Harkin Scandal

January 25th, 2013

Sen. Tom Harkin (D-Herbalife) gets cash for institute after legislative favors

DES MOINES—In the summer of 2011, when most Hawkeye State politicians spent sweaty sessions with constituents in Iowa’s communities, Sen. Tom Harkin (D-Iowa) sat down to a steak dinner with a team of corporate lobbyists and executives in Beverly Hills, Calif. 

Harkin, along with Jeremy Gold, the finance director for his 2014 Senate campaign, met Herbalife International executives at the Four Seasons Hotel at 8 p.m. on Aug. 16. Before Harkin’s rendezvous with Herbalife’s high command, he took a meeting with Hollywood mogul and Democratic donor Steve Bing, according to Harkin’s official schedule, which was provided to TheIowaRepublican.com by a source in Harkin’s Washington, D.C. office.

After Harkin’s meeting with Bing, whose company donated $250,000 to Majority PAC, Senate Democrats’ so-called super PAC, he met with Herbalife executives—CEO Michael Johnson, chief legal officer Brett Chapman and chief lobbyist John Venardos. The fivesome dined at CUT Restaurant, the “classic steakhouse” designed by chef Wolfgang Puck, where a steak can set you back $160. The “chic spot in the heart of Beverly Hills… has become the place to see and be seen,” according to CUT’s website.

Harkin and Herbalife officials chatted about America’s obesity epidemic, which Herbalife aims to combat with its line of weight-loss products, and Federal Drug Administration regulations, Venardos said. The 32-year-old company sells its products through independent distributors in more than 80 countries.

In Oct. 2011, two months after the swank supper, Venardos pledged $100,000 on behalf of Herbalife to the Harkin Institute of Public Policy at Iowa State University in Ames. He is the company’s senior vice president of worldwide regulatory, government and industry affairs, but he is not registered as a federal lobbyist (he terminated his registration in 2007).

Venardos would not respond to questions regarding whether Harkin solicited the donation for his ISU center at the dinner, but he said that dining party discussed the “obesity epidemic confronting our country” and Herbalife’s “continued support for the FDA, which is charged with enforcing the [] Good Manufacturing Practices regulations, so consumers could be assured [that] what was stated on the label was indeed in the product containers.”

Labor unions, foreign nationals, lobbyists, millionaire Democrats and corporations with interests before Harkin’s committees—such as Herbalife—have pledged $3.1 million to Harkin’s state policy organization. Herbalife has transferred $66,666 to the Harkin Institute, making the multi-level marketing company the institute’s seventh-largest donor.

“Herbalife and its independent distributors have long-appreciated Sen. Harkin’s leadership aimed at improving the health and well-being of American consumers,” Venardos said in an emailed statement to TheIowaRepublican.com. “Herbalife made a three-year commitment to financially support the establishment of the Harkin Institute at the university where his Senatorial papers and related documents would be stored for scholars to study in the years ahead.”

Harkin has pushed Herbalife’s interests since 1990s

Harkin has served as Herbalife’s chief patron in the federal government for decades. Harkin attended the company’s “New Orleans Extravaganza” in June 2002 to speak to Herbalife officials and distributors about “the status of preventative healthcare in the U.S.” Harkin also spoke at the company’s 25th Anniversary “Atlanta Extravaganza” in April 2005. “Il Senatore Tom Arkins” addressed a confab of some 35,000 Herbalife consultants about a bill he sponsored to make “good nutrition available to everyone,” according to an English translation of a report from Leonardo di Paola, an Italian Herbalife distributor.

An interview of Harkin in Herbalife’s internal newsletter illustrates the symbiotic relationship:

“I strongly believe in helping people help themselves, and that’s what Herbalife’s all about,” Harkin told Herbalife’s magazine, which features “Millionaire Training” tips for Herbalife’s distributors and weight-loss success stories from customers. “I’m also a long-time champion of preventative healthcare and good nutrition… The values my parents taught me helped me get ahead so I know the importance of opportunity—the kind of opportunity that Herbalife provides.”

In 1992, Harkin appropriated $2 million to establish the Office of Unconventional Medicine, which was later renamed the Office of Alternative Medicine. At a congressional hearing, Harkin claimed that bee pollen cured his allergies, according to a report by Stanford University emeritus professor of medicine Wallace Sampson. Harkin appropriated $200,000 to Royden Brown, who sold Harkin the bee pollen, to study the remedy, according to “Natural Causes: death, lies and politics in America’s vitamin and herbal supplement industry,” a book by journalist Dan Hurley. Roydon was later fined the same amount ($200,000) by the Federal Trade Commission for making false claims. Harkin then blasted OAM for its science-based research guidelines, which he described as “the unbendable rules of randomized clinical trials.” Harkin packed OAM’s council with his cronies, such as a travel agent from the Bahamas, where Harkin owns a vacation home.

When then-NIH director Harold Varmus tried to place stricter scientific research standards on the agency, Harkin changed the agency’s status so it would no longer have to answer to NIH and increased its appropriations to $104 million per year by 2002, an increase of 5,130 percent in ten years. In fiscal year 2012, it’s budget was $128 million, a 22 percent increase from 2002.

Harkin’s facilitation of Herbalife’s rent-seeking—seeking private economic gains by manipulating public policy—neatly aligns with the statist views of Iowa’s junior senator, who chairs the Senate Health, Education, Labor and Pensions Committee.

In 1994, Harkin authored the Dietary Supplement Health and Education Act, which “prevented the government from requiring Americans to get a prescription before purchasing the products they want and requires that all claims on supplements be truthful,” Harkin said. Essentially, it allowed supplement makers to voluntarily test their products before they sold them on the market; the U.S. Food and Drug Administration is only allowed to intervene after the product reaches market and allegedly harms people. The five-term Senator then said he planned to work with a “grassroots effort on behalf of natural products” because without that, “we’ll see a return to more paternalistic government policies that limit our freedom of choice.”

Harkin’s libertarian bent on health care policy regulation seems limited to advancing Herbalife’s interests.

In 2009, Harkin increased the authority of the Office of Alternative Medicine, now known as the National Center for Complementary and Alternative Medicine (NCCAM), by slipping a provision into a draft of the Patient Protection and Affordable Care Act of 2010, known to its supporters and detractors as Obamacare.

NCCAM, one of 27 agencies within the National Institutes of Health, has been criticized by scientists for wasting research money on pseudoscience studies such as evaluating heated water as a homeopathic remedy and other “quackery,” according to Dr. David H. Gorski, a surgical oncologist at the Barbara Ann Karmanos Cancer Institute.

Sen. Harkin, a principal author of the 906-page law, slipped a provision in the then-600 page draft that redefined America’s “healthcare workers” to include “licensed complementary and alternative medicine providers.” [Sec. 501(i) of PPACA]

Herbalife and its executives rank fifth among Harkin’s top campaign donors, according to an analysis of Federal Election Commission records by the Center for Responsive Politics. This campaign cycle, the company’s PAC transferred $3,000 to Harkin, more than any other Senator.

Despite Harkin’s decades of favors for the company, Herbalife could still use his help to fend off a brewing federal investigation. Recently, hedge fund manager William Ackman bet $1 billion on the company’s failure by shorting the stock, deriding it as “the best-managed pyramid scheme in the history of the world.” Ackerman’s research indicates that the company operates by entering new foreign markets, experiencing temporary revenue growth and then absorbing deep drops in sales before moving on to the next market.

Another financier, Daniel Loeb, injected $350 million into the company, betting on its continued profitability. The Wall Street Journal reported that the U.S. Securities and Exchange Commission has opened an investigation into the company. The company is also appealing a 2011 ruling by a European court designating Herbalife an illegal pyramid scheme.

Herbalife spent more than $650,000 lobbying Congress in 2012, according to an analysis of Senate records by the Center for Responsive Politics. The company lobbied to expand the definition of medical products covered by government benefits and to reduce tariffs on its exports to Russia.

‘From Ruth with Love’

The driving force behind the Harkin Institute’s fundraising is Harkin’s wife Ruth, a Washington, D.C.-based lobbyist and oil company executive. She orchestrated a strategy to push the institute through the Board of Regents, of which she is a member, in April 2011. Emails obtained through public records requests show that Ruth Harkin pushed for quick approval of the institute, after she quietly raised its seed money. Harkin needed to act quickly—while her political allies remained on the appointed board and before Republican appointees of Gov. Terry Branstad (R-Iowa) took office in May. Republicans sought to slow down regent approval of the institute, arguing that naming a state-run think tank for a sitting Senator posed inherent conflicts of interest and ethics problems.

“The Senate allows senators to create institutes in their own name and raise money for them,” Ken Gross, a lawyer and gift rules expert at the Skadden, Arps, Slate, Meagher and Flom, LLP law firm, told the Washington Free Beacon Thursday. Senators and their agents, however, are still prevented from soliciting donations from lobbyists and foreign agents. Venardos has refused to answer questions about whether Harkin solicited the donation at the August 2011 dinner and declined to answer other reporters’ questions after TheIowaRepublican.com inquired about the dinner.

Herbalife’s main lobbying focus, besides winning U.S. subsidies for its products, is reducing tariffs to expand its distribution to emerging markets, such as Russia. That happens to be a specialty of Ruth Harkin. As former CEO of the Overseas Private Investment Corporation, a government-owned company designed to sell political risk insurance to U.S. companies doing business in unstable countries, Harkin has deep experience dealing with Russian President Vladimir Putin.

According to her Iowa Board of Regents biography, Mrs. Harkin serves on the board of the U.S.-Russia Business Council and co-chairs the Russian Federation’s Foreign Investment Advisory Council Working Group on State Regulation of the Russian Economy, a consortium of Russian politicians and 42 CEOs of multinationals and banks chaired by Russian Prime Minister Dmitry Medvedev.

“Our prospects for business have never looked better in [Russia],” Ruth Harkin, then the top lobbyist for United Technologies Corporation (UTC), told a reporter in 2001 from a party near the Kremlin. “And what has made this specifically such a good time to do business here has a lot to do with President Putin.”

Harkin, who earns about $302,000 as a director for oil conglomerate ConocoPhillips Ltd., managed UTC’s international operations from 1997-2005. Sen. Harkin’s 2012 financial disclosure filing shows that Ruth Harkin, who jointly controls $10.28 million in assets with her husband, is still a paid consultant for UTC, a multinational technology conglomerate and defense contractor. Ruth Harkin, whose husband is a vocal critic of outsourcing, has praised “Russia’s skilled labor force” in contrast to the abilities of U.S. workers.

“We have found terrific Russian partners,” Harkin told the Moscow Times in 2003. “There’s a technical excellence here that in some cases surpasses our own.”

Venardos, the Herbalife lobbyist, said that no one at Herbalife has had contact with Mrs. Harkin on “any matter.”

Ruth Harkin did not respond to repeated requests for comment. Sen. Harkin has refused to comment on the Harkin Institute since early December, when he threatened to move his institute to Drake University. Following sustained questioning by reporters, Harkin has not held his regular conference call with Iowa journalists for several weeks.

The Harkin Institute’s advisory board next meets Feb. 4 in Ames.

[photo: Sen. Harkin speaks at an April 2005 Herbalife event in Atlanta/Leonardo di Paola]

Aug. 16, 2011 schedule from Sen. Harkin’s official office

Oct. 10, 2011 email from former ISU Foundation official Dan Saftig detailing Herbalife donation 

About the Author

Jeff Patch

Jeff Patch is a correspondent for TheIowaRepublican.com. He’s a communications, research and political consultant for Iowa candidates, causes and companies. E-mail questions, comments, insults or story ideas to jeff [at] theiowarepublican.com.

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