Hedge Funds, K Street, and the Ugly Underbelly of the Democratic Party

Like all good Democrats, hedge fund titan Bill Ackman is just looking out for the little guy (AP)

In case you missed it, Senate Democrats staged an all-night talkfest on Monday to promote higher taxes and increased government regulation to address the scientific theory known as "climate change." Hopefully you did miss it, because most well adjusted people have better things to do than stay up all night watching a bunch of senior citizens talk about solar panels and wind turbines.

At least one person was paying close attention: liberal billionaire and reluctant democracy advocate Tom Steyer, who has pledged to spend $100 million backing Democrats who support aggressive government action to reduce carbon emissions. Democratic senators want Steyer’s money, they just don’t want anyone to think their stance on "climate change" is based on anything other than a genuine concern for Gaia. (You can tell how much they really care about the issue by the fact that, since taking the Senate in 2006, Democrats haven’t brought a single climate change bill to the floor for a vote.)

In fact, there’s a lot that Democrats don’t want anyone to know about the way the Democratic Party operates. Unfortunately for them, a number of these unsavory traits were exposed in a recent New York Times report on activist hedge fund manager Bill Ackman. It paints a riveting portrait of the modern Democratic Party as a political cesspool of Wall Street titans, moneyed lobbyists, and racial grievance-mongers.

As usual, it’s worth reading the entire thing. But to summarize, the article details the extraordinary means by which which Ackman, whose firm holds a $1 billion short position in the nutritional supplement company Herbalife, has sought to influence the political system at every level in order to increase the likelihood that Herbalife will fail, an outcome that would yield enormous profits for his firm.

For example, Ackman successfully lobbied two Democratic lawmakers—Rep. Linda Sánchez (Calif.) and Sen. Ed Markey (Mass.)—to write letters to the Federal Trade Commission and Securities and Exchange Commission urging regulators to investigate Herbalife, a company that some have accused of operating like a Ponzi scheme. Herbalife’s stock lost more than 10 percent of its value in late January on news of Markey’s letter.

But that’s barely the tip of the iceberg. Ackman has also lobbied a number of local and state politicians to join his cause. He has organized protests and letter-writing campaigns in several states, and paid a number of civil rights organizations "to collect the names of people who claimed they were victimized by Herbalife in order to send the leads to regulators."

That’s on top of Ackman’s more traditional lobbying efforts via K Street, where he has enlisted the services of a former Democratic Congressman, several former aides to President Obama and President Clinton, as well as former aides to Markey and Sánchez (as luck would have it). Unmentioned in the Times story is the fact that Ackman has donated more than $350,000 to Democratic candidates and committees since 1996, a figure that dwarfs his contributions to the GOP.

Here’s how the New York Times assessed the situation:

Mr. Ackman’s efforts illustrate how Washington is increasingly becoming a battleground of Wall Street’s financial titans, whose interest in influencing public policy is driven primarily by a desire for profit—part of an expanding practice in the nation’s capital, with corporations, law firms and lobbying practices establishing political intelligence units to gather news they can trade on.

That reads like a paranoid liberal’s conspiracy theory of how rich Republicans secretly control the country. Except the key players in this saga are almost exclusively Democrats.

One aspect of Ackman’s lobbying is particularly fascinating, or nauseating, depending on how you look at it. His primary strategy appears to consist of soliciting the outrage of various Hispanic and African-American advocacy groups in order to pressure government watchdogs to investigate Herbalife. He has hired the Dewey Square Group, a firm founded by former Democratic aides and known for its expertise in "grass-roots advocacy," to do just that.

Ackman has also funneled more than $100,000 in donations to these advocacy groups, and then coordinated with them in the lobbying of officials at the local and state level by organizing news conferences and letter-writing campaigns. Groups in several states sent nearly identical letters—drafted by Ackman’s team of lobbyists—to their respective attorneys general demanding an investigation into Herbalife, which they accused of victimizing their respective communities with its Ponzi scheme tactics. Some of these groups don’t even recall sending the letters, and when pressed by state officials to produce actual victims, were unable to do so.

Ackman enlisted the services Minyon Moore, a former senior Clinton aide, to host a meeting at a prominent black church in South Central Los Angeles, where she gave a presentation about Herbalife’s "deceptive sales techniques," according to the Times. Ackman’s team persuaded dozens of prominent Hispanic and black community leaders to send letter to state and federal officials, and organized a protest outside a Herbalife conference in Los Angeles.

One longtime activist told the Times he had no idea Moore was working for Ackman, and now felt as though he had been "an instrument in some billionaire’s investment campaign." (In related news, Moore is alleged to have sought and secured more than $600,000 in funding for an illegal shadow campaign in support of Hillary Clinton’s 2008 presidential bid, according to recently released court documents.)

At this point, you might be thinking: How can this be a legitimate example of Democrats behaving sketchily if Senate Majority Leader Harry Reid (D., Nev.) isn’t connected to it in some way? Don’t worry, he is! A former aide of Reid’s who runs a consulting firm in Nevada helped rally Hispanic groups in the state to Ackman’s cause.

Ackman all but admits that his primary goal is to turn a profit for his firm, but even if you accept the notion that Herbalife is all a huge scam that prays on innocent minorities, Democrats still don't come out looking good. You see, plenty of Democrats are lining up (to get paid) on the other side of the issue. Herbalife has hired the Glover Park Group, founded by former Clinton aides, as well as the Podesta Group, a firm run by the brother of White House senior adviser John Podesta and that until recently was lobbying on behalf of ousted Ukrainian president Victor Yanukovich.

The Ackman exposé comes on the heels of revelations (published on page A18 of the New York Times) that Obama’s personal advocacy group, Organizing for Action, had engaged in shady fundraising tactics, for instance, by encouraging a potential $100,000 donor to send his money to another left-wing group that does not disclose its donors. The donor in question happened to be a doctor seeking a presidential pardon for a 1991 conviction on Medicare fraud. Additionally, some liberals might have been surprised when the Center for American Progress finally published its list of donors late last year, revealing contributions from despised corporate villains such as Goldman Sachs, Northrop Grumman, and Walmart, among many others.

This is the same political movement that has decided to base its 2014 strategy around attacking libertarian billionaires Charles and David Koch. Harry Reid has called them "un-American" and accused them of "trying to buy America," while insisting that Tom Steyer is just "concerned about climate change," despite the millions he has invested in green energy companies. One imagines the majority leader would dismiss Ackman’s efforts as those of someone who is simply "concerned about Ponzi schemes." One also imagines that if a hospital accepted a $100 million donation from David Koch, liberals would take to the streets in protest. Oh wait, that actually happened.

Democrats go to great lengths to conceal the seedy political underbelly that lurks beneath their carefully maintained image as the party that "looks out for the little guy," and for good reason—it’s pretty damn ugly.