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San Francisco-based Orrick, Herrington & Sutcliffe and its employees have pumped more than $1.3 million into local and state political campaigns across the country over the last dozen years, with most of the cash flowing to public officials who award lucrative contracts for government legal work, an analysis of campaign finance data reveals. Orrick — which has the most active bond practice in the nation — spends far more campaign money than its biggest legal rivals in the field of public finance, and its giving targets a select group of often obscure officeholders, primarily the city, county and state treasurers and controllers who dole out assignments for counsel on public debt transactions, the records from local, state and federal sources show. Orrick flatly denies it “pays to play” — or gives contributions in exchange for government work — saying that its status as the No. 1 municipal finance firm in the country is reason enough for it to get work. The firm, in the words of its chairman, Ralph Baxter Jr., “expects nothing in return” for its contributions. Without question, Orrick has built a blue-chip reputation, particularly in the insular world of public finance. But even Baxter acknowledges the spending is designed to buy the firm good will with its government clients. And that kind of positive feeling is critical to a firm that collects — by its own estimates — between $35 million and $50 million a year in revenue from government contracts. “We are building a relationship,” Baxter said. “How would an elected official feel if we don’t make a contribution? Of course we think about that.” Among the biggest recipients are politicians who hand out statewide work in two of the biggest bond markets in the country: California and New York. Campaign records show Orrick over the years has poured $275,000 into the campaign accounts of California Treasurer Philip Angelides, the man who awards the state’s bond counsel contracts. Its political action committee has given more than $130,000 to Gov. George Pataki and Republican Party committees in New York — and since those contributions, the firm’s slice of bond work in the Empire State has grown considerably fatter. The giving doesn’t stop at state treasurers or governors in big states. Orrick campaign checks land in locales as diverse as Hawaii, Utah and Vermont and in the election accounts of school board trustees, water district directors, city council members, municipal comptrollers and county treasurers. Orrick’s two largest public finance competitors, New York-based Hawkins, Delafield & Wood and Chicago’s Sidley Austin Brown & Wood, have spent $650,000 combined on contributions to non-federal political campaigns and party committees since 1995 — primarily in their home states of New York and Illinois. By contrast, Orrick spent more than $725,000 during the same period — not counting individual contributions by the firm’s employees. The political spending comes despite a Securities and Exchange Commission ban on similar contributions by other players in the bond business, and after years of questions from bar associations, the SEC, campaign finance reformers, lawyers and politicians about the propriety of a major government contractor giving so much money to the public officials who award them work. In fact, since the SEC instituted Rule G-37, which essentially banned bond brokers and dealers from doling out contributions to the public officials who awarded them work, average annual contributions from Orrick and its lawyers have climbed by 75 percent. In the five years prior to the 1994 ban, contributions averaged roughly $63,000 per year. Since 1994, that number climbed to an average of $110,000. “Politicians are insatiable in raising money, and when something like [the SEC ban] happens, they are going to go to the rest of the contributors on their list and ask them to pony up,” said Robert Stern, president of the Los Angeles-based Center for Governmental Studies and an attorney who authored California’s primary political ethics law. THE JEWEL IN THE CROWN Ground zero for Orrick’s political spending is California — and, in particular, races for the state treasurer’s office. It’s easy to see why. The jewel in Orrick’s public finance crown is its work as general obligation bond counsel for the state of California, a designation awarded by the state treasurer. That work, while not particularly lucrative in and of itself, is — in the words of a partner at a competing firm — “like the Good Housekeeping seal of approval.” The firm, Orrick partners acknowledge, can use its state bond counsel status as a tool to market itself to other public agencies in California and across the country. Orrick has held onto this role for decades — so long, in fact, that state officials aren’t exactly sure when the firm first won the job. In the last decade, the firm has only once faced a serious, competitive threat for the general obligation bond counsel designation. Cox, Castle & Nicholson of Los Angeles underbid the firm during the tenure of Kathleen Brown. She allowed Orrick to resubmit its bid. Perhaps coincidentally, Orrick was also a major campaign contributor. Brown received nearly $77,000 from the firm’s PAC and individual employees during her four years in the treasurer’s office, state campaign records show. “Orrick has had a real dominance, an almost super-presence on doing business with the state as far as municipal finance,” said Matt Fong, a Republican who served as California treasurer from 1994 to 1998. The presence, of course, extends to the candidates’ campaigns. Orrick has been the No. 1 legal industry contributor to each of the five California treasurers since 1983. And the firm spreads its bets. Since 1990, it has been the top legal contributor to losing treasurer candidates as well. Angelides, the current officeholder, has received more funds from Orrick’s PAC and individual employees than any candidate in the last two decades. The work with the state helps Orrick sell its expertise to California cities and counties — and the volume generated by these local transactions is how the firm generally makes its money in public finance, the firm says and competitors confirm. Orrick captured 52.3 percent of the California bond counsel market in 2001 — mirroring its performance for the previous five years, according to numbers compiled by Thompson Financial Securities Data, which tracks municipal securities issues. By contrast, the No. 2 bond counsel in the state, 13-lawyer Jones Hall of San Francisco, took 10.2 percent of the market in 2001. Preserving its lead is the key reason the firm spends so much on campaigns. “Partners accepted it as a political reality, because it ensures a level playing field,” said a former senior-level Orrick partner. Andrew Hall Jr., a name partner at Jones Hall, said the same five or six firms dominate bond counsel work in the state, and obviously, few compete with Orrick in terms of volume. It would be very difficult, he said, for any firm to come into the market without developing long relationships with their prospective public clients. “This is a relationship business, and it’s generally the same players,” said Hall, a bond lawyer since 1965. “It’s very difficult to come in cold.” THINKING LOCALLY A new player certainly would have a hard time breaking in at the state level — and it would be no cakewalk with local officials either. From large cities like Sacramento to school districts, mass transit authorities and water boards, Orrick collects a sizeable chunk of its public finance fees handling relatively routine bond matters for local government agencies. In return, the firm — public records show — receives a very steady stream of fees from each government agency: $23,500 for the initial bond and an additional $16,500 for other issues from the San Mateo Community College District; $24,500 as lead bond counsel for Turlock’s elementary schools; $148,000 to handle a bond for San Jose International Airport. And where contracts are let, contributions routinely flow, public records show. In Sacramento, where the firm serves as counsel on bond issues for the city and county, Orrick and its employees spent more than $11,000 on local offices over a two-year period, mostly on the mayor’s contest. Orrick has been a top contributor to Riverside County’s treasurer. Though he faced no opposition in his last campaign, he still received a $1,000 check from the firm. Orange County Treasurer John Moorlach said the firm has a good reputation among local officials for the quality of its legal work — but is also well known for the size of its campaign war chest and its ability to exert considerable political pressure. “From a political career standpoint, it’s good to have a network of good connections,” said Moorlach, who said he is contemplating a run for state treasurer in 2006, “and you don’t want to upset Orrick, Herrington & Sutcliffe.” Moorlach did rankle the firm’s lawyers in 1998 when he questioned their handling of a bond deal involving a toll road running from Orange to Riverside counties. Orrick not only represented the state agency issuing bonds, but two of the other parties involved in the transaction. “We jumped up and said, ‘that’s a conflict,’” Moorlach said. What ensued was a very public battle between Moorlach — a reform candidate elected in the wake of Orange County’s 1994 bankruptcy fiasco — and Orrick, which had contributed small amounts to his predecessor Robert Citron. (Citron took much of the blame for the investment decision that led to the county’s fiscal meltdown.) “I said [to them] ‘you’re one of the biggest campaign contributors out there, and the last thing I would want to do is tick off you and yours. But this transaction is a sham,’” Moorlach said. Eventually, Orrick convinced the county that it had done nothing wrong, and the firm has been involved in six transactions in the four years since the deal, a county spokeswoman said. Though published reports at the time of the controversy said Sacramento heavyweights had called members of the Board of Supervisors and asked them to lay off the firm, Moorlach said he felt no personal political pressure to give Orrick a break. “There was no pressure for me, but I can’t speak for the board. I actually felt the opposite. I got a call from someone in Sacramento … and he said ‘it’s about time somebody took them on. They’re everywhere.’” Everywhere may be an exaggeration. But there’s no question that Orrick has extended its public finance reach far beyond the home market. The firm has fought hard to maintain its position as the top adviser on municipal securities issues across the country — and it has dedicated significant political dollars to that end. IF THEY CAN MAKE IT HERE Ned Regan spent 15 years as New York state comptroller before retiring in 1993, but despite his long tenure he has only a vague recollection of Orrick. “I know we hired them … and I know the name of the firm, sure,” said Regan, now president of Baruch College in New York City. “But that’s about it, really.” The haziness is understandable. When Regan was comptroller — one of the two key elected officials who control bond issues in New York — Orrick was a relatively minor campaign contributor, and it had carved out only a small portion of the bond counsel work in the state. But it’s unlikely the current governor, Republican George Pataki, or comptroller, Democrat H. Carl McCall, would so easily forget the firm. In the last eight years, the firm has made a major campaign push in New York state, with most of the money going to Pataki, the state Republican Party and McCall. The investment appears to have paid off: Orrick is now one of the most-used law firms for bond counsel work in the state. During the last six years of his term, former Comptroller Regan received $7,000 from the firm and its political action committee. Then-Gov. Mario Cuomo got $18,000 over the same period, according to New York state campaign finance records. Neither was a fund-raising slouch, and in the late 1980s, Regan, according to various published reports, was even investigated by the U.S. attorney, Manhattan’s district attorney and the state’s ethics commission for awarding lucrative contracts to his campaign contributors. By contrast, since his 1994 election, Pataki and committees he controls have received $38,500 from Orrick. The state GOP has received another $94,250. McCall, who handles a smaller portion of the bond business, has accepted $28,976 from the firm and individual partners, according to New York campaign finance reports. During the same period, the bond business boomed for Orrick in New York. Prior to Pataki’s election, the firm ranked 10th among bond counsel in the state. Since 1996 — and the big donations to the governor and the GOP — Orrick has consistently ranked among the top five bond counsel firms. And Orrick’s share of New York’s bond issues — once under 5 percent — hit 10.9 percent in 2001, according to numbers compiled by Thompson Financial. Orrick still has a long way to go to catch up with Hawkins Delafield, which captured 30 percent of the New York market in 2001, and Sidley Austin, which took 22 percent. Rochester, N.Y.-based Nixon Peabody was No. 3 last year with 15 percent. Nevertheless, higher percentages translate into more cash for Orrick — to the tune of $856,331 in the first three years of Pataki’s term alone, according to a New York state legislative analysis. Orrick’s contributions in New York — along with those of a number of other bond industry players — haven’t gone unnoticed. In 1997, then-state Sen. Franz Leichter, a New York City Democrat, commissioned a report that revealed the Pataki administration’s campaign ties to its bond counsel. Orrick was the top contributor listed in the report. “There were real questions of impropriety in the awarding of these contracts,” said Jonathan Bowles, a Leichter staff member who researched and co-authored the senator’s report. “Orrick was definitely targeting the governor with its contributions.” For their part, Pataki and his staff have dismissed questions as partisan gamesmanship, and Bowles said the effort did not spark much reaction from Leichter’s fellow legislators. After the report surfaced, however, the state and New York City bar associations tried to ban lawyers from giving contributions to politicians who gave them work. Yet those efforts met with stiff resistance — particularly from bond lawyers — and the original proposals in New York City were reworded: to provoke a disciplinary action, the bar had to prove that an actual agreement existed between the lawyer and the politician that a contribution would result in work. Alan Rothstein, general counsel of the New York City bar, said he knows of no lawyers who have been disciplined under the rule. “Proving a quid pro quo is very difficult,” Rothstein said. If the rules are designed as a deterrent to firms giving to New York politicians who award bond contracts, they don’t appear to have fazed Orrick and its partners. In November 2001, for example, partners at the firm’s New York City office wrote eight checks to the new city comptroller, William Thompson Jr. That was followed by a $4,500 contribution by the firm, according to city campaign finance records. The New York giving is just one of the larger examples of contributions from Orrick to the officials who control the lucrative contracts for bond counsel in state after state. In the last dozen years, officials outside California have received $250,000 from the firm and its partners. Campaign funds from Orrick and its partners have flowed to statewide candidates in Oregon, Florida, Washington state, Hawaii, New Mexico, Idaho, Texas, Vermont and Utah. And all of those candidates are integral players in the bond process. A PUBLIC SERVICE Orrick contends that all of its giving is above-board and legal. Everything is reported to state, local and federal elections commissions. The firm is giving because its lawyers have expertise in the public finance field and knows the players well. In fact, firm chairman Baxter said, it is something of a public service. “We have a responsibility to do it,” Baxter said. He says it’s preposterous to suggest that such contributions win Orrick work. Baxter likens political donations to those the firm makes to charities supported by one of the firm’s corporate clients. “What happens is that from time to time we are asked for charitable and political contributions,” Baxter said. “One of our clients gets involved in a charity, one of the banks or tech companies we represent, and through the fund raising, the charity reaches out to solicit us. It stems from our relationship with the business person. “So, too, with political contributions. We have relationships with states and counties, and political campaigns are funded entirely with contributions. They need contributions � so we make modest donations.” Few charities, however, control millions of dollars in government contracts that benefit the firm. Baxter says the firm’s contributions are done in an “even-handed, bipartisan way. We do not endorse candidates, or positions, because that’s not the way our firm culture operates.” Yet, the firm does play favorites with its political money, the records show. In the 2002 California treasurer race, for example, Republican Greg Conlon has received no money for his campaign against Angelides. And in 1994, Angelides received more money in a losing bid against Matt Fong. The firm made up for it by making big contributions after the election to Fong’s treasurer account and to his 1998 U.S. Senate bid. And some political veterans scoff at the firm’s claims that its contributions are purely a civic-minded effort to give public officials a hand. Orrick has faced tough questions over the years for its campaign giving and the fees it collects from government agencies. In the early 1990s, Orrick reaped millions of dollars in fees from then-California Insurance Commissioner John Garamendi to handle litigation and delinquency work for failed insurance companies. Garamendi, a Democrat and the first person to hold the post of insurance commissioner after it became an elected post in 1990, reaped $46,000 from the firm and its employees during his four years in office. His wife, Patricia, who unsuccessfully ran for office in the Central Valley, took in an additional $11,000. Former state Sen. Quentin Kopp, a San Francisco Independent, led a Senate select committee that looked at how Garamendi awarded attorneys fees for the insolvent company work — with a particular focus on Orrick. His conclusion? “Clearly to me it was pay to play,” Kopp said. Now a San Mateo County judge, Kopp stressed his comments had only to do with his Senate tenure, not his work on the bench. Kopp introduced legislation to bar any law firm from being hired by a state department if the firm was lobbying any state agency. The bill died in committee. A state legislator from 1987 to 1999, Kopp said Orrick was among the few major law firms whose lawyers and lobbyists were seen frequently around the capitol in Sacramento. “None of the big firms was around like this,” Kopp said. “Orrick Herrington stood out.” Garamendi could not be reached for comment, but when news of the large fees to contributors broke in 1993, his political consultant told reporters that there was “no reason to think” contributions were given to influence business at the Department of Insurance. Orrick and Garamendi haven’t broken ties. The former insurance commissioner is seeking his old job again, and his campaign accounts contain a familiar name. On May 22, his campaign received a check for $10,000 — signed by Orrick, Herrington & Sutcliffe. Related charts: Orrick Herrington & Sutcliffe at a Glance Orrick, Herrington & Sutcliffe Contributions Out of State Spending Where the Money Goes

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