The greedy truth about media consultants
06-06-06 Seleccionado por: Ana Horillo
By Walter Shapiro
Think you know where your campaign dollars go? Think again, sucker. Political image-makers skim off percentages that would make Exxon execs envious -- and the public never knows about it.
Psst! You with your checkbook in one hand and a political fundraising letter in the other. Are you sure you're being shrewd instead of being screwed when you send your money to this particular campaign?
OK, you've studied the issues so intently that you can recite from memory the candidate's nine-part plan for graduated, phased "victory with honor" withdrawal from Iraq. And you've crunched enough polling data to create a black hole and can prove through regression analysis that your candidate can knock off the incumbent merely by picking up 11 percentage points among male voters over the age of 37 who watch the Cooking Channel.
But have you scrutinized the financial arrangements and consultant contracts of this campaign the way you would skeptically analyze the balance sheet of your favorite charity? Would you feel ripped off if you discovered that about 15 percent of everything you donate goes right into the pockets of the media-consulting firm?
What we are talking about is one of the biggest secrets in politics, right up there with debate briefing books and sealed divorce decrees. In this fate-of-the-nation political year when more than $1 billion will be given to Senate and House candidates, there is just one certainty about the outcome -- the true winners in November will be the leading media consultants in both parties.
For more than a quarter-century, media consultants have been paid not in fixed dollar terms, but as a percentage of the campaign's television buy. The more often a candidate goes on television, the more the media consultant makes, even though the actual cookie-cutter commercials may have all the originality of a Harvard undergraduate's coming-of-age novel. Small wonder that in virtually every free-spending political race in both parties, the campaign manager (who is paid a salary, which is publicly disclosed) and the pollster (who is usually compensated by a flat rate per poll) start gazing enviously at the media consultant as they conclude, "We're in the wrong business." Remember, we're not dealing with chump change here like FedEx charges or gassing up the campaign van. We're talking about an off-the-top rake-off of campaign funds that might make Exxon executives envious. As Leslie Kerman, a Democratic campaign lawyer and a leading behind-the-scenes crusader against the inflated fees paid to media firms, puts it, "These same consultants love to run ads about out-of-control compensation for CEOs, but they don't think about their own compensation."
Democrats have the reputation as the party of gold-plated consultants largely because of Bob Shrum, the sharp-elbowed and avaricious image-maker for Al Gore and John Kerry. But in this campaign year, at least, there do not appear to be major differences between the two parties in terms of the vigorish paid to media consultants. Interviews with both Democratic and Republican campaign managers, pollsters and national party officials all produced similar descriptions of the current fee structure for ad makers. Given the reluctance of virtually everyone in politics to talk on-the-record about this taboo topic, I sometimes felt as if I would have to resort to meeting my sources in underground parking garages at 2 in morning.
These days, in a typical hotly contested House race, the media consulting firm will get between 10 percent and 15 percent of the total television ad buy, full reimbursement of production costs, maybe a post-election "victory bonus" and sometimes a $3,000-a-month consulting fee. To convey a sense of how perplexing this all is (especially to the campaign managers who negotiate the contracts), the consultant's percentage fee is calculated based on the TV stations' posted ad rates (the inflated gross) rather than the actual charges (the net). If the prior sentence confuses you, just think Hollywood sleight-of-hand bookkeeping.
What does all this mean to you as a campaign donor? If a congressional candidate budgets, say, $1.5 million for television, less than $1.3 million will be spent on airtime and production costs. The rest (imagine your money with little wings on it flying out the window) goes directly into what might be called the image-maker's beach-house fund.
When the White House or control of Congress is at stake, a political campaign should be more than an income-transfer program from contributors to consultants. But, in a sense, that is precisely what happened during the John Kerry campaign. As outlined in Joe Klein's new book, "Politics Lost," Shrum and his firm ended up receiving between between 4.5 percent and roughly 6 percent of the money Kerry spent on TV ads from the end of the primaries until Election Day. While precise figures are unavailable, it is a conservative guess that Shrum and his partners made more than $6 million (plus reimbursement for production costs) from the effort to oust George W. Bush from the White House.
Do you know what it takes to raise $6 million in politics? Picture a political gala in the largest hotel ballroom in the country -- an event so crammed with tables that there is risk of a fire hazard, with everyone in the room giving the maximum legal contribution ($2,000 in 2004). Now imagine the outrage if everyone at that dinner had been told that their money was not going to elect John Kerry president, but to pay the fees of his media consulting firm.
In sharp contrast, the Democratic National Committee, which independently spent about $100 million on TV ads in 2004, insisted that its media firms work for a flat fee rather than a percentage of the ad buy. According to Kerman, the lawyer who negotiated the contracts with consultants Steve Murphy and David Axelrod, each agreed to work for $525,000. Another $700,000 went to a time-buying firm to arrange to put the ads on the air. Unlike the Kerry campaign, the DNC paid a rock-bottom 1.7 percent of the TV buy for consulting services and ad placement.
Part of the difference was because Terry McAuliffe, the ebullient fundraiser who then headed the DNC, understood what every extra dollar meant to an out-of-power party. "You had someone in there who knew how hard it was to raise the money," McAuliffe told me in an interview. "I had a fiduciary responsibility to spend that money well."
McAuliffe -- who called the fees charged by leading Democratic firms "a racket" -- underscored the Election Day implications of running a party for the benefit of consultants. As he put it, "In 2000, the Democratic Party spent millions of dollars on consulting fees to Shrum and Co. That year, Al Gore had to pull out of Ohio six weeks before the election because he was broke. And then Gore only lost Ohio by 2 percent." In short, less Shrum would have meant more Ohio.
Why are consultants' fees such a hush-hush arena of politics? Part of the explanation is that such financial data is only available by anecdote. While the Federal Election Commission requires campaigns to laboriously detail every contribution of $200 or more, the government is far more cavalier about expenditures. The FEC acts as if the only possible corruption comes from the getting rather than the spending.
As a result, all television costs are lumped together on a campaign's FEC report making it impossible to decipher how much money goes to the TV stations for airtime and how much is retained by the media consulting firms. Media consultants are understandably secretive about their own cushy deals as the reigning creative geniuses of politics. Campaign managers are skittish about airing the topic because they do not want to make enemies in this incestuous industry or antagonize the people they are depending on to come up with quick-response attack ads in late October. Winning candidates are understandably grateful to their own overpriced consultants, while losers fear coming across as embittered by defeat.
Political reporters (myself included) tend to shy away from this topic because, frankly, consultants tend to be our best sources. They are the people we turn to for the larger political perspective and a level of hired-gun honesty that is often unavailable from campaign staffers. It seems journalistically self-destructive to aggressively quiz these invaluable political insiders about their personal income. Not surprisingly, the only newspaper reporter in recent years who examined in depth the financial dark side of campaigns (the Washington Post's Susan Glasser in 2000) immediately left the political beat to report from Moscow.
To be sure, there are tentative signs of change on the Democratic side. Leading figures in the party such as Sens. Hillary Clinton and Mark Warner have, with Kerman's assistance, championed flat-fee and reduced-fee arrangements with their consultants. But deals like these remain the exception in a greed-locked business in which ad makers have been known to demand victory bonuses not only for the general election, but for near-uncontested primary races as well.
If campaign reform is ever extended to the spending side of the equation, it will only be because donors finally wake up and start shouting, "I am not a schnook." There is no tactical reason why the details of a media consulting firm's contract should be secret from the contributors who are subsidizing its profit margin. Just as the Internet broadened the fundraising base of politics, so, in theory, can the Web be used to organize for full disclosure of the fee structure of politics.
So here is a small suggestion for would-be political donors: Before you write your next check, try asking the campaign how much of its TV buy is going to the ad maker. For it seems unfair that passionately committed middle-class donors should be the only ones making a true financial sacrifice to elect their favorite candidates. Isn't it time for the consultants to start giving at the office?
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