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No BlackBerrys, no lobbyists, and a political action committee with less than $40,000 in the bank. Not exactly the best calling card for a law firm looking to move up in the influence business. But that’s exactly what Sonnenschein Nath & Rosenthal’s D.C. office was offering recruits in 2002. Although the Chicago firm had made its name inside the Grain Belt, its 35-lawyer D.C. office was struggling to find an identity. Like many law firms, Sonnenschein had long looked down on lobbyists as not “lawyerly” enough. But after more than a decade inside the Beltway, Sonnenschein wanted to grab a piece of the growing public-policy industry after seeing many of its clients turn to others for political advice. Since then, the firm has transformed its lobbying practice into one of the largest in the country, with more than $18 million in lobbying revenue last year. Although the recent lobbying scandals may have led some lawyers in Washington to distance themselves from the political process, Sonnenschein hasn’t flinched. Over the past four years, the firm has tripled the number of lawyers and lobbyists in its D.C. office and quadrupled its lobbying revenues. It now manages the largest law firm PAC in the country. The firm is so invested in Washington that Elliott Portnoy, the man who engineered the firm’s lobbying success, is slated next year to become Sonnenschein’s youngest chairman and the first based outside Chicago. “I think Washington’s ability to grow is a direct result of the management committee supporting Washington,” says Caryl “Cap” Potter III, former D.C. managing partner and a member of Sonnenschein’s management committee. “Nobody’s ever kept their thumb on the scale to keep Washington down.” SOLD! In 1996, Potter, then the new D.C. managing partner, and incoming Chairman Duane Quaini reversed Sonnenschein’s long-held no-lobbying policy. They had a vision for increasing the firm’s D.C. profile by hiring a legislative group that would then help the firm attract more lateral growth. But entering the lobbying sphere proved more difficult than Sonnenschein originally thought. In fact, it literally took years to get going. “I didn’t meet any candidates,” says Potter of the first six years searching for a lobby group. “Nobody was very interested in us. We were not anybody’s first choice.” But in June 2002 headhunter Tom Wronski of Bishop, Levin & Wronski persuaded Portnoy, a public-policy partner at Arent Fox at the time, to meet with Sonnenschein. The meeting in Potter’s K Street office was a short one, but Portnoy was sold. “My gut, after just the initial meeting with colleagues in the Washington office, was that this would be the perfect home for our team,” says Portnoy. “It was a decision at the time that many of our friends and neighbors and colleagues found surprising.” Lobbyists say Portnoy’s jump was unexpected because he had been instrumental in raising Arent Fox’s lobbying profile. Portnoy, then the head of Arent Fox’s government relations group, had brought on 14 new lobbyists and banked more than $10.3 million in lobbying revenue in 2001. But after 10 years at Arent Fox, which was also going through inner turmoil over partner defections and compensation issues, Portnoy was ready to make the jump. He says his group was looking for a firm with more of a West Coast presence where nonlawyers were compensated like lawyers and there were incentives to share work. “We were looking for a compensation philosophy and a culture with collaboration and cross-marketing, because the nature of the public policy we do really requires that cross-marketing,” says Portnoy. Sonnenschein delivered on its commitment to investing in its talent, even down to the details of installing a BlackBerry server and having BlackBerrys ready for the lobbying team on their first day.
Following a wave of lobbying scandals last year, Congress pledged to reform the money-driven culture of Washington politics. By all accounts, virtually nothing has changed. This summer Legal Times began looking into the role money continues to play inside the Beltway and beyond. In a four-part series, we delve into how Washington’s influence-peddling community does business and how the free flow of money in the nation’s capital has a significant impact on everything from the laws that are written to the people we put in office.Part 1, Oct. 9: The Jack Abramoff scandal was the biggest catalyst for lobby reform in years, and Congress reacted with predictable outrage and a slate of reforms. The result: zero legislation, an ever-powerful lobbying community, and a money chase that grows more intense each day.Part 2, Oct. 16: Even newcomers to political office know that a member of Congress can’t get far without the financial backing of D.C. lobbyists. Part 3, Oct. 23: Lobbyists often help members get into office and stay there. But that relationship goes two ways. Lobbyists’ campaign work helps them grow closer to the very members who can help their clients.Part 4, Oct. 30: Lobbying is a business in which you have to pay to play and newcomers have to work hard to catch up. In just a few years one law firm transformed itself from an unknown to an inside-the-Beltway government relations powerhouse. Anna Palmer will chat with readers at LegalTimes.com about this series from 2 to 3 p.m. Tuesday, Oct. 31. Email your questions for the chat in advance…

“Washington at that point had a lot of credibility. The office was making a lot of money for the firm, so they didn’t view our interest in the [lobbying] group as silly,” says Potter. Portnoy took six other Arent Fox lobbyists and one other lobbyist with him. The group included Michael McNamara, who now heads Sonnenschein’s public-policy group, and Todd Weiss, a former aide to Sen. Rick Santorum (R-Pa.) who is McNamara’s second in command. Five of the eight original lobbyists are still at Sonnenschein. Upon his arrival, Portnoy identified three key components his group needed to be successful: a larger Washington footprint, a sizable PAC, and lawyers who would refer firm clients to lobbyists. Portnoy knew the first two were feasible, but the third would ultimately depend on Sonnenschein’s firm culture. His fears were immediately put to rest when, on his first day at Sonnenschein, he was inundated with e-mails from lawyers in the firm referring their clients to the public-policy practice. “I turned my laptop on and there were requests, literally, for our team to get engaged with existing Sonnenschein clients, sight unseen,” says Portnoy. “From that moment on it has been like trying to drink from a fire hydrant.” Over the next two months, Portnoy and McNamara completed the circle by embarking on a roadshow visiting the firm’s offices. Portnoy also had associate Alison Kutler work out of the firm’s Chicago office to help build a lobbying presence. The idea was to persuade existing clients to also utilize the firm for lobbying work. “We took an inventory of what the firm did, pulled together the top 25 clients by revenue and which of our competitors represented them legislatively,” says McNamara. The tactic worked. By the end of 2002, Sonnenschein had signed up 30 lobbying clients and had taken in $1.02 million in business, according to Senate records. And that was just the beginning. Over the next four years the lobbying group’s head count grew from eight to 25, and last year the firm reported $8.58 million in lobbying revenues, according to public records. The firm’s overall lobbying revenues were $18.8 million in 2005, according to Legal Times‘ Influence 50 survey. “The proportion of that work compared to overall revenue has shrunk in the last 18 months,” says Portnoy. “We’re doing less and less pure lobbying work and a huge amount of political intelligence, M&A [mergers and acquisitions] political strategy work, transaction advisory services work, and political compliance.” Last year Sonnenschein had $411 million in overall revenue, according to the AmLaw 100, The American Lawyer‘s annual survey of the nation’s top-grossing firms. The 660-lawyer firm’s profits per partner were $720,000, and revenue per lawyer hit $620,000. Firmwide matters continue to be a mainstay of the lobbying practice. Two of the public-policy group’s largest clients stem from Sonnenschein’s bankruptcy practice. Since 2003 the firm has represented the Unsecured Creditors of Federal-Mogul, an auto parts supplier, and Unsecured Creditors of United Airlines. In 2005, the firm collected almost $1.5 million in lobbying fees from Federal Mogul creditors and $380,000 from United Airlines creditors. Portnoy has led the offensive for Federal Mogul, which formed the Asbestos Reform Coalition, working the heavily lobbied asbestos-litigation reform bill. Sen. Arlen Specter (R-Pa.), chairman of the Judiciary Committee, pushed last year to get an asbestos bill through that would have made Federal Mogul the largest contributor to the litigation fund. (Sonnenschein’s PAC contributed $10,000 to Specter in the 2006 cycle.) The lobby group has also worked with United Airlines’ creditors, who tried to revive a loan guarantee that the government had turned down twice. Although Sonnenschein was ultimately unsuccessful in getting the loan for the creditors, once United emerged from bankruptcy, Sonnenschein lobbyists turned their attention to pension reform for the airline industry. The firm also has a slew of health care clients and nonprofits, such as the Lance Armstrong Foundation, Prevent Blindness America, and the Points of Life Foundation. “We went from ground zero to the Sears building in terms of capability,” says Fruman Jacobson, a bankruptcy partner in the firm’s Chicago office. “They were instrumental helping us not only know what was going on in Congress, but they gave us unparalleled access to some of the legislators who were very interested in our views, not only on United, but for the whole airline industry.” FILLING THE GAP Besides pure lobbying, the public-policy group has also embarked on two new practice areas teaming lawyers and lobbyists in capital transactions and political intelligence. The firm’s capital-transaction advisory services is led by former Democratic National Committee Chairman Joseph Andrew, who joined the firm from McDermott Will & Emery. Sonnenschein has emerged as a player in capital markets, not only advising companies on deals but also helping smooth the political sensitivities of regulated industries such as health care and insurance. In 2004 the firm was called in after California and Georgia insurance commissioners rejected the merger of health-care giants WellPoint and Anthem. Sonnenschein put 20 lawyers and lobbyists on the ground working the deal. “There often is both a cultural and linguistic gap between [corporate lawyers and lobbyists]. We fill that gap,” says Andrew. The firm has also heavily marketed its political-intelligence capacity. Sonnenschein works for Wall Street hedge funds and private investment banks, giving them inside information from Capitol Hill. But because the firm doesn’t actually lobby on behalf of the companies, it doesn’t have to publicly register its clients. McNamara declines to name any of their political-intelligence clients but says they account for almost a quarter of the public-policy practice. JUST DON’T BLOW IT After moving to Sonnenschein, Portnoy swiftly increased the firm’s profile by retooling its PAC to increase lawyer participation. Although the firm had the Sonnenschein Nath & Rosenthal Good Government PAC, it raised only around $15,000 per election cycle. Portnoy hoped to top $150,000 a cycle to be competitive with other law firms. “The PAC would certainly rank as one of the really truly extraordinary successes,” says Portnoy. “You really have a very narrow window to do it right or blow it, and if you blow it you can’t fix it.” Portnoy and Chairman Quaini also announced major changes to the PAC. First, they renamed it the Sonnenschein Nath & Rosenthal (ironically, dropping the “Good Government”) PAC so that the firm’s lawyers would better understand its business purpose. And more fundamentally, they changed the structure of the PAC. Historically, funds had been disseminated at the chairman’s discretion, but Portnoy and Quaini created an 11-lawyer board made up of leaders of the firm who would have to approve all PAC checks. No one from the firm’s public-policy team is on the committee. “We believed it was critical that none of our lawyers ever came to regard our PAC as a slush fund for the use of the public-policy group,” says Portnoy. To convince his new partners of the necessity to raise funds, Portnoy took an aggressive approach. At his first partners meeting in Chicago in 2003, Portnoy started his presentation by playing a tape of several congressmen directly asking for donations. Lobbyists meet at least twice a year to decide which members to target, but Portnoy says unexpected requests can come from any of the offices, as clients may ask the PAC to contribute to fund-raisers they hold. In the 2004 election cycle, the first full cycle since Portnoy’s arrival, Sonnenschein’s PAC doled out more than $650,000. Today, Sonnenschein outspends firms, such as Patton Boggs and Akin Gump Strauss Hauer & Feld, that have long had large lobbying presences. This cycle the firm has already raised more than $1 million and has a 75 percent to 80 percent lawyer participation rate, McNamara says. The firm solicits all partners and counsels and its public-policy lobbyists. In the 2006 cycle the PAC gave 55 percent to 45 percent in favor of Republicans. “The PAC is a business tool,” says Potter. “That’s the way you get money into the process. The way you participate in the process that Congress has approved, the Supreme Court has approved it. . . . It’s a reality of the business, and our clients now understand that it’s an important aspect in how they deal with people that affect their business. They don’t have to like their politics, but it’s the reality of politics.” NEXT STOP: LONDON? Today, the firm’s Washington office has 103 lawyers and lobbyists, 25 of whom are core lobbyists. But Portnoy sees that number increasing, because as Sonnenschein’s profile rises on Capitol Hill, the firm has been able to recruit bigger players in Washington, such as security and enforcement partner Marc Zwillinger, who jumped from Kirkland & Ellis to Sonnenschein in 2004. The firm also brought on former JPMorgan Chase & Co. executive Victoria “Penny” Rostow as a financial-services specialist in the public-policy practice in 2005. “We have done a lot in the last four years that has been fabulous, and Sonnenschein is a much more well-known name in the D.C. community, but it’s not yet a household name,” says Amy Bess, D.C. managing partner. Portnoy says he expects the firm to be “substantially larger in size, scale, stature, and in profitability” in the next three to four years. The D.C. office is looking to add litigation, health care, intellectual property, and corporate lawyers. The firm is also considering its options abroad. So far, its only overseas office is in Brussels, Belgium (the government relations capital of Europe), but Sonnenschein is closely looking at opportunities in London and Asia. “We’ve grown and changed over the last four and a half years,” says McNamara. And now, Sonnenschein’s counting on the firm’s influence in Washington to take it to the next level.

Anna Palmer can be contacted at [email protected].

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