Silicon money: How do tech firms buy influence in Washington?

Nonprofits are true powerbrokers

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EFF's position--which supported reimbursing companies for wiretapping compliance--also happened to coincide with the interests of some of the telecommunications giants that provided it with cash. AT&T, Bell Atlantic, Apple Computer and Microsoft gave EFF a combined $235,000 in 1993, according to CyberWire Dispatch.

With EFF's cautious endorsement, CALEA easily cleared both houses of Congress, and President Clinton signed it in October 2004. After a worried EFF board ousted Berman soon afterwards, he created what became CDT and brought with him money from Nynex and a penchant for compromise and deal making. Today, CALEA is being applied to voice over Internet Protocol (VoIP) and broadband connections, and it has become the subject of a federal lawsuit.

Newt Gingrich's favorite think tank
Despite their influence, nonprofits can easily fall victim to the vagaries of Beltway politics--a precarious position underscored by the fate of the Progress & Freedom Foundation, one of Washington's most influential think tanks in the vanguard of the Republican revolution in the mid-1990s. Mostly conservative, and in some ways libertarian, the foundation was the ideological favorite of then-House Speaker Newt Gingrich, and it wielded unusual clout as a result.

"The (contribution) percentages are only important insofar as you accept an assumption that they somehow influence the work that is done here. I would argue vehemently against that."
Patrick Ross, senior fellow, Progress & Freedom Foundation

"Of all the think tanks, that's one whose reports are not just going to sit on the shelf," lobbyist Jim Tozzi, whose firm has helped tobacco and chemical companies fight government regulations, told Time magazine in 1995. "If I give somebody money, I want to make sure the report will be read. If I give to that group, I know it will be."

Then Gingrich ran into ethics charges, a leadership challenge and allegations of an improper $4.5 million book deal. Because PFF funded Gingrich's college course, called "Renewing American Civilization," it was drawn into the investigation.

The foundation suffered that blow around the same time the Clinton administration began pursuing Microsoft through the court system on antitrust charges.

Major conservative, free-market and libertarian groups sided with Microsoft--this was, after all, a Democratic administration assailing a high-tech company that, until 1997, had been practically unfettered by government regulation. The lone exception was PFF, which had been taking money from Microsoft rivals Sun Microsystems and Oracle. PFF called for a complete breakup of the software company.

An essay published in 2000 by the free-market Cato Institute, which did oppose the antitrust case and lost support from Sun as a result, accused PFF of "making the case for Microsoft's archrivals, like IBM, Oracle and Sun Microsystems." Cato receives about 85 percent of its funding from individuals instead of corporations, so it's not terribly vulnerable to pressure from contributors, said David Boaz, a vice president at Cato.

"Corporations support organizations because they think they'll get something out of it," he said. "One of the great virtues of not getting much corporate money is that you don't hear (demands) very often."

Since the Microsoft trial, PFF's staff has gone through a near-complete turnover. It's hired former analysts from Cato, Citizens for a Sound Economy (now FreedomWorks) and the Competitive Enterprise Institute, which opposed the antitrust suit. PFF has become primarily active on digital copyright and broadband topics, and it no longer talks about antitrust. Microsoft has even become a sponsor.

In a recent interview, foundation spokesman Patrick Ross said his group's public stance was not for sale. "That's a pretty scurrilous charge," Ross said.

"If I give somebody money, I want to make sure the report will be read. If I give to (PFF), I know it will be."
Jim Tozzi, advisory board member, Center for Regulatory Effectiveness

Today PFF lists as supporters a wealth of companies, including AT&T, BellSouth, Disney, eBay, Intel, Sprint Nextel, Qwest Communications International and Time Warner. The nonprofit group does not disclose specific dollar figures or breakdowns, but it says it has a minimum of $25,000 for corporate contributions. Individual contributions appear to be minimal.

Ross says PFF does not disclose its funders' payments as a "courtesy to these people funding us. I don't think it's appropriate for us to put that amount out there. If they want to disclose it, it's certainly their prerogative."

PFF, which had a 2004 budget of $3.1 million, paid its president $235,000 that year. Unlike CDT, the foundation does not disclose rough percentages that could indicate how much cash came from a certain corporation.

"The percentages are only important insofar as you accept an assumption that they somehow influence the work that is done here," Ross said. "I would argue vehemently against that." 

CNET News.com's Anne Broache contributed to this report.