AT&T wields enormous power in Sacramento

SACRAMENTO — As the sun set behind Monterey Bay on a cool night last year, dozens of the state’s top lawmakers and lobbyists ambled onto the 17th fairway at Pebble Beach for a round of glow-in-the-dark golf.

With luminescent balls soaring into the sky, the annual fundraiser known as the Speaker’s Cup was in full swing.

Lawmakers, labor-union champions and lobbyists gather each year at the storied course to schmooze, show their skill on the links and rejuvenate at a 22,000-square-foot spa. The affair, which typically raises more than $1 million for California Democrats, has been sponsored for more than a decade by telecommunications giant AT&T.

At the 2010 event, AT&T’s president and the state Assembly speaker toured Pebble Beach together in a golf cart, shaking hands with every lawmaker, lobbyist and other VIP in attendance.

The Speaker’s Cup is the centerpiece of a corporate lobbying strategy so comprehensive and successful that it has rewritten the special-interest playbook in Sacramento. When it comes to state government, AT&T spends more money, in more places, than any other company.

It forges relationships on the putting green, in luxury suites and in Capitol hallways. It gives officials free tickets to Lady Gaga concerts. It takes lawmakers on trips around the globe and all-expenses-paid retreats in wine country. It dispenses millions in political donations and employs an army of lobbyists. It has spent more than $14,000 a day on political advocacy since 2005, when it merged with SBC into its current form.

A handful of labor unions and trade groups have spent more on a combination of lobbying and direct political giving, but state records show that in the last seven years, no single corporation has spent as much trying to influence lawmakers as AT&T. At the same time, a tide of consumer protections has ebbed and the company has been unshackled from the watchful eye of state regulators.

Efforts to force phone companies to be more transparent about fees on cellphone bills died; so did an attempt to end monthly charges to unlist a phone number. The charge for that kind of privacy rose sixfold in a three-year period, and those fees generate $50 million annually for AT&T, according to a 2009 legislative analysis.

State controls on land-line pricing were eliminated. And in 2010, legislation to make it easier for consumers to stop receiving the phone book — another revenue source — was defeated after fierce opposition from AT&T. The bill received just 12 votes in the 40-member state Senate, the scarcest support for any measure that reached the Senate floor that year. This year, AT&T is part of a coalition of telecom and high-tech companies seeking to strip state regulators of authority over some basic telephone services.

The company, whose annual report pegged its revenue last year at $34 billion, does suffer the occasional setback. For example, the state Senate in 2009 refused to confirm a regulator for the telecommunications industry who had AT&T’s strong backing. But defeats are rare.

AT&T has “shown the ability to exercise political power on an unprecedented scale,” said Regina Costa, a researcher for the Utility Reform Network, a consumer group.

At the state’s Division of Ratepayer Advocates, Denise Mann handles telecommunications issues.

“Every day I look at a case and I think, well, if they [AT&T] don’t care, we have a good chance,” she said. But if AT&T’s corporate offices do care, she added, “all we can do is appeal to conscience, reason and the public interest.”

Ken McNeely, president of AT&T California, said his company is active in Sacramento because of its large presence in the state.

“We have about 40,000 employees, we have about 50,000 or so retirees, millions of customers, millions of shareholders in the state,” he said. “It’s important for us to participate, and participate actively, in the public policy arena.”

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Many of the company’s victories have come at the California Public Utilities Commission, a five-member panel appointed by the governor that oversees the telecommunications industry. Its members have waved through mergers, limited regulations on cellular service and helped AT&T rebuild itself into a telecom behemoth almost 30 years after it was split apart in the wake of a federal antitrust case.

The rest of AT&T’s wins come at the state Capitol, where the company focuses most of its lobbying efforts. There, lawmakers have passed bills that have translated into millions of dollars for the firm’s bottom line and stopped dozens of measures that AT&T has opposed.

The core of the firm’s strategy has long been the two-day Speaker’s Cup, the jewel of the legislative fundraising circuit. There is an annual golf outing in Del Mar for the Capitol’s minority Republicans, but it raises a fraction of what Democrats get at Pebble Beach.

Tickets for the Speaker’s Cup, to be held May 5-6 this year, average more than $12,000 per person. Some legislators donate to the cause from their campaign funds; otherwise they pay nothing for a weekend that, in addition to world-class golf, features free-flowing wine and four-star cuisine. Body wraps and hot-stone massages are de rigueur.

AT&T spent more than $225,000 on last year’s event. The goody bags contained a new iPad with a thank-you note signed jointly by Assembly Speaker John A. Perez (D-Los Angeles) and AT&T’s chief of government relations.

In addition to the Pebble Beach festivities, AT&T has given hundreds of tickets — for concerts, the World Series, even Disney on Ice — to lawmakers and their staffs over the years. A phone call to one of the company’s lobbyists is typically all it takes to have a ticket or two waiting at the box office.

Assemblyman Steven Bradford (D-Gardena), chairman of the lower house’s telecom committee that hears all AT&T-related bills, went to the 2011 NBA All-Star game courtesy of AT&T. In 2009, his predecessor, Sylmar Democrat Felipe Fuentes, attended a Lakers playoff game. Perez, then expected to be the next speaker of the Assembly, was treated to Game 2 of the 2009 NBA Finals.

Perez said that he didn’t remember AT&T paying his way to the game, which the Lakers won in overtime, and that the company has received no favorable treatment in the Legislature. He dismissed the notion that the Speaker’s Cup, a gift or a campaign check would influence policy decisions.

“I know people love to try to create that impression ... but the reality is, that’s not the way things happen. People give money because of whatever reasons motivate them, and we evaluate legislation regardless,” he said. “I know that that’s a hard concept for some people…. I cannot think of anything they’ve asked me to do.”

They don’t necessarily have to ask, said Derek Cressman, Western states director for Common Cause, a watchdog group. There may not always be a direct quid pro quo, he said; influence is often more subtle.

“What these things do is create a sense of gratitude and indebtedness,” he said. “It’s basic human nature: If someone does something nice for you, you want to do something nice for them.”

AT&T’s lobbying shop is among the most robust in the Capitol. The company employs three full-time advocates and keeps on retainer seven blue-chip firms that can deploy dozens more. Sen. Lois Wolk (D-Davis) saw the company’s muscle at a hearing of the Senate telecom committee last year.

The veteran legislator was pushing for a law to stop fraudulent charges from being added to customers’ wireless bills by phone companies, a practice known as “cramming.” She wanted to require carriers to report the number and nature of cramming complaints and to empower regulators to quash unwanted charges. Wolk said her measure was needed after efforts to curb the practice were watered down by the state utilities commission.

She said her bill was poised for passage after she had spent days hammering out changes negotiated with Sen. Alex Padilla (D-Pacoima), the committee chairman. Then Bill Devine showed up.

Sporting round glasses and loose-fitting suits, Devine is AT&T’s chief operative, a fixture in the Capitol and at fundraisers. He strolls the halls greeting lawmakers like friends, addressing them by first name rather than by title and greeting many with a hug.

In the committee room, Devine took a front-row seat reserved for legislators and staff as Wolk approached the podium to present her bill. When she had finished, he followed with his own vision of what the measure should be. Wolk was visibly upset.

“It’s highly irregular to have a lobbyist come up and make a proposal … without having shared it with me … or the chair,” she said later.

But as others on the committee voiced support for AT&T’s position, Wolk grudgingly agreed to postpone the vote. A week later, the bill died.

“In the olden days, people have told me … chairs would have thrown the lobbyist out of the room and scolded him for his disrespect of the author and the process,” Wolk said after the hearing.

The senator describes AT&T’s lobbying style as more aggressive than that of other Capitol interests. She said its lobbyists “flooded” her office before the bill was heard, asking that she drop it. Later they asked her to delay it. When she persisted, they asked her to water it down. Wolk said the lobbying effort was unusually intense for what she deemed relatively minor legislation.

“I can’t even imagine what it would be like if I had a really dramatic bill,” she said.

Devine declined to comment.

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From 1999, when the state began keeping electronic records of lobbying activity, through the end of 2011, AT&T spent more money trying to influence public officials than any other single corporation. In those 13 years, according to records from the California secretary of state, AT&T and its affiliates spent more than $47 million on lobbying — more than twice the figure for the next biggest corporate spender, Edison International, which shelled out about $21.9 million.

In addition, AT&T hands out, on average, more than $1 million in political contributions each year. Every current member of the Legislature has received at least $1,000; chairmen of the committees that oversee the telecommunications industry get far more.

Padilla has chaired the telecommunications panel since late 2008, collecting $41,200 from AT&T and its employee political action committee — more than the company has given since then to any other lawmaker except the leaders in each house. In the Assembly, Steve Bradford has received $23,500 from AT&T since becoming telecom chairman in 2010.

In the 2003 recall campaign against Gray Davis, AT&T spent $425,000 trying to save his governorship. As soon as he was gone, AT&T sent checks to the man who replaced him. The first arrived in Schwarzenegger’s campaign account four days after he was sworn in.

In total, his political treasuries received $490,000 from the telecom company and its affiliates during his tenure.

By January 2006, Schwarzenegger had installed Susan Kennedy, a business-friendly Democrat who helped AT&T while she was a regulator on the Public Utilities Commission, as his chief of staff. At the time, AT&T was preparing its most important legislative move in years: pushing to undo decades of cable franchising and gain access to California’s cable market.

Fabian Nuñez, a Los Angeles Democrat who was then Assembly speaker, introduced legislation on phone companies’ behalf to do just that. AT&T spent more than $23 million that year on lobbying and advertising in favor of the bill, which Schwarzenegger signed into law that September. Today, AT&T’s federal filings show billions in revenue from its cable business, the largest piece of which is in California.

Kennedy, Nuñez and other key players in that legislative effort now have financial ties to AT&T. Nuñez is a partner at Mercury Public Affairs, a public relations firm that lists AT&T as a client. Martha Escutia, a Whittier Democrat who headed the Senate utilities committee when the cable bill passed, now lobbies the Public Utilities Commission on AT&T’s behalf. Kennedy has been hired by a law firm that lobbies the federal government for the company.

Nuñez declined to comment on whether he works on AT&T business. A Mercury spokeswoman noted that AT&T was a client before Nuñez joined the firm. Escutia declined to comment, as did Kennedy.

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Six months after signing the cable bill, Schwarzenegger was feted at a Texas fundraiser by AT&T brass, including McNeely. The governor also attended a celebration for After-School All Stars, a charity he founded in the early 1990s. The cause for the festivities: a $500,000 donation from AT&T.

Charitable giving has long been entwined with AT&T’s political strategy. The firm has given $145,000 to two charter schools in Oakland founded by Gov. Jerry Brown, $50,000 of that since Brown was elected governor. It gives to a range of other groups, and many AT&T representatives serve on their boards. The organizations often back the company’s priorities.

In June, California’s utilities commission held a hearing on the proposed AT&T merger with T-Mobile. Several community groups praised AT&T’s contributions to them as the chief reason to support the potential new mega-firm. When AT&T was lobbying for the cable bill, groups including local Boys and Girls clubs and the NAACP — whose president was then being paid $12,000 a month by AT&T as an advisor — signed on as supporters.

And when Kennedy’s replacement on the utilities commission faced a confirmation fight in the state Senate, letters of support arrived from charitable groups that had received AT&T money that year. Among them were United Way branches in the Bay Area, Fresno, Merced, San Joaquin, Butte and Glenn counties that, according to federal tax records, received a combined $589,464.

McNeely, calling his company a “good corporate citizen,” denied any link between the company’s giving and its political agenda.

“Absolutely not,” he said. “AT&T has placed a significant corporate value in giving back to communities for more than a century. We have been active participants in the communities in which we live and work for over 100 years and we’ll continue to do that for the next 100.”

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