GP dollars flood K Street(3)

KKR recently augmented its tax lobbying capability - and it’s not alone. Buyout shops are spending millions on Washington’s K Street - synonymous with the Capitol’s powerful lobbyists - as US lawmakers mull legislation that would increase taxes.

Washington tax lobbyists are profiting handsomely from private equity. As committees in the House and Senate ponder bills that would increase taxes on carried interest and publicly traded partnerships, big buyout firms cannot throw cash at K Street, home to many lobby firms, fast enough. Just this week it was disclosed that Kohlberg Kravis Roberts has added to an already sizeable stable of tax lobbyists.

Washington: buyout firms lobbying hard

Whether or not they operate from K Street, they’re receiving millions from buyout firms intent on blocking the proposed legislation. An informal tally of mid-year disclosure reports submitted by firms lobbying on behalf of some of the US’ biggest private equity players indicates they’ve earned more than $4 million from January to the end of June. 

Private equity firms have regularly employed powerful Washington, DC lobbyists, most frequently to lobby on issues affecting portfolio companies or deals in progress. The majority of Cerberus Capital Management’s lobbyists, for example, have been hired to lobby on auto industry issues; in March – two months before it won the bidding war for Chrysler – it was disclosed the firm hired King & Spalding senior counsel Daniel Coats, the former US Ambassador to Germany from August 2001 to February 2005 and a former Indiana Senator and Representative.

But the brighter spotlight on private equity and the introductions of the Baucus-Grassley bill, also known as the Blackstone bill, and the Levin carried interest bill, have private equity firms employing some of the Capitol’s highest-priced hired guns to put pressure on lawmakers.

This week, it was disclosed that KKR augmented its lobbying team with seven tax lobbyists from OB-C Group, including Senate Majority Leader Bill Frist’s former communications director, Robert Stevenson. It is unclear exactly when they were retained, as federal law requires lobbyists to register with Congress within 45 days of hire or commencing activities.

However, KKR has paid the firm $60,000 as of 30 June to lobby on the tax bills, as mid-year disclosure reports were filed with Congress this week. KKR paid double that amount in the same period for eight tax lobbyists from politically well connected Akin Gump Strauss Hauer & Feld, whose hire was disclosed in July.

In June, it was disclosed that publicly traded Fortress Investment Group had hired 15 lobbyists from Ernst & Young’s Washington council to lobby on publicly traded partnerships and miscellaneous tax issues. As of 30 June, Fortress had spent $80,000 on their services.

Since 1995, The Blackstone Group has retained lobbying firm Ogilvy Government Relations, which is led by Wayne Berman, a former Assistant Secretary of Commerce for Policy under President George Bush, and a major player in Republican campaigns and fundraising.

This year, as of 30 June, the now-publicly traded Blackstone spent $3.74 million employing 13 lobbyists, one of whom is Julie Dammann, the former chief of staff of Christopher Bond, a Republican Senator from Missouri. That’s nearly double the lobbyists it employed in the same period last year, and well over 3000 percent more than the $120,000 it spent in the first six months of 2006.

Ogilvy is also retained by The Carlyle Group for tax-related issues, as is Akin Gump Strauss Hauer & Feld, though mid-year reports for their Carlyle-related efforts weren’t posted at press time.

Bain Capital hired three lobbyists from Public Strategies Washington before the firm’s registration with Congress on 1 April. Bain paid $100,000 to the lobbyists through 30 June to lobby on the Baucus-Grassley bill and the Levin carried interest bill.

In late June, it was disclosed Apollo Management hired Brownstein, Hyatt & Farber, another well connected firm, to lobby on “issues relating to private equity and real estate”, as well as “ability to access public markets” and carried interest taxation. The mid-year report was not available at press time.

Brownstein, Hyatt & Farber is one of several firms making up more than 20 lobbyists retained by industry group The Private Equity Council. The PEC – which represents Apax Partners, Apollo Advisors, Bain Capital, Blackstone, Carlyle, Hellman and Friedman, Kohlberg Kravis Roberts, Providence Equity Partners, Silver Lake Partners, Thomas H. Lee Partners, and TPG Capital – paid the firm $100,000 to the end of June. In the same period, it paid $100,000 to Akin Gump Strauss Hauer & Feld, and $60,000 to Johnson, Madigan, Peck, Boland & Stewart.

Mid-year reports weren’t yet available for other firms the PEC has hired, including Capitol Tax Partners, whose lobbyists include: former Assistant Secretary for Tax Policy Jonathan Talisman; Richard Grafmeyer, a former Deputy Chief of Staff for the Joint Committee on Taxation; William McKenney, former Staff Director of the Ways and Means Subcommittee on Oversight; and Joseph Mikrut, who Treasury Tax Legislative Counsel in both the Clinton and Bush Administrations and served on the staff of the Joint Committee on Taxation, as Legislation Counsel and later as Associate Deputy Chief of Staff.