Clinton Aide’s Databank Venture Breaks Ground in Politicking

APR 12, 2008 Clinton Aide’s Databank Venture Breaks Ground in Politicking NEW YORK TIMES 
When Senator Hillary Rodham Clinton needed help rounding up superdelegates, she turned to Harold M. Ickes, the ultimate Democratic fixer, who is now working round-the-clock for her, drawing on his vast energy and decades of political connections.

But, at the same time, Mr. Ickes is also wearing another hat. He is president of Catalist, a for-profit databank that has sold its voter files to the Obama and the Clinton presidential campaigns for their get-out-the-vote efforts. With his equity stake in the firm, Mr. Ickes stands to benefit financially no matter which candidate becomes the Democratic nominee.

In creating Catalist, Mr. Ickes, who was deputy chief of staff in the Clinton White House, has formed a rare entity on the political scene, a for-profit limited-liability corporation that allows wealthy Democratic donors to help progressive organizations and candidates by investing in the company. And if Catalist, which has data on 230 million Americans, is successful as a business, these donors-turned-investors stand to reap financial returns from using their money to help elect Democrats.

But some campaign finance watchdogs say they wonder whether Catalist was established not so much to make money but to find a creative way to allow big-money liberal donors to influence the election without disclosing the degree of their involvement or being subjected to other rules that would govern spending by an explicitly political organization.

Catalist has raised over $11 million in venture capital, including more than $1 million from the billionaire financier George Soros, according to his aides. It also counts on such large unions as the Service Employees International Union and the A.F.L.-C.I.O., to buy its products and create revenues. And it plans to be the go-to source for voter data for a broad swath of groups often aligned with Democrats — like the Sierra Club, Emily’s List and Clean Water Action — as they embark on ambitious get-out-the vote efforts this fall.

These liberal clients will buy lists of likely voters based on information that Catalist has gleaned from voter registration files and commercial data providers. For instance, Catalist computers will take voter registration information along with data from appliance warranties, hunting and fishing licenses, charitable memberships and other data points to draw models of potentially sympathetic voters that these clients can approach.

Catalist grew out of the embers of two groups that Mr. Ickes headed in the 2004 election, Americans Coming Together and the Media Fund, which, in part, conducted strong get-out-the-vote efforts. But when the Democrats failed to take the White House in 2004, wealthy donors believed that one reason they had failed was that Democrats lacked the sophisticated voter databanks of the Republican Party, its celebrated “voter vault” that can pinpoint likely supporters.

Out of that analysis came a decision to set up a Democratic voter databank outside the formal party apparatus and structured as a business, with investors and customers drawn from the same pool of those who had worked closely together in 2004.

“We wanted to come at this differently,” said Laura Quinn, chief executive of Catalist. “We needed people with a business background and a political background. Putting together a business model was critical to our effort, but we also needed someone who understood the political space, and that was Harold.”

Mr. Ickes, through a spokeswoman, declined to be interviewed for this article, and the company declined to discuss any details relating to his financial stake or how much he stands to make from it.

The company itself operates in a Washington office building, where rooms of young computer engineers hunch over laptops and personal computers, giving it the air of a Silicon Valley start-up.

Some campaign finance watchdogs, however, say one concern about Catalist is that its precursors — America Coming Together and Media Fund — were found by the Federal Election Commission to have illegally spent $150 million on federal campaign activities without registering as political committees. The two groups were fined a combined $1.35 million.

The political world is filled with polling firms, consultants and others that operate for profit. But Catalist’s business structure — and the political motives of its backers — have raised questions about whether the company is using its status as a for-profit company to shield its investors from disclosure and spending rules that would apply to more traditional political organizations.

Catalist’s backers, along with Mr. Ickes, are some of the same people involved in America Coming Together and the Media Fund, which have since disbanded. As a private company, Catalist does not have to disclose its investors or the amounts they put up, which have run well into the six-figures.

The company has said it will not turn a profit until 2010, making it difficult to determine whether its backers are business investors or political donors, as well as whether or not it is helping to subsidize the liberal groups that are its clients.

“It is something to be concerned about,” said Steve Weissman, associate policy director at the Campaign Finance Institute, a nonprofit in Washington. “Wealthy people and unions are having a greater influence on the political process than the average small donor or the person who doesn’t donate. It skews the political process toward those who have money.”

Catalist is actually just one piece in a larger, and interlocking, network of independent liberal organizations that are acting almost as a shadow Democratic National Committee, now that the party itself can no longer accept unlimited large soft money donations. While these independent groups cannot communicate with the Democratic Party on strategy, they provide yet another way of getting the party’s message out, even if not in the words of the party.

Its clients include groups like MoveOn.Org, the N.A.A.C.P., the Sierra Club, Emily’s List, Naral Pro-Choice America and the National Education Association, along with the service employees union and the A.F.L.-C.I.O. All those groups were involved with Americans Coming Together in 2004 and are planning even bigger get-out-the-vote campaigns this year. Catalist does not do business with Republican-aligned groups.

Helping these groups coordinate their efforts — and to prevent them from bumping into one another — is a group called America Votes, which maintains close ties with Catalist. Until recently, America Votes, which has raised $18 million, shared office space with Catalist. Not only is it a Catalist client, but its mission is to help Catalist clients use the data they have bought to develop on-the-ground strategies in 19 crucial states.

And, standing in the background, but still linked to this effort, is a new group called Fund for America, which is solely a money-raising vehicle, somewhat like a foundation. Fund for America got off the ground late last year with donations of $2.5 million each from Mr. Soros and the service employees union. Since then, Fund for America has given America Votes $1 million for its work in helping Catalist clients. Both groups are tax-exempt organizations that can take nearly unlimited contributions and have limited oversight.

“These groups are trying to inject the same kind of huge amounts of money into the 2008 election that were found to be illegal in 2004, but with the new scheme,” said Fred Wertheimer, president of Democracy 21, one of several nonprofit groups that filed the complaint at the election commission regarding Americans Coming Together and the Media Fund. “There are a series of important legal issues involved in these activities that we will be carefully monitoring.”

In setting up Catalist, Mr. Ickes is also setting up a rival databank to one that the Democratic National Committee has spent millions developing to help candidates and party committees in 2008. While there have been reports that Mr. Ickes, who had been critical of the management of the national committee under Howard Dean, began Catalist as a vote of no confidence in the committee’s effort, Ms. Quinn, the Catalist chief executive, insists that is not the case.

“We never felt that the two databases were incompatible,” Ms. Quinn said. “There was a lack of capacity, and the two databases will fill that need.”

Catalist has issued a prospectus to investors that it has not made public and has said investors would get a fixed rate of return.

One crucial question, several legal experts say, is whether Catalist is selling its data at fair market value or at a discount, another factor in determining whether it could be deemed a political committee and subject to federal campaign regulations. Even though Catalist’s own marketing literature calls it a “low cost” data source, Ms. Quinn said the company charged market rates.

Equally sticky is that there are conflicts within Catalist’s own client lists. The Clinton campaign, for instance, has paid Catalist $125,000 for its data, while the Obama campaign has paid $50,000, even though Mr. Ickes works for Mrs. Clinton and has been raising concerns about Mr. Obama’s electability as he courts superdelegates on her behalf.

“We just hope that Harold’s data is better than his delegate math,” Bill Burton, a spokesman for the Obama campaign, said of the payments to Catalist.

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