Palast on past Mendelsohn scandal

This is worth a read. Just to give the Donorgate scandal some depth…

Top investigative reporter GREG PALAST explains how new Labour’s chief fundraiser was caught out trading cash for access years ago.

IT was a stunning admission. Prime Minister Gordon Brown’s crony explained to the US businessman, in evil detail, exactly how the fix is done in Britain.

Unfortunately for Jon Mendelsohn and his partners, the “businessman” was, in fact, an undercover reporter.

Today, Brown’s foes are calling for Mendelsohn’s resignation as chief fundraiser of the Labour Party for his admitted knowledge of £630,000 in dodgy, possibly illegal, campaign contributions to Labour.

What’s odd here are the protestations of shock at the behaviour of Mendelsohn, described in The Guardian as an “ethical” lobbyist. “Ethical” my arse.

It was exactly nine years ago that Mendelsohn and his lobby firm partners were caught trading cash for access. How this Mendelsohn character ended up heading Labour Party fundraising and how he obtained the sobriquet “ethical” is the real shocker.

I know a few things about this Mendelsohn. The “businessman” with the hidden recorder was me. In June 1998, joined by my recorder and a real US businessman, Mark Swedlund, who designed my elaborate corporate front, I met Mendelsohn at his Soho office. There, Mendelsohn confirmed what was already on tape from his partners in the lobby firm he founded, LLM.

I explained my corporate needs – some environmental rules needed bending. I hinted that I was with Enron. Mendelsohn’s partner Neil Lawson told my recorder that, if I paid LLM £5,000 to £20,000 per month, “we can go to anyone. We can go to Gordon Brown if we have to.” Brown was at the time Chancellor of the Exchequer. Could the lobbyist provide concrete examples of a fix?

Easily. Here is a short list of LLM claimed accomplishments:

• Inside information on then-chancellor Brown’s budgets.

• Tax avoided by a supermarket chain following millions donated to a new Labour pet project.

• A pass on anti-trust action against client Rupert Murdoch’s media empire.

• And, for Gordon Brown, a favour that the Mendelsohn team expected to redeem.

LLM, which stands for the founders Lucas, Neil Lawson and Mendelsohn, were about to derail Brown’s plan for a tax on car parks. This would cost Tesco, which was an LLM client, £20 million annually. LLM was holding secret meetings that week in June 1998 with Tony Blair’s Downing Street Policy Unit to get Tesco exempted from the proposed tax.

The tax threat went away after LLM advised Tesco to drop £11 million into funding for Blair’s odd Millennium Dome project.

“This government likes to do deals,” Lucas told me.

But this deal was complex, Mendelsohn said, not so simple as cash paid for a tax break.

“Tony is very anxious to be seen as ‘green’,” Mendelsohn explained to me and my confederate.

“Everything has to be couched in environmental language – even if it’s slightly Orwellian.”

So LLM devised a set of cockamamie gimmicks for Tesco, like offering bus services to the elderly, which would paint the retailer green.

It worked. Tesco was spared the tax – though the company denies categorically that its cash dumped into the Dome bought any favours.

The year of my original investigation – dubbed “Lobbygate” – anti-trust authorities were looking into Rupert Murdoch’s companies’ alleged predatory pricing practices. LLM carried the word from Downing Street, according to Lucas, that, if Murdoch’s tabloids toned down criticism of new anti-trust legislation, the law’s final language would reflect the government’s appreciation.

On the other hand, harsh coverage in Murdoch’s papers could provoke problems for the media group in Parliament’s union-recognition Bill.

The message to muzzle journalists was not, said Lucas, “an easy one in their culture” – journalists being a trying lot. However, the outcome pleased LLM clientele.

It also happened that, on one of the days that I recorded Mendelsohn’s partners, they boasted of informing an LLM client about details of Gordon Brown’s budget plans before the Chancellor’s announcement went public.

A lobbyist competing for my “business,” when asked to match the offer of inside information and deal-making held out by LLM and another new Labour firm, said: “It’s appalling. It’s disturbing” and added that he would refuse to match the LLM services at any price.

If LLM appeared favoured by Brown’s operation, Brown himself received favours from LLM.

“Gordon Brown asked us to have our client (consultancy firm) KPMG host a breakfast for him where it was prearranged that they would praise him for his prudent budgets.”

Brown basked in this Potemkin praise-fest, a favour that would be returned with special access – and for my own clients, if I paid the retainer.

Whether Mendelsohn, Lawson and Lucas actually pulled off all that they claimed, I can’t say. Though just kids in their twenties, LLM had garnered millions in revenue, a lot of loot if for mere advice.

No-one seriously investigated, no-one asked uncomfortable questions of Brown, Blair or the man at the centre of several of these supposed “deals,” Peter Mandelson, now an EU commissioner.

However, because Mendelsohn made these tawdry claims – or grinned at me while his partner made them – and they were published on page one of every newspaper in the realm, with part of an LLM tape broadcast on BBC Newsnight, one would think that perspicacious Brown would have avoided Mendelsohn like the plague.

But the PM embraced Mr Let’s-Make-A-Deal. The reason was made clear to me by Mendelsohn himself, a man as brainy as he is cynical and wealthy. Those many years ago, at the dawn of the Blair regime, Mendelsohn handed me a confidential manifesto that he’d penned for LLM clients only. It was a map of the soul of new Labour.

Here was a chilling combination of Mendelsohn, Mandelson and Nietzsche. “AN OLD WORLD IS DISAPPEARING AND A NEW ONE EMERGING,” he announced in upper case.

In the “Passing World” were “ideology” and “conviction,” which would now be replaced by “pragmatism” and “consumption.” “Buying” would replace “belief.”

And ultimately, in this Brave New Labour World, style was all. “WHAT YOU DO,” wrote Mendelsohn, was passe, replaced by, “HOW YOU DO IT.”

So why demand Mendelsohn’s head now? Gordon Brown is a prudent man whom, I suspect, reads a newspaper or two – and knew exactly whom he had positioned to fill his party’s coin sacks. Mendelsohn is just a gun for hire, a forgettable factotum.

I wouldn’t place the blame on the hired gun, but on the man whose finger is on the trigger.

The series Lobbygate: Cash for Access was originally published by The Observer in July 1998 by Greg Palast and Antony Barnett. For a complete history of the scandal, read Blair and the Sale of Britain in The Best Democracy Money Can Buy (Constable & Robinson 2004). Excerpt at http://www.GregPalast.com

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