David Axelrod's Very Big Problem - Conflict of Interest? (Hugh Hewitt/Politico breaking news)

The allegations in this Bloomberg story --if true-- pose a huge problem for a senior advisor to the president, David Axelrod. This is the heart of the problem:

The problem is that Axelrod's former firm is currently receiving huge fees "from Healthy Economy Now, a coalition that includes the Washington-based Pharmaceutical Research & Manufacturers of America, known as PhRMA," as well as AARP, the SEIU and other big players in the health care debate.

If Axelrod has been negotiating any part of any deal involving any of these players which are funneling money to the firm that owes him money, or if he is advising the president on the deals with any of these groups, that's a conflict of interest. Laundering the money through a "coalition" doesn't remove the conflict much less the appearance of impropriety. The coalition is in effect partially funding David Axelrod's severance package though its members might have done so unknowingly. These forthcoming payments to Axelrod are much more significant than the sort of "retained ties" that Democrats blasted Dick Cheney for vis-a-vis Halliburton even though there was no high level negotiations between the vice president and his former company.

David Axelrod has some tough questions to answer, and according to Politico's Mike Allen, Politico's Ken Vogel will be publishing more on matters Axelrodian tomorrow. (Thetranscript of my interview with Allen will be posted here later tonight.) Vogel's story on Axelrod's son from a few days back casts doubt on the Bloomberg story's accuracy as Bloomberg has Axelrod's son still at Axelrod's old firm, but Vogel has him at The Huffington Post.

If it was Karl Rove in a similar set of circumstances, the blogs and some in MSM would already be demanding a special prosecutor. There are lots of questions for Mr. Axelrod, the first one being whether the Bloomberg story is accurate. if the answer is "yes," the second will be: "Have you lawyered up?"

Here is the Transcript from Hugh Hewitt:

HH: If you listened last hour, you heard me talking about a story I think could be very, very huge, and it concerns senior advisor to President Obama, David Axelrod. He’s assistant to the President. He’s sort of the mastermind of the Obama campaign strategy, and he is owed $2 million dollars by his former firm, a firm that is now receiving money from a coalition called the Healthy Economy Now Coalition, that includes people like Big PhRMA, the AARP, SEIU, and they’re funneling money, they’re spending money on his former firm that owed him money. And to discuss this and other aspects of Mr. Axelrod’s current situation is Ken Vogel. Ken Vogel is Mike Allen’s colleague at Politico, and Mike tipped us that he’s working on a story. Ken Vogel, welcome to the Hugh Hewitt Show. Good to have you.

KV: Hey, great to be with you, Hugh.

HH: What’s in tomorrow’s Politico?

KV: Well, we’re going to look a little bit at this dynamic wherein David Axelrod’s former firm, which is still on the hook to him for $2 million dollars, is doing business that is running ad campaigns that directly help the White House initiative on health care, and further, has quite a bit of overlap because one of the primary funders of this coalition, Healthy Economy Now, is PhRMA, which if you’ll recall, struck a deal with the White House to back the White House health care reform push in exchange for the White House agreeing that it would sort of limit the liability of the drug industry to $80 billion dollars over ten years. So it was quite a coup for PhRMA, it was quite a coup for the White House to get PhRMA on board. And it’s turning out to be quite a coup for Axelrod’s former firm, AKPD Message and Media, because they are probably getting a cut of a lot of this ad spending. And, we’ll report in tomorrow’s Politico, it’s not just this Healthy Economy Now group, it’s a newer offshoot of it as well, Americans For Stable Quality Care, which is dropping another $12 million dollar ad campaign that AKPD Media will be one of the primary producers of.

HH: Now Ken Vogel, there are a lot of specialists in Washington, D.C. on the ethics laws, for example, Stan Brand, used to be with Lowell and Brand. I don’t know if Stan’s on his own now, but Abbey Lowell, they’re all around, the guys who, this is what they do. Did you talk to any of them about the conflict here? Because what I just posted at Hughhewitt.com reads this way. If, it’s a big if, Axelrod has been negotiating any part of any deal involving any of these players which are funneling money to the firm that owes him money, or if he is advising the President on the deals with any of these groups, that is a conflict of interest. Laundering the money through a coalition doesn’t remove the conflict, much less the appearance of impropriety. The coalition is in effect partially funding David Axelrod’s severance package, though its members might have done so unknowingly. Did you get any reactions from the ethics bar in D.C. as to what he’s been doing?

KV: I did talk a bit with some folks at the Sunlight Foundation, which is a group that pushes for greater disclosure as well as tougher ethics rules in government, and they said you know, basically it is a perception issue. David Axelrod is a smart guy. David Axelrod is not going to lean on PhRMA or anyone else to do business with any firm, least of all his former firm just to get them on board with a White House initiative. However, it does sort of does not pass the smell test, that there is this group that fresh off negotiating a deal with the White House, that David Axelrod is intimately involved in, at least the strategy as a whole on the health care initiative, that this group would join a coalition that then goes and spends millions of dollars on ads that David Axelrod’s former firm gets a cut of. Now there are a couple things to keep in mind here. Number one is Axelrod is on, or rather this firm, AKPD, is on the hook no matter whether they make money or not, so they need to make a good bit of change to make it work for them and the partners who bought out David Axelrod, to be able to pay him and still make a profit. This is clearly a big contract, this being the Healthy Economy Now contract as well as the Americans…the other initiative that I talked about, and it helps them. The other thing to remember is David Axelrod’s son is working for AKPD Media, so it’s not just…

HH: I thought you had reported that he went to the Huffington Post.

KV: That’s a different son. That’s Ethan Axelrod, a recent college graduate. This is Michael Axelrod.

HH: A-ha. Okay, I was doubting the Bloomberg story that I read about this, because I thought they’d screwed up the son detail. But now I’ll have to go post that they actually had it right, because I read your stuff on this. But let’s focus, Ken, obviously if Big PhRMA had given a check to David Axelrod of $2 million dollars, even if Axelrod hadn’t done anything for them, he’d be in big, big trouble, right?

KV: Oh, absolutely. And I talked with the White House about this, and I previously talked with some lawyers within the White House Counsel’s Office about this, and they said that there is this very strict ethics policy that President Obama signed into law on his first full day into office that says that for two years after joining the administration, that new officials are prohibited from working on any matter that affects any specific client of their previous employer or previous business partners. And they say hey, Healthy Economy Now was not a client of AKPD Message & Media when David Axelrod was there.

HH: Yeah, but that’s not even, it’s not the President’s policy, it’s the Ethics In Government Act. I used to be in the White House Counsel’s Office. I counseled nominees on how they have to sever all relations. In fact, I went back and just pulled up a story from early in the Bush years when Frank Lautenberg was out blasting Dick Cheney for his “retained ties” to Halliburton, which were much flimsier than this. You know, David Axelrod has a retained tie to this firm of $2 million big ones, and he’s negotiating with Big PhRMA, which is sending money to him? Didn’t anyone at the White House say that’s a bad thing?

KV: Well, that’s right. I mean, the White House is very attuned to these issues, so it is a little surprising to see this one crop up in such an obvious way. The other thing to consider here, which is why I called the Sunlight Foundation, which has the expertise both in the ethics laws and in the disclosure laws, is that because this spending that’s occurring, this issue advocacy across the board on the health care issue, but for our purposes here on the PhRMA, Healthy Economy Now, theirs spending through AKPD is not campaign spending. It does not have to be disclosed. So the Associated Press, to their credit, managed to find out earlier this month and report that this particular ad campaign was going through AKPD Media, and they disclosed it. But otherwise, there would be no obligation on either PhRMA or Healthy Economy Now to report these payments to anyone. So it kind of gets into the disclosure thing as well. And if you remember when President Obama took office, he not only pledged to have the most ethical administration ever, he also pledged that his administration would be the most transparent ever. So it kind of poses risks in two very distinct areas to the Obama administration.

HH: Big risks.

KV: And then additionally, if I could throw in a third risk, it sort of keeps in the news this deal that the Obama administration struck with, or blessed, in which Big PhRMA negotiated with, according to the PhRMA spokesman with whom I spoke, negotiated with the Senate Finance Committee to limit Big PhRMA’s costs, or its potential losses, if you will, to $80 billion dollars. And liberal Democrats, particularly in the House, they don’t like that. Big PhRMA is still sort of an enemy to them. They see it as a Republican interest group, even as it’s come on board with the White House initiative. And so it keeps this idea out there that hey, we are losing, we the liberal Democrats in the House, are sort of losing some of the things that we really wanted to have in this health care plan.

HH: Let me ask you, Ken, though, did you get a chance to talk to David Axelrod for the story?

KV: I did not speak with him. I did reach out to both the White House and to Axelrod. You know, again, he’s a really smart guy. He’s really sensitive to perception, so you know, I have to think that this is something that we will see them address further in some way, shape or form.

HH: Well, he is a smart guy, and I think he’s a pretty good guy, too, from what I’ve read about him. But is the sort of thing that rookies in D.C. get into trouble with, because the ethics laws are so absolutely strict on this sort of thing. If you talk to him, ask him if he’s lawyered up. Ask him if he’s already had a lawyer look at this. Did you have a chance to ask anyone in the White House press office about this thing yet?

KV: Well, all this stuff goes through the White House Counsel’s Office, which looks at the personal financial disclosure statements that these guys file.

HH: Yup.

KV: …including the one that Axelrod filed, which showed this severance agreement. And when the severance agreement, when his disclosure statement came out, it revealed this severance agreement, and I think a lot of folks kind of perked up and it…

HH: You know what? What’s very interesting, this is another strike against Craig, the White House Counsel, because this is the sort of thing we used to make sure never happened. I mean, he wouldn’t have been allowed near. In the Reagan administration, he would not have been allowed near these negotiations if he had a severance package with people funding the other side.

KV: And one of the parallels I heard, funny you mention that Dick Cheney came in for a bit of scrutiny for his ties to Halliburton and to energy companies when he did the energy task force. And the Bush administration is, Karl Rove…Karl Rove sold his direct mail firm, which you know, is not exactly analogous to what the media firm that David Axelrod has, but nonetheless, it was a firm that did a lot of political business, a lot of corporate business. He sold it in 1999, so that was well before the campaign was really in high gear, let alone when he was on the verge of entering the administration.

HH: Yeah, excellent.

KV: Axelrod did not sell his interest in AKPD, or I should mention, a separate corporate public relations firm that also does business that overlaps with some of the administration’s initiatives.

HH: Quick exit question, Ken. Did Axelrod refuse to talk to you?

KV: Axelrod I reached out to, I had not heard back from him. And in all fairness, he’s a busy guy, he has responded to my e-mails in the past. So we’ll see if he does in this case.

HH: He hasn’t responded to your e-mail today yet, though?

KV: Correct.

HH: Ken Vogel, I can’t wait to read the story tomorrow. Thanks for joining me on the Hugh Hewitt Show. Big stuff here. Big, smelly stuff here.

End of interview.

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