10/17/2005

Abramoff Used DeLay Aide, Attacks On Allies to Defeat Anti-Gambling Bill

How a Lobbyist Stacked the Deck
Abramoff Used DeLay Aide, Attacks On Allies to Defeat Anti-Gambling Bill

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.

Abramoff's plan: argue that the legislation and its exemptions would actually expand legalized gambling.
Check in the Mail

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.

How a Lobbyist Stacked the Deck

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