Statewide: Long arm of the law

 In 2015-04
by Jane Duckwall

When Google Inc. convened a reception in Charlotte in late January to discuss plans for broadband service in North Carolina, the tech giant relied on one of the state’s largest law firms to help attract business and political leaders to the event, which was closed to the public and press. The work by Moore & Van Allen PLLC, which involved wining and dining at Charlotte’s The Liberty restaurant, showed how the breadth of legal services offered by bigger firms now extends far beyond briefs, litigation and negotiations. One thing that hasn’t changed is the preference of lawyers and lobbyists for discretion on behalf of their clients.  Walter Price, co-head of Moore & Van Allen Public Affairs, wouldn’t discuss the Google reception, which came two and a half months after firm member Robert Rust filed Google Fiber North Carolina LLC’s incorporation with the state. “We find an advantage in providing not only government relations, but also communications and event-management services to meet our clients’ needs,” Price said in a statement.

Moore & Van Allen isn’t alone in broadening its base. Many of North Carolina’s major firms are responding to changing legal-industry economics and increased demand for lobbying, now a growth business because more companies, trade groups and nonprofits want their voices heard in the capital, says Linda Millsaps, executive director of the Raleigh-based nonpartisan N.C. Center for Public Policy Research. Money spent on lobbying doubled to $47.4 million between 2009 and 2013, according to statistics compiled by N.C. Secretary of State Elaine Marshall. That’s just a snippet of total corporate spending on lobbying, and it may not show the bigger picture of how much companies or institutions pay law firms for federal or multistate lobbying, according to Bernard Burk, an assistant professor at the UNC School of Law in Chapel Hill who has studied law-firm finances.

For many firms, it’s more than just lobbying. Changing technologies and reduced profit margins in standard legal work are prompting firms to develop other affiliated businesses, including business consulting and real- estate appraisals, Burk says. Clients are pickier about what they’re willing to pay for, often seeking to negotiate rates or set up alternative-fee arrangements, a trend that gained momentum during the 2007-09 recession. “The last seven years or so have been exceptionally hard on the profession,” he says. Margins for lobbying and other nontraditional services “can be higher than those available for ordinary legal work. Yet some of it is similar or related to work that lawyers have always done and are used to doing, so they understand it to some degree and have existing clients that may need it.”

Lobbying by licensed lawyers in North Carolina dates back to at least the 1930s, when a Raleigh firm started by former U.S. Sen. Willis Smith first represented the N.C. Medical Society, says Dave Horne, head of a six-member government relations team at what’s now the Smith Anderson law firm. His colleague Dana Simpson was named the state’s most influential lobbyist in 2012 by the public policy center, which publishes rankings every two years based on surveys of state lawmakers, lobbyists and media representatives. In 2014, Simpson ranked second behind former House Speaker Harold Brubaker, a Randolph County Republican who resigned in 2012 after 35 years in the General Assembly and opened a lobbying firm.

While corporations and others are investing more in advocacy, the money is going to a smaller pool of people. The state had 653 registered lobbyists as of Feb. 10, a third fewer than in  2009, state records show. In the public policy center rankings, the eight top-ranked lobbyists who were working for more than one client represented an average of 16 clients each. In 2013, Harry Kaplan, a partner at McGuireWoods LLP, represented more than 40 principals, the term for the business or group paying the lobbying bill, and ranked fifth on the power list. Among his clients are Parents for Educational Freedom in North Carolina Inc., which promotes state funding for private schools, and Koch Companies Public Sector LLC, a lobbying arm of the Wichita, Kan.-based conglomerate owned by brothers Charles and David Koch. Nationwide Mutual Insurance Co., which ranks among the state’s largest auto insurers, was the only company that retained each of the top-three ranked lobbyists: Brubaker, Simpson and Tom Fetzer, a Republican who was Raleigh’s mayor from 1993 to 1999.

Kaplan was one of two lobbyists in Raleigh for McGuireWoods when the consulting office opened in February 2007. Now the firm employs nine because of greater demand from clients and increasing referrals from the firm’s 220 lawyers in North Carolina. While the lobbyists collaborate with the firm and share overhead costs, he says, they operate as a separate entity. That gives McGuireWoods more flexibility to work out payment arrangements with lobbyists who are not lawyers, such as Johnny Tillett, the ninth most influential lobbyist in 2014, and Jeff Barnhart, a former state representative who was 13th. “Lawyers have had very strict rules that they can’t be partners or share profits with anyone who isn’t a lawyer,” Burk says.

Knowing how much money is really spent for lobbying may be more art than science because details are hard to gather. Before 2011, Marshall’s office compiled an annual report showing how much each principal paid each lobbyist. It hasn’t produced a similar report since then because budget cuts reduced the number of people in the lobbying compliance division from nine to five, spokesman George Jeter says. Based on 2010 figures, the biggest spender was the North Carolina Hospital Association, which paid $791,000 to 11 lobbyists. The lobbyist earning the most compensation that year, based on the report, was John Bode, a Raleigh lawyer who received about $592,000 from 14 companies. Bode ranked 18th in the latest power rankings, his lowest rating in two decades.

More information about who is wielding clout in Raleigh should be made accessible to the public, Millsaps says. But it’s a tricky calculation, with some lobbyists billing by the hour and others negotiating flat sums for each session or pooling their compensation with other firm members. None of the lobbyists contacted for this story wanted to cite any of their clients.

And understanding who is getting paid is getting fuzzier. Should Marshall’s office resume its annual reports, it won’t show individual amounts paid to lobbyists. Effective in 2011, the rules were changed so that principals now report total compensation to all lobbyists cumulatively. Some lobbyists still disclose how much they receive from clients, but for those working with partners, it’s no longer required.

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