Posted by Brendan Fischer on October 12, 2011

British Conservative Party defense secretary Liam Fox is in the midst of scandal that has grown deeper as ties to the American Legislative Exchange Council (ALEC) are revealed. Pressure has been growing on Fox in recent weeks after having been caught in a lie about unethical dealings with his friend and former flatmate, and more ethical problems arising from the operation of a recently-dissolved, ALEC-connected "charity" Fox founded.

Improper Dealings, Friend Given Inappropriate Access

Liam FoxIn June, a businessman had a private meeting with Fox in a Dubai hotel to ask the defense minister to put pressure on United States corporation 3M regarding a $41 million dispute over technology sales. Fox initially claimed the meeting was a chance encounter, but The Guardian revealed that the get-together was organized by Adam Werrity, Fox's longtime friend and the best man at his wedding. A lobbying firm linked to Werrity also received payment for his fixing the meeting.

Werrity was not a public employee and had no security clearances, but had been handing out business cards embossed with Parliament's logo that described him as an "adviser" to Fox. Other evidence suggests Werrity had an inappropriate level of access to British government affairs. He accompanied Fox to meetings with overseas dignitaries like the president of Sri Lanka, and met with Fox multiple times in the defense secretary's offices. Werrity has unofficially been at his friend's side throughout Fox's career, taking director positions at companies in the health industry when Fox was health secretary for the minority party, and moving to the defense industry when Fox became defense secretary.

British newspapers have been closely tracking allegations that Werrity has been profiting off access to Fox, his friend and former flatmate. According to The Guardian, concerns about these types of conflicts-of-interest are "why special advisers now have to be vetted, why they must observe their own code, and why there is a compulsory register of their interests -- these are part of the machinery of good governance about which this government is beginning to look casual." Having an "off-the-books" advisor like Werrity, The Guardian writes, "deprives officials of their essential role as guarantors of the public interest."

Fox had been a star of Britain's Conservative Party, and like ALEC-connected Republicans in the United States, he attacked public employees earlier this year, responding to budget woes by cutting unionized civil service jobs. But the Werrity scandals could be his downfall. Even the Rupert Murdoch-owned tabloid The Sun said the arrangement with Werrity "oozes access-and-influence" and called for Fox's ouster.

Fox Founded ALEC-Connected Group, Headquarted in Public Office

As the Fox-Werrity scandal unfolded, it emerged that Werrity had been using Fox's taxpayer-funded office in the MPs' block at Portcullis House as the official headquarters of a supposed charity called "Atlantic Bridge." Fox had founded Atlantic Bridge in 1997 to promote the "Special Relationship" between the United States and the United Kingdom, and named Werrity its Executive Director. Fox stepped down as a trustee in May, 2010, when he became defense secretary. In 2001, the American Legislative Exchange Council set up a sister charity by the same name, reportedly offered benefits to those donating to the British charity, and directly funded Fox's Atlantic Bridge with at least $44,000 USD (£28,528 British pounds) in the past four years.

In a press release (pdf), ALEC described the project as aiming to "foster positive relationships between conservatives on both sides of the Atlantic, so that they may further the ideals exemplified by Ronald Reagan and Margaret Thatcher," which some have called an effort to "import U.S.-style conservatism to the U.K." When the project was announced in 2007, ALEC stated that it had 27 European Parliament members "and expects to increase that number substantially through the project." It is unknown how many European politicians are currently ALEC members.

The organization's advisory council as of 2010 consists of Sen. Jon Kyl (R-Arizona), Rep. John Campbell (R-California), Sen. Lindsey Graham (R-Sout Carolina), former Rep. Adam Putnam (R-Florida until 2011), Sen. Joe Lieberman (I-Connectucut), and Sen James Inhofe (R-Oklahoma). All but Kyl and Lieberman are known ALEC alumni.

Atlantic Bridge Dissolves in Midst of Scandal

Atlantic Bridge closed its doors on September 31 in the midst of the Fox scandal, and just before The Guardian revealed Werrity had been running the charity from Fox's taxpayer-funded offices. Last year, the British Charity Commission cited Atlantic Bridge for "promoting a political policy [that] is closely associated with the Conservative Party," rather than advancing its charitable purposes. Atlantic Bridge agreed to conduct a review over the following year and report back to the Commission.

One event noted in the Commission report was a 2009 fundraiser to present the "Margaret Thatcher Medal of Freedom" award to Henry Kissinger, where VIP attendees paid $1,000 USD (£700) and the rest paid $600 (£400). The donations were used to advance the interests of the Conservative Party, but were tax-free. Sen. Kyl attended the event and received reimbursement for his business class flight to London and stay in a $1,250-per-night hotel room.

The Commission concluded that Atlantic Bridge's stated purposes, to conduct research and public education on U.K.- U.S. relations, met the British definition of "charitable," but in practice, the organization had actually been advancing partisan political ends. Atlantic Bridge stayed together for another year but dissolved as Fox and Werrity's political troubles multiplied.

Inquiry Into Charitable Status Mirrors U.S. Effort

In July, Common Cause requested that the U.S. Internal Revenue Service conduct a similar inquiry into ALEC for possibly violating its status as a tax-exempt "social welfare" charity under U.S. tax law. As a non-profit organized under section 501(c)(3) of the tax code, "no substantial part" of ALEC's activities can be spent on lobbying, which Common Cause alleges ALEC violates by drafting and affirmatively promoting corporate-sponsored "model legislation." The letter to the IRS concludes:

By claiming to be a charity and calling participating legislators "members," ALEC attempts to evade disclosure of its lobbying, allows corporate members to deduct their payments as charitable contributions rather than non-deductible lobbying expenses, and does an end-run around state ethics laws intended to restrict the ability of businesses to buy access to legislators in order to promote their policy agendas. The IRS should stop allowing the continuation of this charade.

Like Common Cause, British newspapers reporting on the Fox scandal have called ALEC "a major U.S. lobbying organisation for big corporations." The Guardian cites Fox's connection to the organization as a potential liability based on ALEC's climate change denial, anti-environmental stance, and opposition to public healthcare.

More on this story as it develops.

Brendan Fischer

Brendan Fischer is CMD's General Counsel. He graduated with honors from the University of Wisconsin Law School.

Comments

Senator Jon Kyl is also an ALEC alumni - though that is not well known: http://alecwatch.org/members.PDF