Conglomerate Buys Lobbying and PR Firms

The Washington power lunch has just gone global.

The Cassidy Companies, a mini-empire that includes the city's largest lobbying shop, was purchased yesterday by Shandwick International, a public relations powerhouse with offices in 54 countries.

The deal, to be closed in November, folds Cassidy into a publicly traded conglomerate and is intended to provide its collection of lobbyists and spin controllers with an international reach. Terms were not disclosed, though published reports have put the price at somewhere between $70 million and $80 million.

With expected revenue of $45 million this year, Cassidy runs the city's most lucrative lobbying operation--Cassidy & Associates. Its clients include General Dynamics Corp. and Boeing Co. In addition, Cassidy owns Powell Tate, a public relations firm co-founded by Jody Powell, White House press secretary for President Jimmy Carter, as well as a polling firm, Frederick Schneiders Research, and a public relations firm that specializes in litigation, Bork & Associates, founded by Robert Bork Jr.

For firm founder Gerald Cassidy, 59, a former Capitol Hill staffer, the deal brings a multimillion-dollar windfall and marks another step in his decades-long effort to turn the influence business into a corporate enterprise. It also ends Cassidy's extensive search for an infusion of capital. Last year, the company aborted an initial public offering after the market tumbled in September, and it has been looking for a buyer ever since.

"What I want to do is give our people the best opportunity to grow this business and play on a worldwide stage and give them the best opportunity I can to serve our clients," said Cassidy.

Shandwick is a subsidiary of Interpublic Group, a holding company with advertising and public relations outfits. It is traded on the New York Stock Exchange.

--David Segal

HUD IG Criticizes 'Community Builders'

The Community Builders program created two years ago by Housing and Urban Development Secretary Andrew M. Cuomo appears to operate as a political and public relations effort and should be shut down, the HUD inspector general said in a report released yesterday.

HUD officials rejected the IG's recommendation to disband the Community Builders program and issued a nine-page rebuttal to the IG's findings, which officials described as riddled with errors and allegations.

The IG report, released by the office of Sen. Judd Gregg (R-N.H.), comes at a sensitive time for HUD, as Congress sorts out its spending priorities for fiscal 2000. Some congressional Republicans have proposed substantial cuts in some HUD programs, drawing a White House threat of a veto if the cuts are not modified.

The report also reignited a long-running feud between Cuomo's senior staff and the HUD IG, Susan M. Gaffney, who has repeatedly criticized Cuomo's efforts to revamp management practices and policies. The IG report faulted the Community Builders program for failing to follow civil service hiring rules, performing work of minimal value, engaging in public relations and diverting scarce budget dollars from other HUD functions.

HUD has hired about 800 people as community builders as part of Cuomo's overhaul of agency operations. The department has described them as "one-stop customer service representatives" in 81 field offices providing economic development, home ownership, public housing and homeless assistance. In theory, they would leave much of the HUD staff to focus on monitoring and enforcing federal housing and loan regulations.

Last month, Ernst & Young LLP wrote the department that case studies and interviews showed that the community builders "have been successful in facilitating positive communication between HUD and the communities they serve." Other outside reviews also have praised the program's intent, HUD officials said.

But the IG report said "the impact of community builders is difficult to measure, when measurable. The one clear effect of the Community Builders is the dramatic increase in the number of people at HUD not part of a specific program, engaged in customer relations, and owing their jobs to the department's political management."

In its findings, the IG report concluded that many community builders "cannot provide . . . accurate answers and solutions to customers' questions and problems. . . . The primary information the Community Builders seem to have disseminated is political."

HUD officials said the IG was "just plain wrong." The officials said HUD civil servants controlled the hiring of the community builders and set their pay. Community builders, they said, are not a financial drain because they constitute a small segment of the department's work force.

--Stephen Barr

CAPTION: A public relations firm co-founded by Jody Powell is part of the deal.

CAPTION: A program set up by HUD Secretary Andrew M. Cuomo is assailed.