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EXCLUSIVE: Sen. Hatch’s secret drug firm links

- The Washington Times - Monday, March 2, 2009

EXCLUSIVE:

The pharmaceutical industry that long has benefited from Sen. Orrin G. Hatch's legislative efforts has directed large sums of money to a charity he helped found -- and still raises money for -- while also hiring the Republican lawmaker's son as a lobbyist.

Though Congress boasts that it is more transparent after passing new disclosure rules, Americans have had no way of knowing about the drugmakers' largesse to the charity, Utah Families Foundation. No way, that is, until a normally confidential tax filing was mistakenly released by the Internal Revenue Service to a nonprofit database last year.

The tax form, obtained by The Washington Times, shows that five pharmaceutical companies and the industry's main lobbying group wrote checks in 2007 to the Utah Families Foundation -- some as large as $40,000 -- that far exceed what they could give publicly to Mr. Hatch's campaigns.

RELATED STORY:Many legislators' charities toe fuzzy line

The donations, $172,500 in all, came at the same time that the Pharmaceutical Research and Manufacturers of America (PhRMA) was paying one of Mr. Hatch's sons, Scott, to be its lobbyist in Congress.

And if that weren't enough political intrigue, the tax-exempt charitable foundation, which the senator from Utah helped start in the 1990s and still vigorously supports, has been delinquent for nearly a decade in filing its required annual reports with Utah state officials, a review by The Times found.

The tale of the Utah Families Foundation provides fresh evidence that the campaign-finance limits and transparency reforms that President Obama demanded and that Congress enacted still leave avenues for interests to route large sums of money to lawmakers' favorite causes without disclosure.

"This could be more common than we know," said Melanie Sloan, a former federal prosecutor who now heads the political watchdog group Citizens for Responsibility and Ethics in Washington, which first spotted the errantly released tax form.

"When companies need a member of Congress and they've already donated to their campaigns, they can make very large contributions to members' foundations," she said. "It's another way to curry favor with a member of Congress."

Family ties

Under the law, companies lobbying Congress have to report donations to charities "established, financed, maintained or controlled" by a member of Congress. Mr. Hatch helped start the organization and serves as a host at its fundraisers, but he's not on its board of directors.

Mr. Hatch, one of the most influential lawmakers in Congress, is among several politicians in the past decade to found or help raise money for favored charitable organizations that could still fall outside federal disclosure requirements. Others include former President Bill Clinton, who is an officer of the private Clinton Family Foundation, and Sen. Ted Stevens, an Alaska Republican who was convicted of corruption charges.

Questions were raised when Hillary Rodham Clinton became a candidate for secretary of state and it was disclosed that the foundation had raised about a half-billion dollars since 1997, including tens of millions from foreign governments and other overseas sources.

In a statement to The Times, Mr. Hatch confirmed his role in raising money for the Utah Families Foundation and his son's lobbying for the very drug industry that enriched the charity. But he insisted there was no blurring of ethical lines.

"My son, Scott, does not lobby me or anyone in my office. He is a very moral and ethical person," Mr. Hatch said. "As for the Utah Families Foundations, my limited involvement consists mainly of attending their events. As with most service opportunities, I find even these small gestures are very gratifying ways to volunteer my time and give to those less fortunate in our community.

"Giving charitable contributions of time or money to good causes is something I believe every individual and organization should try to do," he said. "Organizations choosing to donate to the Utah Families Foundation are giving resources to help Utah's families in need from all corners of our state and that is very admirable."

Mr. Hatch has sought to distance himself from the foundation's day-to-day operations, with his staff noting that the charity is run by an independent board. However, Mr. Hatch serves as an "honorary host" for the charity's annual fundraising golf tournament, and he touted the charity on the Senate floor in June 2005.

The senator "does not benefit in any way" from the donations, and "there is an independent board who makes the decisions as to which charities receive donations and for what specific projects," Hatch spokeswoman Heather Barney said.

Scott Hatch also has denied any wrongdoing, steadfastly maintaining that he doesn't lobby his father, even when paid to lobby on legislation with which the senator is involved.

Hatch 'seal of approval'

The drugmakers said that they've been donating to the charity for years, well before the 2007 tax form mistakenly got released, and that they make no secret that Mr. Hatch's connection to the charity influenced their decision to support what they said was a worthwhile cause.

Any charitable cause backed by Mr. Hatch "automatically carries the gold seal of approval," said Ken Johnson, senior vice president at PhRMA, which began donating to the group in 2000.

"There's not a more honorable person than Senator Hatch," Mr. Johnson said, downplaying any suggestion of ties between the company's donations to the foundation and PhRMA's business in Congress.

Joe Kelley, vice president of government and public affairs at drug manufacturer Eli Lilly, which has been donating to the charity for about a decade, said the company gives to the Utah Families Foundation because of its help for abused women and other worthwhile causes.

"I personally believe that if someone has a profile and is in a position to help people out, then that's a positive thing," Mr. Kelley said.

The drugmakers' donations to Utah Families Foundation were part of the $1.1 million that the charity raised in 2007. About $726,000 of that was donated to community groups, hospitals, wellness centers, youth and family support groups, and food banks. The remaining $375,000 went for salaries and operating expenses, according to the IRS report.

Public mistake

The foundation's officers include prominent Utah political figures and Hatch supporters, such as former Govs. Norman Bangerter and Olene Walker, and former Republican Sen. Jake Garn, according to tax records.

Pharmaceutical and health-product companies already rank at the top of Mr. Hatch's political supporters, donating more than $1.25 million to his campaigns since 1998. Those donations are disclosed to the Federal Election Commission.

But as a tax-exempt 501(c)(3) group, the Utah Families Foundation doesn't have to release its list of donors, making the release of the 2007 tax form so rare.

In a Feb. 18, 2008, report to the IRS listing its 2007 revenue and expenses, the Utah foundation said Eli Lilly and Co. gave the charity $25,000; medical supply company Becton Dickerson, $25,000; Barr Pharmaceuticals, $30,000; AstraZeneca Pharm LP, $25,000; drug maker Sepracor, $27,500; and PhRMA, the major health-care lobbying group, $40,000.

The donor information had been available on Guidestar.org, a nonprofit organization that gets public tax filings from the IRS and charities and then posts the information online. However, the company removed the Utah foundation's donor information immediately after being contacted by The Times.

"The IRS is supposed to withhold that information," said Guidestar spokeswoman Suzanne Coffman. "It's an error. I'm assuming the error was with the IRS. It's a mistake we take seriously. It's a mistake that happens very, very rarely."

The IRS did not return messages concerning the Utah foundation.

The man in Congress

At the time of the PhRMA donation to the Utah charity, Scott Hatch was a named partner and registered lobbyist at Walker, Martin & Hatch LLC, a Washington lobbying firm that was paid $120,000 by PhRMA to lobby Congress on pending Food and Drug Administration (FDA) legislation.

PhRMA, which both donated to the charity and hired the senator's son, said it has never asked Scott Hatch to discuss any issues with his father.

"Clearly, Scott's a very bright guy," Mr. Johnson said. "He provides strategic advice."

Walker, Martin & Hatch was formed as a partnership in 2001. Jack Martin was a staff aide to Mr. Hatch in Utah for six years, and H. Laird Walker has been described as a close associate of the senator's. The Los Angeles Times quoted the elder Mr. Hatch in 2003 as saying that the firm was formed with his "personal encouragement" and that he saw no conflict of interest in championing issues that benefit his son's clients.

Neither Senate rules nor federal laws forbid relatives from lobbying members of Congress.

The elder Mr. Hatch was a member of the Senate Health, Education, Labor and Pensions Committee when the Walker, Martin & Hatch contract with PhRMA was signed. The committee oversees the FDA, among other agencies.

Walker, Martin& Hatch has been paid more than $1.5 million by pharmaceutical and medical companies since 2001, according to Senate lobbying records.

Since 1998, Mr. Hatch also has been a senior member of the Senate Judiciary Committee, where he plays a key role in influencing patent disputes, and the Senate Committee on Finance, whose jurisdiction includes health programs under the Social Security Act and health programs financed by a specific tax or trust fund.

He has been one of the biggest recipients of political funding from the nation's health industry and pharmaceutical giants. He often has been criticized for his close ties to the industry.

During a speech to the Generic Pharmaceutical Association in 2005, Mr. Hatch described himself "as one of your good friends in the Senate," urging those in attendance to "get on the Congress' radar screen," and adding, "I will do everything I can to help you." In addition:

• Mr. Hatch cast the only dissenting vote in the Senate in 2003 on an amendment that would reduce protections that the pharmaceutical companies used to block generic drugs from entering the market.

• The Center for Public Integrity (CPI), a nonprofit government watchdog organization, said that in 2006 Mr. Hatch took seven trips costing a total of $12,000 sponsored by Pfizer and GlaxoSmithKline, as well as two industry trade groups, the California Healthcare Institute and the Healthcare Leadership Council. At the time, he held $18,000 worth of stock in Pfizer and Novartis, the Swiss-based manufacturer of Ritalin, the drug that treats attention-deficit (hyperactivity) disorder.

• Mr. Hatch co-sponsored a Medicare bill while holding shares in Pfizer and Novartis, according to his 2003 financial disclosure forms. In statement at the time to CPI, Mr. Hatch defended the stock holdings, saying they represented a small percentage of his investment portfolio. He also characterized his travel as "legitimate activity under Senate rules," adding that he "likes to have open communication with industry leaders."

• After using a complimentary Gulfstream executive jet provided by drugmaker Schering-Plough Corp. for his long-shot presidential campaign in 2000, he drafted legislation extending the drug company's patent on the drug Claritin.

An 'oversight'

According to filings with the Utah Secretary of State's Office, the Utah Families Foundation has been delinquent for years in filing its required annual reports.

Guy Morris, the foundation's accountant, said the paperwork is being updated and called the failure to file "a very innocent situation" that likely happened when the organization switched addresses.

"It was just an oversight," he said. "They do a ton of good work. I wish all of the people I donate to were as efficient as Utah Families Foundation."

Fred Wertheimer, president of Democracy 21, a nonpartisan campaign finance watchdog group, said he doesn't doubt that charities run or founded by members of Congress often put their money to good uses. But he said the donations nonetheless can help provide special interest groups with important access to lawmakers.

"There are any number of ways in which individuals and interests looking to influence Congress can provide financial help to members," he said. "And contributing to a foundation is certainly one of those ways."