Trouble on the Right: Free Enterprise Fund Hits Turbulence

Roll Call ^ | July 24, 2006 | Kate Ackley

[D.C. Media Hor]

Capping a period of staff turnover and news reports about its connection with a lobbyist who pleaded guilty to bribery charges, the conservative Free Enterprise Fund has lost its public relations firm.

The Herald Group, a year-old firm doing PR work on the fund's legal challenge to the Sarbanes-Oxley corporate governance law, has resigned.

Matt Well, a partner with the Herald Group, said his firm "released them as a client."

"They're going through some transitions at the Free Enterprise Fund, and we made a decision that we had a limited amount of resources and wanted to put those resources to better use for other clients," Well said.

The departure of the Herald Group underscores a recent period of turbulence for the fund, which was founded in early 2005 by conservative activist Stephen Moore after he was ousted from the Club for Growth. Moore subsequently left to join The Wall Street Journal editorial page.

Former Executive Director O'Brien Murray left and recently was replaced by Jim Terry, a one-time chief of staff to Rep. John Campbell (R-Calif.). Others who have left include the fund's Policy Director Phil Kerpen; Peter Roff, former political director and vice president of the political action committee; and former Chief Economist Larry Hunter.

The group recently was linked with lobbyist Tony Rudy, who pleaded guilty earlier this year to involvement in a Congressional bribery scheme. Rudy had been a top aide to then-Rep. Tom DeLay (R-Texas) and later worked at the Alexander Strategy Group, which has since disbanded due to the scandal.

Rudy wrote an eight-page strategy memo for the fund's chairman, Mallory Factor, in early June. That memo was first disclosed by The Wall Street Journal.

However, sources familiar with the fund, who would only speak on condition of anonymity, said the ties between Rudy and the group's chairman are deeper than Factor previously had indicated.

In an interview in late June with Roll Call, Factor said that he and the fund had never, at any time, considered hiring Rudy for a position or as a consultant to the group.

But these sources said Rudy spent part of June 8 at the group's offices in meetings and working on a computer.

At a subsequent staff meeting, which sources say Rudy did not attend, the group's senior fellow James Pinkerton discussed the possible hiring of Rudy and told staffers that the fund could, if it retained Rudy, get a seasoned consultant for a discounted rate.

After backlash from the staff about having an association with Rudy, Factor assured his colleagues there would be no deal and no working with Rudy.

Pinkerton did not return a call seeking comment.

Todd Schorle, a spokesman for the Free Enterprise Fund, said Factor was in the process of closing his New York office and moving his residence to South Carolina, after selling his New York home.

But Schorle said he had spoken with Factor recently and that Factor confirmed that he had a meeting with Rudy in the fund's offices.

"I don't know the exact date," Schorle said. "Mallory said that he was willing to look at ideas but that there were no plans to use Tony Rudy or pay Tony Rudy, and that he hasn't been paid."

As for the Herald Group, Schorle said he had not seen the firm's resignation letter. "They sent that to Mallory," he said.

Schorle said the recent departures were unrelated, and added that the fund remains focused on its legal challenge to the Sarbanes-Oxley law and on fighting the estate tax, also known as "the death tax."

"We have raised a couple million dollars on the death tax," Schorle said. "We are just wanting to make sure we're slowing down and doing the right things."