Bob Izenberg <bei%dogface@uunet.uu.net> (10/01/90)
From the September 30, 1990 edition of the Austin, TX {American-Statesman}:
Phone Company Mishandled Lobby Expenses
By Seth Kantor
American-Statesman Washington Staff
WASHINGTON - Southwestern Bell Corp. improperly charged millions
of dollars in Washinton lobbying expenses to long-distance carriers
operating in Texas, according to documents filed with the Federal
Communications Commission.
"Lobbying money has been thrown all over the place by
Southwestern Bell," and the long-distance companies got stuck with the
bills, said Roy Morris, deputy general counsel of Allnet
Communications Services Inc., a Michigan-based long-distance carrier.
The long-distance carriers, in turn, may have passed the charges
on to their customers - although Southwestern Bell said individuals
would have ended up paying only a fraction of a penny each.
Bell officials acknowledge that they improperly charged $4
million in lobbying expenses to Allnet, AT&T, Sprint, MCI and more
than 44 other long-distance companies. The money helped pay for
expensive drinks, dinners and entertainment events that a platform of
lobbyists have lavished on members of Congress and their aides, Morris
said.
The improper charges were the result of $19 million in accounting
errors committed by Southwestern Bell from 1985 to 1989, the company
said.
But Morris said the admitted errors are "just the tip of the
iceberg," and that Southwestern Bell may have widespread bookkeeping
problems.
The accounting errors have awakened interest in Bell's lobbying
activities, have raised questions about the FCC's performance as the
industry watchdog and appear likely to prompt closer scrutiny of the
regional phone company the next time it comes before Texas utility
regulators.
Discovery of the bookkepping errors was triggered by a complaint
Allnet filed in early 1990 with the FCC against Southwestern Bell.
The five-state regional phone company subsequently told the FCC
that "we had inadvertently misaccounted for (our) Washington, D.C.,
lobbying expenses," according to Joseph E. Cosgrove Jr., a lawyer at
Southwestern Bell's corporate headquarters in St. Louis.
Cosgrove estimated that his company spent $10.9 million on
lobbying efforts in Washington between 1985 and 1989, including the $4
million in improper charges to the long-distance carriers. The
company's lobbying expenditures were incorrectly integrated into other
categories on Southwestern Bell's books, Cosgrove explained.
"I certainly hope our investigators look into this," said Jo
Campbell, a member of the Texas Public Utility Commission, which
regulates phone service in Texas.
"Lobbying charges that are flowed through to long-distance access
ratepayers are improper," Campbell said. "They should be fully borne
by the shareholders. My hope is that the FCC examines this very
closely."
"The FCC has already failed to do its job," said Brian Moir, a
Washington communications lawyer who represents a coalition of
business telephone customers. "The FCC hasn't spent one millisecond's
worth of energy on examining lobbying activities of the phone
companies since 1984."
That was the year of the landmark federal court consent decree
that broke up AT&T's "Ma Bell" communications monopoly and created the
seven so-called "Baby Bells" - the regional phone systems such as
Southwestern Bell.
Even though long-distance carriers were improperly charged for
Bell's lobbying, Robert Digneo, a Southwestern Bell spokesman in
Austin, said local billing rates for residential and business
customers in Texas have not been affected.
Texans placing calls within Texas were not hit with any extra
charges because of the accounting errors, Digneo said.
"If anything was affected, it would have been via the
(customer's) interstate long-distance rates," DIgneo said. "But for
basic local phone service, this is a different ballpark."
Digneo said a customer in Central Texas placing a call to some
other state might have had to pay "something like .0001 of a penny
extra" because of the fouled-up bookkeeping transactions.
"It would have been a very tiny slice of one cent," said Digneo.
But Allnet's Morris said Southwestern Bell's admission that it
made a $19 million mistake is just the beginning. "There's a lot more
money than that involved, facts will show."
Allnet's case against Southwestern Bell is still in the discovery
stage at the FCC. No final resolution is expected until next year.
In the meantime, the case has sparked interest in the
concentration of Southwestern Bell's lobbying activities in Congress.
Records show that Southwestern Bell has a team of eight
registered lobbyists promoting special-interest legislation on Capitol
Hill - six of them based in the company's downtown Washington office.
An outside Washington consulting firm - Bayless and Boland, which
is well connected with the Bush administration - and Washington
attorney Mitchell Pettit are also registered as Southwestern Bell
lobbyists.
Pettit, whose contract with the phone company expires today,
reported that Southwestern Bell paid him $24,000 plus expenses between
April 1 and June 30 for lobbying activities that he did not detail.
Two other lobbyists on Southwestern Bell's corporate payroll
share the same title. Both William H. Shute and M. Camille Barnes are
listed as director of federal relations for the company.
Shute said he is primarily concerned with issues that come before
the House Judiciary and the Energy and Commerce committees, while
Bares is involved in budgetary affairs and tax matters that come
before the House Ways and Means Committee.
Bares and Shute reported spending $5,748.95 in the first half of
1990 on wining and dining members of COngress and congressional aides.
Among Shute's listed lobbying expenses were a $162.50 dinner tab
on April 15 ar Restaurant Nora's, an expensive French hideaway in
Washington, and $419.25 for tickets on April 21 to a Paul McCartney
concert.
In mid-May, Shute reported spending $421.95 in Fort Worth to
treat a Texas congressman to the annual professional golf tournament
at Colonial Country Club.
Shute, a University of Texas graduate, refused to identify the
Texas congressman and did not want to be interviewed on the record for
this article. But he indicated that as a Washington lobbyist, he
frequently discusses legislative business with congressional staff
members at restaurants away from Capitol Hill, "because they have so
little time for such discussions during the crush of business hours."
Records show that Shute and other Southwestern Bell lobbyists
like to treat their congressional guests to the posh, members-only
Tournament Players Club at Avenel, in a neighborhood of million-
dollar-plus homes near the nation's capital.
Southwestern Bell has been active this year in various political
arenas. In Texas, for instance, the telephone company denied state
se. Hugh Parmer, the Democratic challenger to Republican U.S. Sen.
Phil Gramm, a 900 number that would allow callers to make political
contributions to Parmer.
But the phone company reversed its stand under Public Utility
Commission pressure when Parmer proved that the Republican National
Committee had been granted a 900 fund-raising number in Texas.
Parmer spokesman Mike Kelly said this week that "at best, it
showed that Southwestern Bell's Washington lobbying activity,
according to official records, concerns Southwestern Bell's efforts
strong interest in legislation that would allow the Baby Bells to
become involved in three communications areas forbidden to them by the
antitrust consent decree of 1984.
Under that judgment, the Baby Bells are not allowed to originate
information databases, manufacture telephone equipment or conduct
long-distance operations.
Sen. Ernest F. Hollings, D-S.C., has sponsored a bill that would
allow Southwestern Bell and the other six regional companies to plunge
into the manufacturing business.
The bill is controversial within the Texas congressional delegation.
Sen. Lloyd Bentsen is a strong supporter of the bill, but a
fellow Democrat, Rep. John Bryant of Dallas, is strongly against it.
"It no longer makes sense to bar the regional Bell companies from
manufacturing telephone equipment," Bentsen told the Austin American-
Statesman. "Not when America has a telecommunications trade deficit of
some $2.6 billion, not when giant foreign firms - many heavily
subsidized by their governments - can sell their equipment here."
Bryant, a member of the House telecommunications panel, argues
that such legislation "serves no public purpose."
He said he would be for it "only if each of the regional Bells
guarantees they would manufacture the equipment in this country. But
in hearings before our panel so far, officials of every Bell company
have admitted they would manufacture the equipment overseas under
their name.
"That's not creating jobs to benefit American labor," Bryant
said. That's creating jobs to further compete with America.
[ end of article ]
Bob Izenberg (512) 346 7019 [ ] cs.utexas.edu!{kvue,balkan}!dogface!bei