Under the Dome

Obama's informal adviser in Raleigh

Ken EudyKen Eudy is one of Barack Obama's key supporters in North Carolina.

According to a 2005 profile by Rob Christensen, the Raleigh public affairs consultant is the "full-service, behind-the-scenes political Mr. Fixit" in state politics.

A former political reporter for The Charlotte Observer, Eudy first worked as a lobbyist for the N.C. Press Association, gradually shifting to more general lobbying work. 

In 1994, he and public relations consultant Steve Meehan started Capital Strategies, a strategic communications firm in Raleigh. They renamed the firm Capstrat in 2004.

The company has helped promote state bond issues, a Raleigh convention center, a constitutional amendment that legalized tax-increment financing, a campaign to reduce teen smoking, among other things.

In recent months, he's given informal advice to the Obama campaign in North Carolina. 

The full profile after the jump.


"Eudy's PR-lobbying firm is one-stop influence shop," by Rob Christensen
May 8, 2005 

RALEIGH — Ken Eudy is a new kind of figure in the state capital --- a full-service, behind-the-scenes, political Mr. Fixit.

Need to stop teenagers from smoking? Hire Eudy. Need a mental health insurance proposal killed in the legislature? Hire Eudy. Are pesky reporters giving you headaches? Hire Eudy.

Eudy, 51, is the CEO of Capstrat, where public relations, lobbying, politics and government blend to help shape public opinion and public policy in North Carolina.


- Eudy's firm has been the political strategist for passage of $6 billion worth of North Carolina bond issues since 1996.

- Capstrat is a major government contractor --- hired by state, local and federal agencies to make sure the new $192 million Raleigh convention center will be a commercial success, to polish the national image of UNC Health Systems, and to make the promotional videos telecast at halftime at UNC basketball and football games.

- As a lobbyist, Eudy helped the insurance industry kill a bill requiring companies to provide equal treatment for mental as well as physical illness. He helped the tourism industry push back the start of the school year to late August. And he did work for Affiliated Computer Services, which landed a $171 million, five-year contract to handle state payments for Medicaid.

Capstrat has grown from a two-man shop in 1994 to 55 people at a large, open office in West Raleigh. It is now the second-largest public relations firm in the Triangle. Its revenue has grown from $4 million in 2001 to $6.3 million last year, according to PR Week, a national trade publication.

The growth of such large PR firms troubles those who view it as the further Washingtonization of Raleigh.

"The fundamental issue is that the system of influencing legislators has moved to where big money dominates," said Chris Fitzsimon, of NC Policy Watch, a nonpartisan organization that monitors issues in Raleigh. "It means the average person in North Carolina has even less opportunity to have his voice heard."

But Eudy says a broad range of interests are turning to PR firms to get out their message, and he notes that Capstrat has worked for environmental causes.

"It's not just large and powerful corporations," Eudy said.

For decades, Raleigh has had a thriving influence business. Battalions of lobbyists roam the halls of the legislature, blue-chip law firms help corporations navigate the regulatory agencies, and numerous consulting firms keep the political machinery greased. The city is dotted with trade and professional associations and expense-account steakhouses.

But large one-stop firms that handle public relations, lobbying and political strategy are a relatively recent phenomenon.

With Congress increasingly deadlocked over major issues, much of the legislative action has shifted to state capitals.

Rather than start initiatives in Washington, many corporations and public policy groups are launching campaigns in state capitals. Political victories at the state level can build momentum for congressional action in such areas as energy deregulation, welfare reform and environmental legislation.

In addition, lucrative public relations contracts are increasingly being awarded by state and federal agencies, creating a free-for-all for business by firms that do PR, advertising and marketing.

Such contracts have come under close scrutiny due to recent scandals.

Earlier this year a furor arose over the disclosure that the Ketchum public relations firm, as part of its work for the U.S. Education Department, paid conservative commentator Armstrong Williams $240,000 to promote the No Child Left Behind Act. Officials in Los Angeles have alleged that the giant PR agency Fleishman-Hillard overbilled the city's Department of Water and Power by millions of dollars.

There have been no such scandals in Raleigh, although Capstrat's largest business rival complains that Eudy's firm has an unfair advantage because of its political connections.

Those connections have been built over many years. Every morning at 5:15, Eudy gets up to work on a novel about a journalist who goes into politics. It is a subject he knows well.

Writer to hired gun

A smooth, soft-spoken Stanly County native, Eudy has been a fixture on North Carolina's political scene since the 1970s, when he was a political writer for The Charlotte Observer. After he began dating the daughter of the Democratic nominee for governor --- making it ethically difficult to cover the campaign -- Eudy changed careers, becoming executive director of the state Democratic Party.

His first major lobbying job was for the N.C. Press Association, pushing to make government meetings and records more open. "It's easier lobbying for Saddam Hussein," he quips, "than it is lobbying for newspapers."

The transition from advocate for causes --- press freedom and progressive politics --- to corporate hired gun has been gradual. The only clients Eudy says he won't work for are the video poker industry and the tobacco industry, the latter only because he has already been hired to conduct an anti-smoking campaign.

Eudy and his wife, Linda Davis, a top Democratic fund-raiser, live in Raleigh's Victorian-era Oakwood neighborhood. They also own a beach home at Emerald Isle.

Eudy does not regard himself as a political consultant because he does not work for candidates. But he is one form of political operative. Capstrat has been the consultant behind every major North Carolina bond issue since 1996, including the record $3.1 billion higher education bond issue in 2000.

His most striking victory may have been the passage of a bond financing proposal last year.

"Are you nuts?" Eudy said he told Charlotte officials when he was approached about helping pass a constitutional amendment to allow "tax-increment financing."

North Carolina voters had twice overwhelmingly rejected a complex proposal to let local governments issue bonds to buy land and build streets and utilities for private development without putting the issue to local citizens for approval.

Eudy conducted a makeover as complete as any of the reality TV shows that transform plain janes into glamorous women.

He helped junk the radioactive name "tax-increment financing" bonds for the more neutral sounding "self-financing" bonds. His firm oversaw focus groups, orchestrated endorsements from 400 groups or individuals, set up delegations to visit newspaper editorial boards and produced TV ads.

Capstrat was paid at least $300,000 in fees put up mainly by private companies, according to campaign finance records.

The makeover worked. In November, voters approved the constitutional amendment, 51 percent to 49 percent.

Such well-financed public relations campaigns make it difficult for opponents to get their voices heard, said Charles Heatherly, an opponent of incremental financing.

"It is a sign of good government when the public understands the issue," Heatherly said. "When they come in with Madison Avenue-type advertising to sell something, it is often based on a misleading premise."

Focus on public policy

Bond issues and referendum campaigns come along only once every several years, though, so much of the time Capstrat focuses on corporate clients. Deloitte, a giant accounting and consulting firm, had never heard of Capstrat until the agency sent an unsolicited analysis of the consulting practice --- complete with suggestions on how Capstrat could help it grow.

"It really caught our attention," said Mike Nethercott, former global marketing director for Deloitte's consulting practice. "It was a very innovative direct-mail piece."

So Deloitte hired Capstrat to adapt that approach to help Deloitte attract new clients of its own. "I was very happy with the results," Nethercott said.

Capstrat emphasizes making government work for its clients.

"We help corporations advance regulatory interests," says the company's literature. "We build grass-roots coalitions to support local, state and federal lobbying. We help businesses, associations and nonprofit organizations map out plans to pass --- or block --- legislation. And our substantial political experience adds muscle to issues or bond campaigns."

Or, as Eudy says, "We are not interested in doing press releases on underwire bras or beef jerky. There are agencies that are. We are more interested in [public policy] issues. That's our background."
Eudy seems to know every important political player in town. Or someone on his payroll does.

Eudy was the best man at the wedding of Bob Greczyn, the CEO of Blue Cross and Blue Shield of North Carolina, the state's largest health insurer. He has contributed to a host of Democratic politicians.
Within the past year, Eudy has hired Leslie Bevacqua Coman, the lead lobbyist for the state's top business association, and Frank Hill, who was chief of staff for U.S. Sen. Elizabeth Dole. Hill opened a Washington office.

One rival who has lost contracts to Capstrat complains about its political influence.

"The concern of the industry," said Rick French, CEO of French/West/Vaughan, North Carolina's largest public relations firm, "has been that many of the contract awards have not been based on a merit based system ... because of the convergence of big dollars, political connections and probably a lack of sophistication on how to properly evaluate an agency."

The complaints were particularly loud in 2003 after Eudy's firm won a $1.5 million contract --- later expanded to $2.6 million --- to run the state's campaign to discourage teenagers from smoking. The contract was awarded by the Health and Wellness Trust Fund Commission, set up with money from the national settlement with cigarette manufacturers.

The commission is headed by Lt. Gov. Beverly Perdue. The lead person on the Capstrat team seeking the bid was Billy Warden, who was communications director for Perdue's 2000 campaign.

Eudy said hiring Warden was a risk, because Warden had chosen not to work for Perdue after helping her get elected.

A study released last week by UNC researchers found the campaign had been effective in making teenagers more aware of the dangers of smoking. Two TV ads produced for the campaign won Telly Awards from the advertising industry.

After gaining the contract, Eudy showed his appreciation to Perdue. He had contributed only $500 to her 2000 campaign for lieutenant governor, but he and his wife gave $8,000 to her 2004 re-election effort, according to state campaign finance records. Eudy says he increased his contributions to many candidates during the 2004 election cycle, not just Perdue.

Perdue said Warden --- a former News & Observer reporter --- never contacted her about the contract.
Perdue said, "I don't believe it [Warden's hiring] would influence anybody's decision."

Contracts criticized

Capstrat landed another big contract in March --- $750,000 from state Treasurer Richard Moore's office to promote his effort to return unclaimed money and property to the rightful owners.

Capstrat had a leg up because it had won a $15,000 contract for a pilot project two years earlier. The lead official on the 2003 Capstrat bid was Rachel Perry, who was former Gov. Jim Hunt's communications director. Perry and Moore served together in the Hunt administration when Moore was secretary of crime control and public safety.

When Capstrat landed the Raleigh Convention Center contract in February, critics were quick to point out that Davis, Eudy's wife, has raised money for Raleigh Mayor Charles Meeker during past elections. She is not working for him this year. Capstrat could be paid as much as $158,800 for a little more than five months' work.

"Politics play a role in these contracts whether we like it or not," said French, whose own firm recently muscled up by forming an alliance with two political consulting firms.

Eudy says critics are just complaining because they didn't win contracts.

"It's a factor," Eudy said of politics. "I think being smart is a lot more important."

(News researchers Denise Jones and David Raynor contributed to this report.)


Blue Cross and Blue Shield of North Carolina: Blue Cross is a nonprofit that yearned to become a for-profit, publicly held corporation, but backed down in the wake of resistance from state regulators and the public.

Deloitte: Different groups within Deloitte, an accounting and consulting firm, hire Capstrat for projects as-needed.

Red Hat: This Raleigh-based company is the world's largest distributor of Linux, an open-source software whose code can be manipulated by anyone. Red Hat is competing against the 800-pound gorilla in the software universe, Microsoft.

Amerix Corp.: Based in Columbia, Md., Amerix provides technology services to non-profit credit counseling agencies serving nearly 300,000 clients nationwide.


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Re: Obama's informal adviser in Raleigh

Every so often you get a glimpse of the machinations behind the curtain and this is one of those pieces of investigative reporting.

This is all you need to know about Mr. Eudy: "We help corporations advance regulatory interests" ; "Eudy was the best man at the wedding of Bob Greczyn"; "CAPSTRAT'S LARGEST CORPORATE CLIENTS: Blue Cross and Blue Shield of North Carolina." and, "Ken Eudy is one of Barack Obama's key supporters in North Carolina."

Couple that to this week's WaPo article outlining how BCBSNC is using the ill gotten gains from not paying for patient care (as a BCBSNC Advanta insured member, in a 3 member healthy family, I cannot get reimbursed screening colonoscopies or mammograms; and there is no mental health parity tho a law was passed last year: BCBSNC was allowed by state legislature to OPT OUT) and this is what you got: 'North Carolina's Blue Cross Blue Shield Trying to Kill Key Plank of Obama Plan.' :"the company has hired an outside PR company to make a series of videos sounding the alarm about a government-sponsored health insurance option, known as the public plan"


Marsha V. Hammond, PhD Lic Psychologist, NC

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