How a Lobbyist Stacked the
Deck
Washington Post
By Susan Schmidt and James V. Grimaldi
Washington Post Staff Writers
Sunday, October 16, 2005; Page A01
Lobbyist Jack Abramoff and his team were beginning to panic.
An anti-gambling bill had cleared the Senate and appeared on its way to
passage by an overwhelming margin in the House of Representatives. If that
happened, Abramoff's client, a company that wanted to sell state lottery
tickets online, would be out of business.
But on July 17, 2000, the Internet Gambling Prohibition Act went down to
defeat, to the astonishment of supporters who included many anti-gambling
groups and Christian conservatives.
A senior aide to then-Majority Whip Tom DeLay (R-Tex.) helped scuttle the
bill in the House. The aide, Tony C. Rudy, 39, e-mailed Abramoff internal
congressional communications and advice, according to documents and the
lobbyist's former associates.
Rudy received favors from Abramoff. He went on two luxury trips with the
lobbyist that summer, including one partly paid for by Abramoff's client,
eLottery Inc. Abramoff also arranged for eLottery to pay $25,000 to a Jewish
foundation that hired Rudy's wife as a consultant, according to documents and
interviews. Months later, Rudy himself was hired as a lobbyist by Abramoff.
The vote that day in July was just one part of an extraordinary yearlong
effort by Abramoff on behalf of eLottery, a small gambling services company
based in Connecticut. Details of that campaign, reconstructed from dozens of
interviews as well as from e-mails and financial records obtained by The
Washington Post, provide the most complete account yet of how one of
Washington's most powerful lobbyists leveraged his client's money to influence
Congress.
The work Abramoff did for eLottery is one focus of a wide-ranging federal
corruption investigation into his dealings with members of Congress and
government agencies. Abramoff is under indictment in another case in connection
with an allegedly fraudulent Florida business deal.
Abramoff had deep roots in the conservative movement and rose to prominence
by helping Republicans tap traditionally Democratic K Street lobbyists for
campaign dollars. But in the eLottery fight, he employed a win-at-any-cost
strategy that went so far as to launch direct-mail attacks on vulnerable House
conservatives.
Abramoff quietly arranged for eLottery to pay conservative, anti-gambling
activists to help in the firm's $2 million pro-gambling campaign, including
Ralph Reed, former head of the Christian Coalition, and the Rev. Louis P.
Sheldon of the Traditional Values Coalition. Both kept in close contact with
Abramoff about the arrangement, e-mails show. Abramoff also turned to prominent
anti-tax conservative Grover Norquist, arranging to route some of eLottery's
money for Reed through Norquist's group, Americans for Tax Reform.
At one point, eLottery's backers even circulated a forged letter of support
from Florida Gov. Jeb Bush (R).
Rudy declined to comment for this report. A spokesman for Reed -- now a
candidate for lieutenant governor of Georgia -- said that he and his associates
are unaware that any money they received came from gambling activities. Sheldon
said that he could not remember receiving eLottery money and that he was
unaware that Abramoff was involved in the campaign to defeat the bill.
Norquist's group would say only that it had opposed the gambling ban on
libertarian grounds.
Abramoff's lawyer declined requests for a comment.
DeLay, an outspoken opponent of gambling, was an instrument, witting or
unwitting, in eLottery's campaign, documents and interviews show. Along with
Rudy, he was a guest on a golfing trip to Scotland. As majority whip, he cast a
rare vote against his party on the Internet gambling bill and for the rest of
the year helped keep the measure off the floor. He told leadership colleagues
that another vote could cost Republican seats in the hard-fought 2000
elections.
A statement from DeLay's lawyer said his votes "are based on sound public
policy and principle."
The Scotland trip is one aspect of the gambling matter being investigated by
the corruption task force. The trip took place more than five years ago, which
ordinarily would be beyond the five-year statute of limitations on certain
possible corruption charges. But legal sources say prosecutors have obtained a
waiver of the time limit because of the need to gather information abroad.
Desperate Company
Like many Internet companies emerging from the overheated 1990s, eLottery's
money was drying up in the spring of 2000.
The company was founded in 1993 on the gamble that even a small fraction of
the market for helping states and others put lotteries online could be worth a
billion dollars a year. But the company faced many obstacles.
In 1998, the Justice Department had used existing gambling laws to force
eLottery to shut down its first online lottery venture, with an Idaho Indian
tribe. ELottery had not earned a dime since.
The Senate had passed the Internet Gambling Prohibition Act in late 1999,
aiming to make it easier for authorities to stop online gambling sites. With a
companion bill by Rep. Robert W. Goodlatte (R-Va.) advancing in the House in
the spring of 2000, eLottery was desperate to ramp up its Washington lobbying.
It had to sell off assets to stay afloat and raise cash.
In May, eLottery hired Abramoff's firm, Preston Gates & Ellis LLP, for
$100,000 a month, according to lobbying reports. In the following months,
Abramoff directed the company to pay hundreds of thousands of dollars to
various organizations, faxes, e-mails and court records show. The groups
included Norquist's Americans for Tax Reform; Sheldon's Traditional Values
Coalition; companies affiliated with Reed; and a Seattle Orthodox Jewish
foundation, Toward Tradition.
Robert Daum, a former eLottery official, said he could not recall the names
of the groups that received the payments but noted that all the money spent by
the company at Abramoff's direction was for the purpose of defeating the
Internet bill.
"We were willing to pursue all legitimate means to ensure that outcome, as
people do all the time in Washington," Daum said. "Nothing more, nothing
less."
Arrayed against eLottery were many leading groups on the religious right who
were pushing to ban Internet gambling, including the Moral Majority and the
Christian Coalition. James Dobson, influential leader of Focus on the Family,
praised the bill in an opinion piece for the New York Times.
Still, according to his strategy e-mails, Abramoff thought he could turn
conservatives in the House against the bill. He seized on some compromise
language in the bill making exceptions for jai alai and horse racing.
To reach the House conservatives, Abramoff turned to Sheldon, leader of the
Orange County, Calif. - based Traditional Values Coalition, a politically
potent group that publicly opposed gambling and said it represented 43,000
churches. Abramoff had teamed up with Sheldon before on issues affecting his
clients. Because of their previous success, Abramoff called Sheldon "Lucky
Louie," former associates said.
Checks and e-mails obtained by The Post show that Abramoff recruited Reed to
join Sheldon in the effort to pressure members of Congress. Reed had left the
Christian Coalition in 1997 and started a political consulting firm in
Georgia.
Abramoff asked eLottery to write a check in June 2000 to Sheldon's
Traditional Values Coalition (TVC). He also routed eLottery money to a Reed
company, using two intermediaries, which had the effect of obscuring the
source.
The eLottery money went first to Norquist's foundation, Americans for Tax
Reform (ATR), and then through a second group in Virginia Beach called the
Faith and Family Alliance, before it reached Reed's company, Century
Strategies. Norquist's group retained a share of the money as it passed
through.
"I have 3 checks from elot: (1) 2 checks for $80K payable to ATR and (2) 1
check to TVC for $25K," Abramoff's assistant Susan Ralston e-mailed him on June
22, 2000. "Let me know exactly what to do next. Send to Grover? Send to Rev.
Lou?"
Minutes later Abramoff responded, saying that the check for Sheldon's group
should be sent directly to Sheldon, but that the checks for Norquist required
special instructions: "Call Grover, tell him I am in Michigan and that I have
two checks for him totaling 160 and need a check back for Faith and Family for
$150K."
According to the e-mails, Reed provided the name and address where Norquist
was supposed to send the money: to Robin Vanderwall at a location in Virginia
Beach.
Vanderwall was director of the Faith and Family Alliance, a political
advocacy group that was founded by two of Reed's colleagues and then turned
over to Vanderwall, Vanderwall said and records show.
Vanderwall, a former Regent University Law School student and Republican
operative, was later convicted of soliciting sex with minors via the Internet
and is serving a seven-year term in Virginia state prison.
In a telephone interview, Vanderwall said that in July 2000 he was called by
Reed's firm, Century Strategies, alerting him that he would be receiving a
package. When it came, it contained a check payable to Vanderwall's group for
$150,000 from Americans for Tax Reform, signed by Norquist. Vanderwall said he
followed the instructions from Reed's firm -- depositing the money and then
writing a check to Reed's firm for an identical amount.
"I was operating as a shell," Vanderwall said, adding that he was never told
how the money was spent. He said: "I regret having had anything to do with
it."
Abramoff had previously paid Reed's consulting firms to whip up Christian
opposition to Indian casinos and a proposed Alabama state lottery that would
compete with the gambling business of Abramoff's tribal clients, sometimes
using Norquist's foundation as a pass-through, a Senate investigation has
found.
A spokeswoman for Reed said Century Strategies had no business relationship
with eLottery. She said Reed did anti-gambling work for Abramoff but was
assured by Abramoff's firm "that our activities would not be funded by revenues
derived from gambling activities."
Norquist declined to be interviewed. His spokesman did not answer questions
about the movement of funds.
Another check issued in 2000 by eLottery at Abramoff's direction wound up
helping to fund the Scotland golfing trip attended by Rudy and DeLay. On May
25, 2000, as the trip got underway, the company sent $25,000 to the National
Center for Public Policy Research, where Abramoff was a board member at the
time. Along with money from another Abramoff client, that payment covered most
of the Scotland travel costs, according to records and interviews.
DeLay has said that he thought the National Center sponsored and paid for
the trip.
A few weeks after the golfing trip, Abramoff took Rudy to the U.S. Open in
Pebble Beach, Calif. They traveled aboard a corporate jet belonging to SunCruz
Casinos, a Florida cruise line Abramoff was negotiating to buy, according to a
participant who spoke on the condition of anonymity because of the ongoing
investigation. Rudy did not report this trip in his House travel records.
Abramoff listed Rudy as a financial reference that summer in the SunCruz
purchase. That transaction ultimately led to the indictment two months ago of
Abramoff and a business partner on charges that they had forged a $23 million
wire transfer.
Working the Bill
In early June 2000, DeLay had not yet taken a position on the Internet
gambling ban. But his aide, Rudy, was already providing advice to Abramoff
about how to kill it.
Five days after Rudy and DeLay got back from the Scotland trip, Rudy sent an
emergency message to Abramoff from a wireless device.
"911 gaming," Rudy typed on June 8.
He followed up with a suggestion that Abramoff's team get a conservative
House caucus to seek a meeting with the chamber's top leaders, Speaker J.
Dennis Hastert (R-Ill.) and Majority Leader Richard K. Armey (R-Tex.) -- a key
supporter of the bill. Abramoff forwarded the idea to his team members.
"Message from Tony Rudy. Don't share it please. However we should take his
advice."
Sheldon was also hard at work, holding news conferences and buttonholing
House conservatives to argue against the bill. On July 10, he called Abramoff's
group saying he had run into resistance from the staff of an influential member
who still favored the bill.
"Lou just called," team member Shawn Vasell told colleagues in an e-mail.
"We need to get together and draft a response for Lou." Kevin Ring, Vasell's
associate, responded: "This is a disaster."
Abramoff weighed in minutes later, saying he would get Reed to ramp up
efforts. "I just chatted with Ralph. We are going to have to go on the air
nationally on radio. We must get the conservatives back on this or we are
doomed," he told the team.
Abramoff got another strategy e-mail the next morning from Rudy. Rudy was on
DeLay's staff but wrote "we" as though he belonged to Abramoff's team. "I think
we should get weyrich to get like 10 groups to sign a letter to denny and armey
on gaming bill," Rudy wrote, referring to Free Congress Foundation Chairman
Paul M. Weyrich and the House leaders.
Sheldon got a private meeting with DeLay on July 13. "I told him I strongly
opposed the bill," Sheldon told Congressional Quarterly at the time.
A former DeLay staff member who spoke on the condition of anonymity said,
"Lou was a credible face" because Sheldon's religious credentials carried some
weight with conservative voters.
DeLay then told House Republican leaders that he was prepared to go against
the anti-gambling bill.
The Bush Forgery
Still, the Abramoff team was worried about the vote. So the eLottery forces
pressed the argument that the Internet bill was an unfair infringement of the
right of individual states to sell lottery tickets online. Amid the frenzied
lobbying, a potentially influential letter making that case began circulating
on Capitol Hill. It was purportedly signed by Jeb Bush.
"While I am no fan of gambling, I see this bill as a violation of states'
rights and I am looking to prevent this encroachment," the letter said.
A surprised Hill staffer called the Florida governor's office, and the
letter was exposed as a forgery.
Months later, a little-noted investigation by Florida authorities resulted
in a confession from a Tampa man hired by a division of Shandwick Worldwide, a
public affairs company. Shandwick was working on the eLottery account with
Abramoff's team. The Florida man, Matthew Blair, told authorities in a plea
bargain agreement that he was hired to get letters opposing the bill from the
governor and others. He said he created the forged letter on his own after he
was unable to obtain one from Bush's office.
Brian Berger, then a Shandwick official, said his firm had been hired to
produce the letters by Abramoff associate Michael Scanlon, a former DeLay press
aide. Berger said in a recent interview that although he and Scanlon knew
Blair, they did not sanction the forgery. "Essentially, we had a bad
operative," Berger said.
But the letter still had an impact. It fed the confusion about the bill in
the days before the floor vote. Goodlatte, the sponsor, had more than enough
votes for his carefully crafted compromise. Yet he became worried that
amendments might be introduced during the debate that could kill the bill.
One way to avoid a floor fight is to place a bill on the suspension
calendar, which is supposed to be for non-controversial legislation; it
suspends the usual rules, banning amendments and limiting debate. But doing so
would require a two-thirds majority for passage.
Goodlatte agreed to the suspension calendar approach because he thought he
could get the two-thirds. "We were told [by House leaders] to bring it up on
the suspension calendar so you won't have to deal with all these amendments,"
said a member of Goodlatte's staff who spoke on the condition of anonymity.
That opening was exploited by the Abramoff team with Rudy's help -- fewer
votes would be needed to stop the bill.
On July 17, the House debated for about 40 minutes. Rumors continued to fly
about the Bush letter. Some members remained confused about the bill's
contents. About 30 did not vote. "There was a lot of misinformation," said a
congressional staff member who worked on the bill.
Still, Goodlatte had reason to be optimistic because nine out of 10 bills on
the suspension calendar pass.
But Abramoff's efforts had eroded just enough votes. The roll call -- 245 in
favor, 159 against -- left Goodlatte 25 members short. The bill failed.
'All Systems Go'
The eLottery team was euphoric. Abramoff lobbyist Patrick Pizzella, who was
in the Capitol to watch the vote, wrote in an e-mail to colleagues the next day
that he saw Sheldon celebrating the victory, too. "There was lucky Louie out
front hi-fiving with some lobbyists," said Pizzella, who the following year was
named an assistant secretary of labor. Others partied across from the Capitol
at the restaurant Tortilla Coast.
Supporters of the Internet gambling ban, though, were outraged. They vowed
to resurrect it, perhaps as part of an appropriations bill.
The Christian Coalition issued an "action alert." Dobson took to the
airwaves, saying, "I'm just sick about what the Republican leadership is doing
with regard to gambling." He urged listeners to contact DeLay and other House
leaders to revive the measure.
Abramoff's team realized there was no way to win enough support for a simple
majority because they were down more than two dozen votes. Instead, they had to
persuade the leadership to keep the bill off the House floor, despite intense
pressure from Goodlatte and another backer, Rep. W.J. "Billy" Tauzin (R-La.)
.
On July 21, DeLay's legislative director, Kathryn Lehman, e-mailed Rudy:
"Goodlatte and Tauzin asked Tom [DeLay] what they needed to do to get his vote,
and Tom said to talk to you!"
Rudy immediately forwarded the e-mail to Abramoff asking for help.
Documents show that Abramoff's strategy was to dispatch Sheldon to pressure
about 10 social conservatives in their home districts, accusing them of being
soft on gambling for supporting Goodlatte's bill. Abramoff's group hoped those
members would stir fears among House leaders that another vote on the gambling
bill could threaten those members and thus the GOP's thin 13-seat majority.
On Aug. 18, Abramoff faxed a message to eLottery's Daum ordering more money
for Reed's activities. "I have chatted with Ralph and we need to get the
funding moving on the effort in the 10 congressional districts," Abramoff
wrote. "Please get me a check as soon as possible for $150,000 made payable to
American Marketing Inc. This is the company Ralph is using."
ELottery issued the requested check to American Marketing on Aug. 24 and
delivered it to Abramoff at Preston Gates. Five days later, Abramoff e-mailed
Reed. The subject, "Internet Gambling: And so it continues." The message asked,
"Where are we? You got the check, no? Are things moving?"
Reed answered the next day: "1. Yes, they got it. 2. Yes, all systems
go."
Targeting 'Our Guys'
Weeks later, a political mailer from Sheldon's group landed like a small
bomb in the North Alabama district of Rep. Robert Aderholt.
The Republican was a member of the religious right's Values Action Team in
Congress, a champion of public displays of the Ten Commandments and a vigorous
gambling opponent. But now, in the midst of a tough reelection race, Aderholt
was accused of being soft on gambling.
"Congressman Robert Aderholt voted with them in support of HR #3125 with the
law the gamblers want on horse and dog racing," said Sheldon's mailer. Sheldon
urged voters to call Aderholt's Washington office "and ask him to vote NO this
time." Aderholt's opponent quickly incorporated Sheldon's attack in an ad of
his own.
The bulk rate stamp on the mailing said it was paid for by American
Marketing. Records show that the company is run by Robert Randolph, the
president of Reed's direct-marketing subsidiary. A spokeswoman for Reed said
that American Marketing is "a different company" and that she could not respond
to questions about it.
Sheldon's fliers also targeted Rep. J.C. Watts of Oklahoma, then the House
GOP deputy whip, and vulnerable incumbents, including Rep. James E. Rogan of
California, one of the managers of the impeachment of President Bill Clinton,
and Rep. Robin Hayes of North Carolina.
Angry House members targeted by Sheldon complained to the leadership.
"Certainly our displeasure was relayed on up the chain, so to speak," said
Andrew Duke, the chief of staff for Hayes.
Abramoff's willingness to jeopardize Republican House seats startled his
lobbying team, some of whom had come from DeLay's office. "Once we started
talking about taking out our guys, I got worried," said a former associate of
Abramoff's who spoke on the condition of anonymity.
The same former Preston Gates lobbyist said Rudy played a key role in
getting House leaders to pay attention to the plight of members under
attack.
"Tony would say to members, 'Oh, you're getting phone calls on this? I
better go tell the whip.' Lou Sheldon sending a letter is not going to do
anything unless you have somebody on the inside. Tony exaggerated to leadership
how backing the bill could hurt those members," the former Abramoff associate
said.
The outrage prompted Sheldon to back off in some of the races. In Aderholt's
district, he issued a letter praising the congressman and claiming that his
previous mailer had been mistakenly distributed. In Rogan's district, he
stopped pressuring the incumbent and, instead, attacked his challenger as "a
champion of the homosexual agenda."
Sheldon said in an interview this week that he recalled little about his
efforts against the bill in 2000. He said he did not remember receiving a
$25,000 check from eLottery, but added that it is possible that his
organization did receive it. He said he remembered some money coming in to pay
for fliers he had printed and mailed to congressional districts to persuade
members to oppose the bill.
"I wasn't aware the money was coming from them [eLottery]," Sheldon said. "I
don't think I ever saw the check. It came in, and we paid the bill for some of
the printing."
Sheldon also said he had no idea that Abramoff was lobbying against the bill
or that he was working for eLottery.
"This is all tied to Jack?" Sheldon said. "I'm shocked out of my socks."
Chilling Effect
Rudy, who had known Abramoff for years, went to work for Abramoff when the
lobbyist switched law firms, to Greenberg Traurig LLP, in January 2001.
Rudy's wife, Lisa, was also drawn into Abramoff's orbit. She was paid fees
by Toward Tradition, the Seattle-based Orthodox Jewish foundation that often
allies with the Christian right on social issues. The foundation is headed by
longtime Abramoff friend Rabbi Daniel Lapin and the lobbyist served as chairman
of the board.
Toward Tradition was issued a $25,000 check dated Aug. 24, 2000, by
eLottery. A copy of the check was obtained by The Post. Daum, the former
eLottery official, said he could not remember the check but said all funds
Abramoff directed him to spend were intended to defeat the Internet gambling
bill.
Lapin said in an interview that he could not remember a check from eLottery
but that the company could have made donations to his foundation. He said that
any such donation would have been separate from his foundation's hiring of
Liberty Consulting, a political firm founded and operated by Lisa Rudy.
"Lisa Rudy worked for us for six months -- six to nine months -- to organize
groundwork for a conference," Lapin said. He said she was paid more than
$25,000 but was unsure exactly how and when Lisa Rudy was hired. Lapin said her
work could have been for an interfaith conference held in Washington in
mid-September 2000. That conference, which opened a few weeks after the
eLottery check was sent to Toward Tradition, featured such speakers as DeLay,
Sheldon and Norquist.
Rudy declined to comment on the Toward Tradition contract and said that his
wife was not available for a comment.
A month after the interfaith conference, the gambling bill's sponsors
agitated to get House leaders to let them attach the measure to an
end-of-the-year spending bill.
But Sheldon's campaign in conservative districts had the desired chilling
effect on GOP leaders. That became clear on Oct. 24, when House Republicans met
to discuss their year-end strategy.
What happened at the meeting was relayed to Abramoff by a former associate,
David H. Safavian, who was then a lobbyist for a coalition of online gambling
companies and who this month was indicted for allegedly lying to federal
investigators in the Abramoff probe.
DeLay, Safavian wrote in an e-mail, "spoke up and noted that the bill could
cost as many as four House seats. At that point, there was silence. Not even
Rep. Dick Armey (R-Texas) -- our previous opponent -- said a word."
When Congress prepared to adjourn in 2000 without revisiting the gambling
bill, Safavian was ecstatic. He sent his clients an e-mail, which was posted on
the Web site of the Fantasy Sports Trade Association.
"Relax a bit," Safavian wrote. "Policy beat politics once again. (Maybe the
American system isn't really that bad.) The good guys won."
Researchers Alice Crites and Julie Tate contributed to this report.
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