K Street earned record income last year as uncertainties created by the slouching U.S. economy and continued threats of terrorism from overseas delivered new business for Washington’s lobbying firms.
According to a Roll Call review of lobbying reports for 2002, the top 25 lobbying firms raked in $304.3 million in fees during the year, more than ever before and an impressive 17 percent increase over the revenue reported by the firms the previous year.
The strong growth in fees indicates that last year’s frenzied policy agenda on Capitol Hill helped the lobbying industry bounce back from a yearlong slump in 2001.
“Whenever there is uncertainty … there is an opportunity to help clients,” said Richard Gold, a lobbyist with No. 20-ranked Holland & Knight.
Added Tony Podesta of 14th-ranked Podesta Mattoon: “People who are struggling tend to come to Washington.”
The K Street rebound came during a year in which many predicted that the combination of a struggling economy and the continued threat of terrorism would depress lobbying activity.
Instead, the data shows that 24 of the top 25 firms boosted their take from lobbying in 2002.
However, much of the gain did not come from some of K Street’s biggest and best- known firms, such as Cassidy & Associates and Patton Boggs.
Lobbying activity dropped for the No. 1-ranked firm, Cassidy & Associates, and slowed for many of K Street’s other top firms.
Instead, a group of lesser-known players emerged as the engine that drove the industry to one of its best years ever, according to lobbying disclosure forms filed with Congress at the end of the year.
From the Dutko Group to Holland & Knight, firms that ranked No. 11 through No. 20 grew by an average of 34 percent in 2002 — more than three times faster than their larger competitors.
Overall, the second-tier firms boosted lobbying revenues by $22.9 million over 2001, compared with just $16.7 million for the top 10 firms.
“We had a pretty good year last year,” said Ed Kutler, managing director of Clark & Weinstock, which increased revenues 44 percent last year to claim the No. 17 slot on Roll Call’s rankings.
Among other second-tier firms, the Dutko Group boosted lobbying fees by 31 percent; Washington Group by 85 percent; BKSH & Associates by 72 percent; Carmen Group by 29 percent; Livingston Group by 49 percent; PMA Group by 24 percent; Podesta Mattoon by 22 percent; and Holland & Knight by 35 percent.
Despite the startling growth rates among the second-tier firms, the top 10 firms still far outpaced the competition in total lobbying fees.
In fact, the five largest lobbying firms — Cassidy, Patton Boggs, Akin Gump, Piper Rudnick and Greenberg Traurig — together accounted for as much lobbying revenue as the No. 11 through No. 25 firms last year.
Cassidy, for example, hauled in $28.9 million in fees in 2002 to once again claim the top slot in the rankings.
However, the firm reported a $1.1 million drop in fees last year as the company began focusing on helping to secure federal contracts for its clients from the Pentagon and the newly established Homeland Security Department.
“We have switched a lot of our efforts to federal marketing,” said Gerald Cassidy, the firm’s chairman. “A good deal of our growth is in that area, and we expect a good deal of our future growth to be in that area.”
Contracting work does not show up as lobbying revenue because it does not involve lobbying Congress.
As is the case with Cassidy, there was little change in the order of the rest of the top 10. Patton Boggs ($26.2 million in lobbying fees in 2002), Akin Gump ($22.2 million), Piper Rudnick ($20.9 million), Greenberg Traurig ($17.7 million) and Van Scoyoc and Associates held on to the No. 2 to No. 6 slots, respectively.
Barbour, Griffith & Rogers ($12.7 million) climbed a slot to seventh place, even though GOP rainmaker Haley Barbour announced that he is running for governor of Mississippi.
No. 7 Williams & Jensen ($12.3 million) fell a spot to No. 8 while picking up Susan Hirschmann, a former chief of staff to House Majority Leader Tom DeLay (R-Texas).
Rounding out the top 10 was Washington Council Ernst & Young, which fell two positions to No. 9, and Hogan & Hartson, which returned to the elite list by posting a 27 percent increase in fees.
The Roll Call analysis is based on the lobbying fees received by K Street firms for representing their U.S. clients before Congress and the administration. Firms are required to disclosure their total lobbying fees to Congress every six months.
The total does not include revenues for lobbying state governments or fees received from foreign corporations or governments.
The Livingston Group, for example, received an additional $2.5 million in lobbying fees in 2002 from several foreign clients that are not included in the Roll Call study.
The growth on K Street came after a year in which lobbying revenues flattened for the industry. In 2001, lobbying activity fell slightly from the level reported in 2000, according to PoliticalMoneyLine.com.
Though industry-wide figures are not yet available for all of 2002, the latest figures indicate that K Street bounced back last year.
From Jan. 1 to June 20, 2002, total lobbying fees exceeded $859.5 million — the highest total ever reported since the 1995 Lobbying Disclosure Act.
Total fees for the second half of the year will not be available for months.
The rebound also came as many expected lobbying activity to remain subdued as the result of poor economic performance and sustained threats of terrorism.
Instead, lobbying flourished as Congress and the Bush administration pressed forward on a number of fronts to breath new life into the economy and guard the country from further terrorist attacks.
Last year’s creation of a Homeland Security Department, for example, created a new bureaucratic thicket that K Street firms helped navigate for their corporate clients.
Meanwhile, Congress took up dozens of measure to help revive the economy, such as an energy bill designed to boost U.S. energy supplies, a measure to restore investor confidence in the stock market and broadband legislation to boost the ailing telecommunications sector.
“Things just come together in an economy like this,” said John Merrigan, a partner at Piper Rudnick, which bought the No. 4 slot by purchasing Verner, Liipfert, Bernhard, McPherson and Hand last year. “Times of transition make for busy years.”
The ailing economy also provided two other unexpected benefits to K Street. For one, scores of states, cities, public universities and nonprofits turned to Washington for federal dollars as state dollars dried up.
“There has been a substantial growth in nonprofit growth as colleges and nonprofits and communities explore all options for revenue because it has become harder to get traditional revenues,” said David Gogol, president of the Sagamore Associates, which fell off the Top 25 list to No. 29.
Added Stewart Van Scoyoc of Van Scoyoc and Associates: “When the economy is tough, anyone who does anything that relies on state funding needs to get money somewhere else.”
Meanwhile, some lobbyists said their firms benefited from the poor economy because several corporations cut down on the size of their Washington offices by funneling more work to outside lobbying firms.
“If you have to cut $200,000, you would rather cut one employee than a 20-person team,” said one lobbyist.
Meanwhile, several firms boosted their lobbying revenues the old fashioned way: by adding big-name partners.
The Washington Group, for one, nearly doubled in size after adding former Rep. Susan Molinari (R-N.Y.) to its roster at the end of 2001.
“She came with a big book of business,” said Managing Partner John Raffaelli, who saw his firm jump 85 percent after Molinari’s arrival.
Among other big hires: Williams & Jensen scored Hirshmann, the former DeLay aide; Hogan & Hartsen picked up former Rep. John Porter (R-Ill.); the Carmen Group brought in former Sen. Max Cleland (D-Ga.) and Holland & Knight landed former Rep. Tillie Fowler (R-Fla.)
Together those firms saw a 28 percent bounce in lobbing fees in 2002 — well above the 17 percent average for the Top 25 firms.
Said one lobbyist: “Adding a big name always means big money.”