Although it is not publicly saying so, the ICI appears to be bending to pressure from a leading Republican Congressman. Whether the fund industry's trade group is actually responding to pressure from the Hill is not clear, but sometimes in Washington perception is as important as reality.

The ICI now confirms that it has retained Korn Ferry, an executive recruitment firm, to find a new lobbyist. It also contends that the search started months ago. So why is that important?

The brewing saga started earlier this month House Financial Services Committee chairman Michael Oxley (R-Ohio) reportedly sent Robert Foster, director of his staff, to carry an offer to the ICI that it could not refuse. Foster told the ICI that it needed to replace its top lobbyist Julie Domenick with a Republican, according to the Washington Post. If it did so, Foster promised that Oxley's upcoming look into the fund industry might go more smoothly for the industry, again according to the paper. Domenick is, of course, a Democrat. She is also a 20-year veteran of the ICI.

Dow Jones published a second and less sinister version of the story. That report states that the message was actually delivered to the ICI by a junior staffer at a holiday party. That report also carried a denial from Oxley's office that any pressure is being brought to bear. Peggy A. Peterson, Oxley's spokesperson is quoted by Dow Jones as saying, "The rumors of some quid pro quo are exactly that -- rumors. The story is groundless."

Groundless or not, executives in the fund industry have been baffled by the controversy. The ICI has long been a non-partisan organization and its operations are likely to be little effected by the party membership of its lobbyists. That misses the point, though.

After taking control of both Houses of Congress in January, the elected on Capital Hill are seeking ways to reward those that helped them. One way is for them to arrange sinecures at lobbying groups. To be used in this way at a time when its credibility is under attack is the last thing the fund industry needs.

The Republicans started to eye trade groups as both a source of contributions and plum assignments as far back as in 1998 when they established the "K Street Project." That project was put together with the help of Grover Norquist, president of Americans for Tax Reform. The idea was to bring pressure on trade associations to hire more Republicans and up their contributions to the GOP. The Project believes that many trade groups are run be "aging, left-wing Democrats," according to the paper. Norquist told Dow Jones that he expects the new ICI hire to be a Republican.

The ICI's explained that its decision to retain Korn Ferry came after it decided to add a fifth full-time lobbyist to its staff. The ICI has also not commented publicly on the reports of Foster's alleged meeting with the ICI staff.

The ICI also hinted that Domenick's job is safe. The new hire will report to Domenick and ICI President Matthew Fink.

Let's hope that the new position, whether or not it was created in response to Congressional pressure, is awarded on the merits and not as a political spoil. 

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