Of course Axelrod profits from the advertizing deal Tom Smith

The White House is claiming that because David Axelrod no longer owns stock in AKPD, the Chicago advertizing firm he used to be the majority shareholder of, he does not benefit from the business the White House is now throwing its way.  This is completely wrong, however, because AKPD still owes Axelrod money, $2 million in fact.  Unless AKPD is currently sitting on a pile of cash, which seems unlikely, then its ability to make good on this debt, which comes due soon, depends on its cash flow, and its cash flow depends on its deal flow, and that is exactly where the White House comes in.  Look at it this way.  Suppose Axelrod were to sell the obligation owed him by AKPD and you were thinking of buying it.  You would have to discount it down from the $2 million by some amount to take account of the possibility that AKPD would not be able to pay it.  Whether they have fat contracts to advertize for the health care "reform" has everything to do with whether AKPD will be able to repay Axelrod for the sale of his stock, and thus how much that obligation is worth.  There is therefore a direct conflict between sending business to AKPD and Axelrod's position of influence in the White House.

Whether government ethics laws are so obtuse as not to pick up on an only slightly indirect conflict of interest as this, I don't know, but they certainly should.

Comments

[Jonathan]

It's disturbing on two levels. One, they're doing it. And two, they have open contempt for the intelligence of the public. Perhaps it was ever thus in DC, and certainly in Chicago. I think that's what many Americans believe, and why so many citizens are uninterested in the details ("all the pols do it"). But now so much of our GDP is controlled by govt that the scope of official corruption is unprecedented and astonishing. It's impossible to keep track of it all. And the crooks, including those at the highest level, exploit the public cynicism and sense of powerlessness. None of this bodes well.

[Floridan]

Didn't Dick Cheney receive deferred compensation and hold stock options from Halliburton at the same time the company garnered something like 20 billion dollars in government contracts?

[bailey]

Where is the evidence that the White House is throwing money toward AKPD? The article certainly doesn't say that. The firm was hired by a coalition of private groups paying private money. It doesn't strike me as particularly suspicious that pro-health care reform groups would want to hire AKPD. They explicitly support progressive causes and David Plouffe -- the winning campaign manager in the last election -- is one of their principals.

By your logic every progressive group that hires AKPD to advance their cause would be a sign of the White House sending business to AKPD. I just don't see it.

[Johnny]

Where was the outrage when Dick Cheney, Condoleeza Rice, Donald Rumsfled, etc were doing much much worse.

[Jonathan]

I recall outrage from many people over most of the things that members of the Bush administration did. I don't think the outrage was justified, but it's a little odd not to remember it. The assertions that Bush wanted to invade Iraq because he had once been in the oil business and would somehow benefit, and that Cheney wanted war because he had been CEO of Halliburton and would somehow benefit, made little sense on slight reflection yet were thick on the ground for years. But of course we must give the current administration all benefit of doubt, and when their actions and words conflict we should trust their words and suspend judgment on their actions.

[bailey]

Look, I'm not giving them the benefit of the doubt, I'm just saying that what the administration is accused of in this post -- directing business to firms in which they have a financial interest -- doesn't seem to be happening here.

From what I can tell from the linked article, the accusation is actually the converse: that because Axelrod still has an indirect interest in AKPD, that firms are hiring them in hopes of influencing the administration's health care policy. If that's the accusation, the concern seems pretty far-fetched to me. Partly because any client's ability to affect Axelrod's financial interest is pretty marginal. And partly because I'm skeptical that Axelrod would (or could) sell out the president's agenda for such a marginal benefit.

So, sure, it's good to be vigilant about stuff like this, and it seems prudent for Axelrod to wrap up this relationship as soon as possible (as is apparently happening). But I just really don't see the corruption here.

Likewise, I don't think that Bush and Cheney were corrupt in that sense. But, the contracting that was done in connection with the war in Iraq is certainly cause for real alarm for various other reasons.

[Mike]

Myside bias. No doubt Tom Smith, like Barney Frank, is undeniably smart. It's just that either of them rarely seem to notice the wrong stuff their side does.

Cheney made a killing off of stock options:
http://www.rawstory.com/news/2005/Cheneys_stock_options_rose_3281_last_1011.html

You just gotta accept that you can't trust the JUDGEMENT of smart people.

Politics is like the adversarial system in the U.S. Smart guys like Frank and Smith are going to say smart things that are so slanted that it borders on falsehood. Consider their arguments accordingly.