, too. A former Washington newspaper correspondent recalls such an evening - one he will never forget. "It was more than 20 years ago." he relates. "I was brand new in town, and a friend invited me to the Carlton Club on Sunday evening. I'd never heard of it. He called over somebody named Roger and introduced us. It was Roger Blough, then chairman of U.S. Steel. We chatted easily for a while, and my host called over somebody he introduced as Tom Clark. In a few seconds, I realized it was Mr. Justice Clark of the Supreme Court. Next came some guy whose name now escapes me - but a guy who then ranked high on Ike's White House staff. It struck me as one hell of a place to pick up inside information if I could just hang out there, which of course I couldn't".
A hideaway of a different sort - equally discreet but with a different set of players - is the 116 Club, situated not at 116 something but at 234 Third Street SE, near the Capitol. Its name comes from its old address, now torn down to make way for a Senate office building. Again, it is exclusive and expensive. Only lobbyists and high-level Capitol Hill staff people belong. At any lunch time, a half-dozen to a dozen top Senate aides can be found there, along with the lobbyist members, playing cards, eating lunch, having a drink. It's open in the late afternoon, too, for relaxation and camaraderie. "The amount of information that gets passed along there is unbelievable," says one who often partakes.
Obviously no one can pinpoint when the Washington intelligence industry began, but no doubt somebody was quilling hot information out of the capital in the earliest days of the Republic. According to Congressional Quarterly, an authoritative weekly publication here, a lobbyist for the National Association of Manufacturers admitted in 1913 to paying the chief House page $50 a month for inside information overheard in congressional cloakrooms. Franklin Roosevelt, the New Deal agencies and World War II awakened the more enlightened corporate world to the need for help in Washington, but the bureaucratic bafflement was just beginning.
"There has always been the need," says Marvin L. Esch, head of U.S. Steel's Washington office. "But as Washington has impacted more on corporate decisions and on the day-to-day functions of corporations, this interrelationship had to come. And therefore the need to know at all levels has become acute. And that's why the information systems have exploded."
Those information suppliers are not to be confused with this city's lobbyists or those who peddle a company's wares to the government-although some intelligence operatives mix lobbying with their general surveillance activities. Information, in fact, is fundamental to lobbying or selling. One corporate vice president, who is a registered lobbyist, estimates 90 percent of his time actually is spent just gathering information from the Hill, from the agencies and from other corporate representatives here.
"Information-gathering is necessary before you can do any lobbying," observes Sidney G. Hawkins, director of national affairs for Mead Corp. "Being informed is absolutely critical to doing any kind of job as a lobbyist." Some firms restrict themselves to gathering information and providing advice; if a client then wants to lobby, he goes to someone else.
Occasionally, an intelligence agent may overachieve and make the public prints, as did the Boeing employe who seemed to know too much about a top-secret Pentagon document being prepared for President Carter. As the Wall Street Journal reported, the Boeing man later testified that he had read the document, made notes and transmitted a summary by telecopier to Boeing's Seattle offices. Although that sort of thing may be common around the Pentagon, most corporate intelligence work is far less dramatic. And most operatives try to keep a low profile.
"We don't try to get material that's classified," insists James Newmyer of Newmyer Associates Inc., one of Washington's oldest and most respected intelligence-gathering operations. But it is common for a client to ask for an advance copy of some document, he reports. "We certainly would like to feel that we get it on a timely basis, which sometimes means before it becomes public." Newmyer concedes.
Newmyer Associates is a paradox. Although many Washington operatives confide that it is the biggest and best in its line of work, so low is its profile that other successful agents have never heard of it. A check of The Washington Post's library reveals not a single clipping about the Newmyers, although it was founded by the late Arthur Newmyer in 1943. It is now run and owned by his two sons, James and Arthur Jr., plus Richard Borwick, who helped the senior Newmyer found the firm.
The Newmyer staff totals 26, and if a client is interested (or should be) in some particular congressional hearings, Newmyer staffers are certain to be covering them; a report, in as much details as the client wants, will be forwarded promptly. Newmyer does no lobbying; it business is strictly gathering information and counseling clients about what course they should take in light of that information. If a corporate client comes to town to meet face-to-face with the appropriate official, though, Newmyer will make the appointment. "We don't speak for any of our clients," James Newmyer says. "We're not lobbyists, either before the Congress or the executive branch. Many of them have Washington offices who do that spokesman role."
Newmyer corporate clients number only 13 (plus a trade association), but the client list is the envy of other Washington informationists. The senior Newmyer's first client was Standard Oil Co, of New Jersey; Exxon is still a Newmyer client. "We've been working for Ford since 1945," says James Newmyer. Who are the other clients? Newmyer draws a list from a desk drawer and replies: "We work for Westinghouse IBM, Citibank, Imperial Chemical Industries - the U.S. affiliate, the U.S. subsidiary of Inco Inc., Dana Corp. Dun & Bradstreet is a client. Gillette in Boston. Norton Simon, Peat Marwick Mitchell, CBS. The American Watch Association is a trade association of watch importers for which we have worked for many years."
Among veteran Washington intelligence operatives, the fees these corporations pay for Newmyer services are said to be sizable. Gossip puts Ford's for a recent year at $325,000, IBM's at $175,000. A patient man, James Newmyer smiles and proclaims these rumors to be wrong, unreasonably high. But he won't say what the fees are. "We never discuss our bilings. I feel that anything we have told our clients about what they should do or anything else is their property from the time it leaves here, and that is also true for what we send them in the bill."
What do these corporations get for their Newmyer fees? "We are expected to look at the Washington scene through objective eyes and to give them our best counseling advice on their Washington issues," responds Newmyer. "In order to do that, we try to keep ourselves and our clients posted on what's going on down here as sort of a backdrop to our counseling service."
The staff is made up mostly of former newspsper reporters, some with backgrounds in government service, Newmyer explains. "In effect, they continue to cover beats as they did before when they worked for newspapers. We have people who follow the subjects that out clients are generally interested in - taxes, foreign trade and investment. pricing matters, merger matters, labor relations, environment, consumer issues."
According to Newmyer, the staff works hard to develop friendships and contacts in key places to keep the information flowing. Also, a client often wants a very specific piece of material that no one else is really after. "There's no reason you can't have it. It's not confidential. It's not a disclosure. It's just that no one else has asked for it. And when you live here and work here as long as we have, no matter how dumb you are, you sort of learn over a period of time where to ask for things."
Hill and Knowlton, in some ways a rival of Newmyer, has a Washington staff of more than 50, but isn't entirely comparable to Newmeyer, Lobbying is a major activity, plus full public relations service if the client wants it. But the fundamental business of intelligence gathering is stressed here, too. Robert K. Gray, secretary to the Cabinet is the Eisenhower administration, heads Hill and Knowlton's Washington office. He says five members of the staff do nothing but gather information, by persuing speeches and publications and by "getting out on the street trying to uncover news. They may be out with the agencies and departments trying to sleuth down facts behind a rumor they've heard."
Gray says one of his operators is "almost the perfect model of an investigative reporter. He's not stopped by a stone wall. He determines how to go around it or over it or under it - he finds the information some other way." But just as information helps the firm's lobbyists, so does lobbying feed back information, and Hill and Knowlton fields a small army of lobbyists every day. In any given year, the Washington office may work for 100 of the company's clients, Gray notes.
"The length of our client list means that we have probably a client who's a producer or an employer in almost every congressional district and certainly in every state," Gray points out. "That's a good reason for going to a member's office and getting acquainted with the members on business that affects his district, which then makes it easier to open the door when you need to get in on other business. The more clients you have means, on the one hand, you can have a greater variety and depth of lobbyists to deploy, and thus you have more people bringing in information of value and contracts of value, so that it's a chain reaction that builds on itself.
Once collected, information goes out to the clients by different methods, depending on urgency and need. "Sometimes we use the telephone, sometimes Telex, sometimes slow mail," says Gray. "If we found that the Federal Trade Commission was supposed to issue a cease-and-desist order on someone, obviously we would knock down telephone poles to get it to them."
Second in size to Hill and Knowlton here is the Washington office of Burson-Marsteller. James J. Cassidy, vice chairman and head of the Washington operation, reports that his office has a staff of 20 and "a dozen or 15 clients that we work for regularly." Three staff people are "almost fully occupied with information gathering - that is, from keeping in touch with the general staff to getting explicit information from government people," Cassidy says.
Here again, developing contacts and sources is basic, as is the swapping of information and sources within the office. "If we have a query or a problem, one of the first things we do is talk to each other. Who do you know over at the such and such? Have you heard anything about thus and so? One fellow may say he knows a source there that could get it for us. We have a good deal of cross-pollination of information. Whatever we hear may play back to a special situation."
In contrast to the multiple-client firms, most major corporations maintain their own Washington offices to gather intelligence and advance their own interests. Some of these are small, two-person or three-person organizations. Corporate giants employ large staffs with a full array of skills, spread out in elaborate suites.
Marvin Esch directs U.S. Steel's Washington efforts from an office overlooking Lafayette Park and the White House. Esch knows Capitol Hill from the inside. For 10 years, he served as a Republican congressman from Michigan, after a career as a college professor. Working directly under Esch are four "issue managers," plus legal counsel, engineering counsel, public relations and support staff. What a single-company Washington office lacks in cross-fertilization from mulitple-client alliances and umbrella organizations such as the American Iron & Steel Institute, the U.S. Chamber of Commerce. the National Association of Manufacturers and the Business Roundtable.
A primary effort, though, remains intelligence gathering. "Gathering the information early on - that's essential," Esch says. "We have individuals assigned in our office to responsibility for given issue areas. An individual is responsible in the general tax area, another on energy and environment, another relating to coporate governance, labor and personnel matters, as illustrations. Their responsibility is to continually monitor what might be occurring in Washington, to gather that information."
Beyond that, Esch's staff tries to interpret the significance of the information, predict changes" and then obviously you also have the responsibil- ity to try to influence the changes which will be occuring in terms of public policy."
How is the information gathered? According to Esch, there's a "certain amount of investigatory reporting involved. And to have a large number of informal structures - breakfasts, for example, at which you meet with other Washington reps periodically. It's cross-fertilization. And we have a former members (of Congress) group; we meet periodically and exchange information and ideas.
"Likewise, I think one of the more important points is that there is a general misunderstanding by those outside of Washington that if you are in an adversary position on an issure you are therefore in an adversary position in terms of personal relationships. You learn in Congress that you can disagree on an issue without being disagreeable. As a result, frequently sources of information may come from potential adversaries, who know that you are adversaries and yet your personal relationship prevails over that."
Esch muses: "It would be interesting to try to develop a model of the communication system in Washington. You could spend the rest of your life trying to do that. There's a lot of individual consultants. They have small offices. There's any number of those. They range all over-law offices and former members of Congress and former Hill staff people. They take on two or three clients for maybe six months or a year, or for one-issue contracts."
Strangely, some major corporations with full-dress Washington offices sometimes employ outside intelligence operatives, either full time or for specific assignments. The reasons vary. Perhaps an issue becomes so hot that the regular Washington office needs additional help. Sometimes a problem erupts outside the areas normally covered by the Washington office: An outside specialist known to enjoy expertise in that perticular area can get the information more quickly or more accurately, tapping sources already developed. And sometimes the Washington office may be so indoctrinated with the corporate biases that it is blind to the reality of what is happening; an objective report from soembody not employed by the company is needed.
One veteran intelligence operative here has an entirely different explanation. "Any chief executive officer with a sensitive matter such as a possible acquisition to be looked into here would be an idiot to entrust it to his Washington rep," this operative declares. "There's just too much leakage here. People are in the business of trading information. You can't just take. The Washington rep is part of the corporate community here. They know each other, they party together. It's just too easy for information to osmose."
To a Washington rep, that very notion is totally absurd. CAPTION: Illustration, no caption, By Geoffrey Moss for The Washington Post