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Ethanol Lobbying Disclosures Questioned

Huge Tax Breaks Don't Happen Accidentally

July 27, 2006

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Public Citizen has filed complaints with Congress about potential violations of the Lobbying Disclosure Act of 1995 by the Renewable Fuels Association (RFA), a national association for the ethanol industry, and Archer Daniels Midland (ADM), America's largest ethanol producer.

"Ethanol producers receive $2 billion in subsidies from taxpayers, with ADM getting the lion's share," said Tyson Slocum, director of Public Citizen's energy program. "It's important that the American people have an accurate representation of how this industry influences government officials to help determine how the public's money is spent."

Records show a significant discrepancy between what RFA told the government it spent on lobbying and what lobbying firms reported earning from RFA. As a result, RFA appears to have underreported its true lobbying expenditures to the public by at least $1,220,000 from 1999 to 2005.

In addition, the Illinois-based ADM has stated that it does no federal lobbying, but Public Citizen's review of publicly available information casts doubt on that claim.

After the company paid $100 million in 1996 to settle price-fixing allegations, ADM embarked on a new public relations strategy that focused on emphasizing the company's claim that it does not employ any federal lobbyists.

The contention has proved to be a useful tool to deflect criticism that some of ADM's strong financial position stems from generous public subsidies. As the nation's largest ethanol producer, it receives the largest amount of federal subsidies for its production.

The Lobbying Disclosure Act requires organizations that lobby on their own behalf or hire outside lobbyists in order to influence Congress or the executive branch to be registered as a lobbying entity or a lobbying client for the purpose of reporting lobbying activities to Congress and providing semi-annual estimates of their total lobbying expenses.

ADM has an office in Washington, D.C., staffed with at least four people, including government relations executives.

According to the Center for Responsive Politics, the company's political action committee and employees have made more than $2.1 million in federal campaign contributions since 2001, with 63 percent of that total going to Republican candidates.

ADM is attempting to influence public policy. Influence-peddling on Capitol Hill is primarily done through two means: campaign contributions and lobbying. It is very common -- and more effective -- for corporate interests that are attempting to persuade lawmakers to vote for pro-business policies to employ both methods simultaneously.

In its complaint letter about ADM, Public Citizen asks officials to determine whether ADM's government relations staff spends at least 20 percent of its time -- the legal threshold -- on activities to facilitate lobbying contacts with government officials.

Public Citizen believes it is possible that ADM will claim that its employees are exempt from filing because they are restricted to working through the various third-party organizations that the company financially supports, such as the Corn Refiners Association, the Renewable Fuels Association, the National Oilseed Processors Association, the National Corn Growers Association, the AgTrade Coalition and the U.S. Grains Council.

If this is the case, such third-party lobbying exposes serious flaws in the Lobbying Disclosure Act, as it easily allows companies to mask entirely their expenditures to influence the legislative and regulatory process.

Public Citizen also questioned whether ADM has hired lobbyist "consultants" to work on active legislative and regulatory matters pending before the federal government.

This is based on the 2002 Senate lobbying registration filings of former lobbyist Daniel G. Amstutz, who listed the "Farm Bill of 2002," "Trade Promotion Authority" and "Modernization of locks on Mississippi River System" as issues on which he lobbied for ADM. In 2003, Amstutz reversed himself, claiming in a letter to the secretary of the Senate that he was only a consultant and did not lobby for ADM.

Public Citizen contacted ADM in an effort to clarify this discrepancy but received no response.

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