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Will Southern Strategies Become A Southern Tragedy?

 

By Jacob Engels 


Anyone who has read the recent articles from Aaron Deslatte of the Orlando Sentinel or our thoughts on the East Orlando Post realizes that the audits coming to the lobbying industry are happening, in large part, because of some mischevious… ahem… embellishments by one of Tallahassee’s largest and most prestigious lobbying firms: Southern Strategy Group. Responses from the posts have varied from dismissive to confused.  


Now the three "big boys" of Tallahassee Lobbying- Uber-Lobbyist from Miami Ron Book, GOP Powerhouse Brian Ballard of Ballard and Associates and Paul Bradshaw's Southern Strategy Group will be audited and we will know soon who's on the up and up and who's cookin' the books. Some people think Bradshaw has caused a pox on everyone's house.


Reaction to our investigative reporting here at the East Ortlando Post has been diverse.


On September 16, lobbying icon Mac Stipanovich took to twitter and opined “The likely surprise from lobbyist financial report auditing is that many over report.  Not illegal, commendable even, and good for business.” We're told chatter around the Governor’s Club Lounge is more curious.  One prominent young lobbyist was more confused than anything: “We would die for the client roster Southern Strategy Group has.  By the most austere accounting, they are a top 3 firm in the state, with presence in every major city.  I can understand why some of these firms would lie because the truth would be pretty damn embarrassing, but why them?”

 

What the heck is going on at Southern Strategy Group?



To fully understand why, you have to go to the origins of Southern Strategy Group and then to the events that led to their current situation. The firm was founded by Paul Bradshaw and David Rancourt, two well-placed alumni of the Jeb Bush Republican Revolution in Florida.  Both were well versed in the nuances of the executive branch, and founded a firm that understood how, and where, to apply pressure to get results for their clients.


The firm scored a major hit by hiring outgoing house speaker John Thrasher, a popular and highly respected Jacksonville legislator who would, after his career at Southern, go back to the Florida Senate where he would twice be rules chairman.  He would also serve as chairman of the Florida GOP and, as of the posting of this article, is believed to be the frontrunner to replace Jennifer Carroll as Lieutenant Governor. This possiblity makes the narrative so much more concerning.


The synergy created by this team was remarkable.  They gained scores of A-List clients, brought in millions in fees and enjoyed the respect and admiration of their most bitter adversaries. The Bush years were good to Southern Strategy Group, but the election of governor Charlie Crist necessitated change.  The firm model evolved into a three headed monster: Bradshaw would oversee day to day operations, Thrasher would spearhead the legislative lobbying and Rancourt, a Pike fraternity brother at FSU and long time friend and supporter of Governor Crist would handle the executive branch lobbying.



It worked well. Despite the loss of Bush, they continued to grow and operate at the highest levels. Clients were happy, partners were well paid and competitors were scared. In 2009, a series of events unfolded that some believe will permanently alter the future of the once great firm. First, Governor Charlie Crist announced he would forego a reelection campaign for governor in exchange for a safe bet election to the US Senate. Second, the declining health and subsequent death of popular Jacksonville area senator (and former senate president) Jim King led to a rare special election open seat to the Florida Senate that Thrasher decided to enter. 


The exact sequence of events here is not fully comprehended, and the East Orlando Post is uncomfortable putting the speculation of some ill-informed fringe players in print. What is pretty well known is that the firm wanted to find a way to compensate Thrasher for his ownership in the firm, a stake that he would have to forfeit upon return to the senate. It is widely believed that Rancourt, sensing the end of his strong run with the Crist administration, sought to invest his time and energy into other business ventures and piggy backed on the ideas brought forth to compensate Thrasher. Oh, to be a fly on the wall!


So the firm  ended up creating a mechanism for ownership – tradable, securitized shares – to be created.  Not surprisingly, the East Orlando Post doesn’t have access to the founding documents and we don’t know the initial percentages assigned to the three founders.  Other hires were made that certainly merited shares, and we are sure they got them. Over the next two years, Rancourt left and Thrasher returned to the Senate.


So Southern Strategy stock is out there.  What could that possibly have to do with over-reporting of revenues? Some the stock value is being propped up with bogus reporting. As far we know that Southern Strategy Group is the only major lobbying firm in the state of Florida to offer ownership through a stock as a security that you can buy and sell.



A competitor with a firm viewed as friendly to Southern spoke to us made some good observations but posed some questions, too.


“I think most everybody agrees that Southern Strategy Group is full of good guys that are well liked by legislative leadership and rank and file alike.  They have good experience, good contacts and good clients. What those of us who work with them can’t understand is how the firm manages to survive under the weight load of expense they have.

Other firms, with comparable books of business, have much smaller staffs than Southern with equal revenue.

How does it exactly work?  You bring in a client, and then you presumably get paid something for bringing in the client.  The rest of the money goes in to the firm kitty and on a monthly basis they pay you out a ‘bonus’, which is really just a dividend paid based on your stock ownership.

They offer new hires the chance to buy even more stock.  They have an arrangement with a bank to finance these acquisitions, and they tell you all about how much money so and so is making based on his stock ownership.  You almost feel temped in a “SIGN ME UP!!!” kind of way.


But then you ask questions.  Like what if all the guys who brought in all the business sold their stock to the other members, and took the profits from the sale, packed up and started their own firms?  It would have to be pretty irksome to sit there watching the millions of dollars of business you brought in pay their money over to the people you sold the shares to. So obviously, the people who sold the shares and realized an up front profit are going to wait the absolute minimum amount of time required by the contract of sale and then they are going to leave the firm.  They are almost certainly going to bring the clients with them.

So now, an unsuspecting, presumably younger generation of employees is there holding millions and millions of dollars of stock in a firm that no longer has clients because the guys who sold them the stock left the company with the clients.

Only thing I can’t figure out is how they assume this is going to end well, because it isn’t.  There is a certain amount of irony in the idea that the firm that fights so ardently with trial lawyers… the house that John Thrasher himself built… could one day be ravaged by lawsuits of those very same trial lawyers.  It will be political theater for sure.

Look, I’m not saying it’s a ponzi scheme, because that’s a serious thing to say about the people who work there.  I am just afraid that the very elements of a ponzi scheme that you see time and time again are present there, except this time, instead of 25% annual returns on your investment, you are buying the loyalty and revenue from clients that aren’t offering to sell it.  You are catering to young people’s ambition to build a good life for themselves with a recognized power player.  If new hires ever stop buying, it is going to go very badly very quickly over there. And that makes you wonder if they are inflating the numbers because deflating numbers would be a sign of trouble.  People don’t buy stock in companies with rapidly diminishing income.  So you throw everything you can on the board: you fudge numbers, you use accounting tricks, you hire clients in conflict with each other and say to hell with it because you NEED, ABSOLUTELY f^%ing need, to keep the numbers stable.”



Definitely food for thought.


COMING NEXT- HOW DOES TALLAHASSEE REALLY WORK?

 

Jacob Engels, is the Founder of East Orlando Post. Along with the Post, he owns several other businesses and is currently enrolled at Valencia College. Jacob has lived in Avalon Park since it's founding and enjoys playing with his black Labradoodle Jasper, listening to indie rock, and seeking out new business ventures. He can be reached at info@eastorlandopost.com

 

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