Freehold Capital Partners and the Big Tobacco Lobbyist
by Slade Smith | 2011/02/03

Jim Tozzi is the kind of guy who will dance for you if you give him enough money. 

Just ask the tobacco industry-- Tozzi has danced long and well for them.  Tozzi, a former budget official in the Nixon and Reagan administrations, capitalized on his government experience to found Multinational Business Services, a lobbying firm which garnered million of dollars in contracts from Philip Morris to promote its pro-smoking, anti-regulation agenda.

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A May 2004 article in Washington Monthly encapsulates some of Tozzi's methods:

In 1983, after 20 years of learning how to induce regulatory sclerosis from the inside, Tozzi set up a consulting shop--Multinational Business Services--to do it from the outside. MBS clients have included everyone from chemical companies to tire and rubber manufacturers, but Tozzi's most controversial client was undoubtedly the tobacco industry, which during the 1990s sought to battle the emerging scientific consensus that secondhand smoke was a danger to those who were over-exposed to it, particularly people living or working with smokers. One of tobacco's strategies was to advocate standards for "good epidemiology" that would have made it almost impossible to conclude that secondhand smoke was dangerous. These standards insisted that unless secondhand smoke doubled your risk of getting cancer, it should be ignored--a standard, notes tobacco researcher Stanton Glantz of the University of California-San Francisco, that would bar regulation of nearly any environmental toxin.

Tozzi played a key part in this push, earning hundreds of thousands of dollars from Philip Morris for such activities as supporting "legislative mandates on epidemiological standards" and increasing "debate on [secondhand smoke] risk assessment within EPA," according to internal company documents. In one instance, Tozzi deployed a phalanx of lobbyists to his old haunts at the OMB to block the implementation of a government medical code, used for Medicare and Medicaid claims, that tracked secondhand smoke illnesses. By presenting itself as "a defender of good science, not tobacco," noted the Los Angeles Times in a 1995 article, Tozzi's company succeeded in getting the rule changed--an obscure but major victory for his client. As he explains today, had the government been allowed to accumulate such statistics, tobacco firms "could have been subject to tons of legal actions saying, 'Look at all these illnesses caused by secondary smoke.'"

Efforts to fight just a single aspect of tobacco regulation could bring in considerable sums.  For instance, internal Philip Morris memoranda show that the tobacco giant paid Tozzi approximately $300,000 dollars for "invaluable" work on behalf of the company's effort to undermine that EPA risk assessment study on second hand tobacco smoke, which concluded that exposure to second hand smoke presented a "serious and substantial public health impact," particularly on infants and small children-- causing an increase in bronchitis, pneumonia, ear infections, and other diseases.  Tozzi's work, according to Philip Morris, included "generating technical briefing papers, numerous letters to agencies and media interviews." 

Philip Morris also paid Tozzi's company $880,000 to establish a front group called the Institute for Regulatory Policy to promote pro-tobacco issues by disseminating big tobacco's propaganda while purporting to be a broad-based industry and trade advocacy group. It's a Tozzi trademark-- creating an "independent" organization with a credible sounding name on behalf of whatever industry is paying well that day.

Today, Tozzi runs another front group with a credible-sounding name, the Center for Regulatory Effectiveness (CRE), founded in 1996 when the Institute for Regulatory Policy apparently outlived its usefulness and went dark.  The CRE purports, according to its website, "to provide Congress with independent analyses of agency regulations." 

But CRE analysis is anything but "independent"; in fact it is bought and paid for by biased parties that have skin in the game.  Special interests, mostly unpopular ones like big tobacco that can't get much popular grassroots support for free, pay CRE to take up their cause. 

CRE's website contains marketing materials that specifically reveal this fact.  According to its site, "CRE is able to offer analysis and advocacy on regulatory issues in cost-effective fashion," with services to include "coverage of the issue on the CRE website," "technical analysis of the regulatory issue of concern";, "presentation of analytical papers to federal agencies",  and "advocacy before the federal agency on the issue."  Paying firms "are given an opportunity to designate a particular issue to be addressed by the Center and to review CRE's work product prior to its dissemination." 

So what does this all have to do with Freehold Capital Partners, our friends with the patent-pending private transfer fee scam?

Well, last year, as the Federal Housing Finance Agency (FHFA) was considering proposing a rule to prohibit Fannie and Freddie from issuing federally guaranteed mortgages on properties with Freehold-style private transfer fee covenants, a section on the CRE website devoted to Freehold Capital Partners' private transfer fee covenants suddenly came into existence-- providing coverage of the issue on the CRE website.  That was quickly followed by an ever so fair and balanced CRE draft providing technical analysis of private transfer fees. Next came a CRE presentation to federal agencies in the form of a November letter to the FHFA, advocating Freehold's preferred remedy of mere "disclosure" of private transfer fee covenants. 

It's like the CRE, once paid, just goes down the checklist of services provided, like a Jiffy Lube technician.  It's hard to believe that industries pay thousands for this kind of service, or that it is works, but I guess it must fool people in some cases.

Then, two weeks ago, CRE announced that it had "completed its review" of private transfer fees and forwarded its report to the FHFA.  The report unsurprisingly concluded that private transfer fees should be subject only to disclosure requirements rather than be banned for Fannie and Freddie mortgages.  Quickly, Freehold Capital Partners issued a press release touting CRE's "extensive study of the issue", as if this truly was an independent think tank providing unbiased analysis, not a front group paid by its clients to arrive at pre-determined conclusions.

As far as who paid the bill for CRE's work on this issue, there's really only one suspect-- Freehold Capital Partners itself.  Unless I miss my guess, it looks like Freehold Capital Partners has joined big tobacco in having a cause that is so unpopular that they have to pay a faux think tank to generate the false appearance of support by any independent entity.  A sad, sad sight to see! NOTE:  Freehold has denied my theory that they paid for the study in the comments-- see the comment by J.B. Alderman here.

Fortunately, virtually every state legislative body that has considered these onerous private transfer fee covenants has wisely decided that they have no legitimate economic purpose and simply banned them.  And the FHFA just this week formally proposed a ban on Freehold-style private transfer fees for federally-backed mortgages in its domain.


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