By Justin Scheck And Charles Forelle
Michael Howard wears many hats. Last year he traveled to Abu
Dhabi for a policy forum and spent a week at sea as a lecturer on
the cruise ship Quest for Adventure. He advised mining, energy,
finance and waste-management firms. He flew to Somalia for the oil
company of which he is chairman.
And he spent 28 afternoons in the U.K.'s House of Lords working
as a lawmaker. He holds the title Baron Howard of Lympne.
Lord Howard's roles as businessman and politician sometimes
overlap. Lord Howard said he met with senior foreign-office
officials earlier this year to be sure that the activities of the
company whose board he heads, Soma Oil & Gas, were
acceptable.
When Soma later became concerned that its plan to bring armed
guards into Somali waters could violate a United Nations arms
embargo, the company's chief executive mentioned Lord Howard's name
in writing to the U.K. business minister. That minister then wrote
a letter to Soma saying its guard boats could carry weapons despite
the embargo, according to documents reviewed by The Wall Street
Journal.
Mr. Howard's dual political and business pursuits aren't unique.
For centuries, the upper chamber of the British Parliament was
filled largely by the landed gentry. But in 1999, then-Prime
Minister Tony Blair's government replaced most of the hereditary
lords with business people, civic leaders and politicians appointed
for life.
Mr. Blair said the shift would "end the feudal domination of one
half of our legislature." Opponents said he was turning the House
of Lords into a den of patronage--a "House of Cronies" to be
occupied by a lord of "Lobbygate" and lord of "Offshore Funds,"
said then-Conservative Party leader William Hague.
In the 15 years since, the House of Lords has struggled with the
boundaries between public and private service. A code of conduct
meant to separate the two has repeatedly been altered.
Much as Mr. Hague had predicted, many lords now have ties to
organizations that engage in lobbying, including one lord who
agreed to be a lobbyist for an offshore-fund haven. Sixty-eight
others give advice on government affairs to companies, trade groups
or other organizations, or work for companies that specialize in
government relations, according to a Wall Street Journal analysis
of financial disclosures as of early August.
One hundred and thirteen draw paychecks from financial-services
firms. Twenty-six are paid by resource-extraction companies. Twenty
work for foreign governments, in capacities that include advising
officials on policy and consulting for government-controlled
companies.
Some of those jobs materialized after they joined the House of
Lords.
Lords regularly weigh in on legislative debates in which their
employers have an interest, disclosure records and Parliament
transcripts show. Behind the scenes, they sometimes arrange
meetings, host functions and--as Lord Howard did--reach out to
others in government on their employers' behalf, according to
documents reviewed by the Journal and interviews with lords.
Parliament's two houses--Lords and Commons--aren't equal. Though
both can introduce bills and laws pass through both, a determined
House of Commons, whose members are elected, can override a Lords
veto. But lords use the threat of amendments and delay to steer
legislation.
The 786 members of the House of Lords receive no salary, just
GBP300 ($476) a day for attending. They may have outside jobs, and
many do. That is by design, says Lords spokesman Owen
Williams--peers are supposed to have expertise outside
government.
Conduct is governed by a code that requires peers to act
honorably. It forbids exercising "parliamentary influence" in
return for money and says lords "must not seek to profit from
membership of the House" by taking payment for providing
"parliamentary advice or services." If debate in the chamber turns
to an area in peers' financial interest, they must preface remarks
with a disclosure.
A guide to the code's provisions published by a standards
committee says lords are forbidden from "making use of their
position to lobby, or to help others to lobby, members of either
House, ministers or officials, by whatever means."
The code and the guide are frequently revised, especially with
respect to advice and lobbying. An amendment earlier this year, for
instance, clarified the advocacy rules by explicitly forbidding
lords from accepting money to help others to lobby, and by noting
that the lobbying prohibitions extend beyond Parliament to other
government officials. The guide says "public policy and current
affairs" advice is permitted, and allows lords to work for lobbying
groups so long as they don't do any lobbying or provide any advice
themselves. In 2010, the Lords named a former police chief as
ethics commissioner to investigate alleged conduct-code
violations.
The rules are far different than those governing U.S. Congress,
where questions about the influence of money tend to revolve around
campaign financing. The outside pay of members of Congress is
capped at $27,225 a year, and they can't be paid by entities that
provide professional services "involving a fiduciary relationship,"
ruling out banks, law firms and much else.
The U.S. Constitution forbids members of Congress, whose
salaries are $174,000, from receiving an "emolument" of "any kind
whatever" from a foreign state--a provision so strictly interpreted
that fees for appearing on a British Broadcasting Corp. show are
banned because the BBC is considered a state entity.
The House of Lords dates back to the 14th century, when noblemen
and clergy began sitting separately from commoners. For much of its
existence, it could veto legislation. But after lords blocked the
government's 1909 budget, they lost the power to block budget
bills. Over the years, Commons acquired power to pass bills without
Lords' assent, though it does so only rarely. In 1958, Parliament
formally created peers who sit for life but don't pass the seat to
relatives.
Mr. Blair's replacement of hundreds of hereditary peers with
these life peers "gave the place a real boost," says Meg Russell, a
Lords authority at University College London. The House of Lords
rarely rejects government bills entirely. Rather, it negotiates
changes--and members' experience enhance its leverage, Dr. Russell
says.
Lords' outside work "can be seen as a weakness of the place, in
a sense, " Dr. Russell says. "But it can also be seen as a
strength." Many are associated with universities or charities.
"Business is part of that," she says.
In 1992, Anthony Gueterbock became the 18th Lord Berkeley upon
the death of an aunt who had held the peerage. He had worked on
transportation projects in the private sector, and five years after
entering Parliament, he was hired to head the Rail Freight Group,
an industry body whose aim is to "influence policy makers within
Government," according to its website.
Lord Berkeley is a regular speaker in rail debates, during which
he discloses his outside role. His expertise benefits both the
chamber and his group's members, he says.
In a 2007 letter on House of Lords stationery, Lord Berkeley
successfully urged the U.K.'s then-rail minister to let an RFG
member manage part of a large government-funded rail project. Lord
Berkeley says he was offering expertise on behalf of his
organization, not lobbying.
"I have a complete right to write ministers on that," he says.
"We can have an argument about what lobbying means. You shouldn't
be paid by outside interests to influence policy, and I certainly
haven't done that."
Facebook Inc.'s European policy director is Richard Allan--Lord
Allan of Hallam. "I work for Facebook," he said during a 2013
debate on Internet speech. One proposed measure would have required
companies such as Facebook to post notices alongside alleged
defamation or risk legal consequences. Lord Allan argued against
it. It died. He offered an amendment that could make it harder to
force website operators to take material down.
Lord Allan says in disclosure forms that he doesn't lobby
Parliament. He entered the Lords a year after joining Facebook. He
didn't return calls seeking comment.
Companies and trade groups aren't the only organizations paying
lords. In 2012, the Joseph Rowntree Reform Trust Ltd.--identified
on its website as a lobbying group "rooted in liberalism and
Quakerism"--paid about $24,000 to Paul Tyler, a lord, to cover
expenses associated with drafting a bill. On his own website, Lord
Tyler said his bill aimed to "take big money out of politics."
The bill would cap political donations. It hasn't passed. Mr.
Tyler said in an email the Rowntree money was used to pay for
drafting assistance and gave "no financial benefit at all to me
personally." The Rowntree Trust said in an email that it awarded
Mr. Tyler the money after he applied for a grant.
The code of conduct prohibits lords from acting as a "paid
advocate" for an outside entity "in any proceeding of the House,"
including, according to the code's guide, "speaking in debate."
In 2011, Parliament's intelligence-oversight committee was
examining whether a telecommunications-equipment contract awarded
to China's Huawei Technologies Co. exposed the U.K. to hacking.
That fall, Huawei hired Patience Wheatcroft, who joined the House
of Lords the year before. In announcing her hiring, it said she
would join a board "advising the company on building a positive
reputation and improved public profile."
In a 2013 debate on cybersecurity, another lord noted that the
intelligence committee had "criticized the system of regulation in
place to oversee Huawei's operation here and its equipment that is
now part of our digital network."
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After disclosing her Huawei role, Baroness Wheatcroft said the
company "is playing a major role in the infrastructure of this
country and is one of the fastest-growing companies in the world."
She added: "Huawei is demonstrating ably how the U.K. and China can
cooperate."
Baroness Wheatcroft, a former editor of The Wall Street Journal
Europe, said her role at Huawei ended in August. She declined to
detail her duties there and said her comments in the debate didn't
violate the prohibition on speaking on behalf of a private entity
because she was "not speaking on their behalf. I was speaking on my
own behalf."
Charles Powell--Lord Powell of Bayswater--is an adviser or
director for four defense contractors, a gold miner, luxury-goods
maker LVMH Moët Hennessy Louis Vuitton and a subsidiary of
conglomerate Jardine Matheson Holdings Ltd.
"I find I have so many interests it's almost better to speak
very little in debates," he says. "You spend two minutes declaring
your interests, and it takes the flourish away from what you are
going to say."
Lord Powell says he wouldn't lobby government for any company.
"That is absolutely prohibited in my view, to lobby on your own
financial behalf or on the behalf of those who approach you," he
says.
"Can I talk to government on behalf of Jardine Matheson?" he
asks. "That is perfectly appropriate," he said, in cases where he
feels a foreign government might be treating one of his companies
unfairly and a U.K. official might be able to intervene.
Outside ties sometimes come up in debates about rules governing
financial services. In an Oct. 14 debate, Howard Flight, a lord,
decried as "completely out of control" anti-money-laundering rules
requiring banks to monitor transactions of "politically exposed
persons," or PEPs, for possible corruption. Lord Flight is a
director of at least eight financial-services firms. "Wearing a hat
as a banker," he said during the debate, "I would add that, worst
of all, banks are required to look at every transaction in the
account of a PEP, both in and out."
The House of Lords has grappled before with questions about paid
advocacy. The Sunday Times in 2009 reported four lords appeared
willing to be hired to influence legislation by undercover
reporters posing as lobbyists. Two were suspended, and the new
ethics commissioner was appointed.
That ethics cop periodically sanctions members for code
violations, although penalties can be light.
After David Maclean became Lord Blencathra in 2011, he signed a
GBP12,000-per-month contract to be a Cayman Islands' lobbyist. A
report by the nonprofit Bureau of Investigative Journalism
triggered an inquiry. Lord Blencathra told the ethics commissioner
he didn't intend to lobby. The commissioner determined he broke the
rules.
The sanction: an apology.
"My lords," Lord Blencathra told his fellow lawmakers this July,
"although I never actually provided nor intended to provide
parliamentary services to the Cayman Islands government in return
for payment, I acknowledge and I deeply regret that I entered into
a written contract under which I was apparently committed to
provide such services."
Lord Howard, the chairman of Soma Oil & Gas, is one of
several lords working for companies active in Somalia, whose
natural resources are drawing prospectors following years of
violence. He got involved with Somalia after a long political
career. He held cabinet positions under Margaret Thatcher and John
Major, and when he retired from Parliament after the 2010 election,
new Conservative Prime Minister David Cameron named Mr. Howard a
lord.
Three years later, a London investor and party donor named Basil
Shiblaq started a company to explore for oil in Somalia. He asked
Lord Howard to become the chairman. Mr. Shiblaq said he hired Lord
Howard for his high profile.
Lord Howard's stature helped sway the Somali government to sign
a deal with Soma, says Abdirizak Omar Mohamed, then Somalia
resources minister and now a government adviser to Somalia's
president. "It increases the credibility of the company when you
have someone who was a leader of the Conservatives," says Mr.
Mohamed.
The deal between Soma and the Somali government--a no-bid
contract with undisclosed financial terms--drew criticism from U.N.
officials. Somalia's auditor general, Nur Farah, said in an
interview he is concerned because Soma has no prior experience
searching for oil. Soma's CEO said the contract is fair and
transparent.
Lord Howard, who has a stake in Soma, said he sought assurances
from U.K. officials that Britain, a former colonial power in
Somalia, would support the deal. He briefed the U.K.'s Africa
minister on Soma's plans, and had the U.K. foreign office's acting
Africa director brief him, according to U.K. government documents
reviewed by the Journal. The U.K. publicly neither supported the
deal nor declined to support it.
But the U.N. arms embargo loomed. Sea Bird Exploration, a
company Soma hired to do a survey offshore, demanded armed guards
for its vessels, says Sea Bird CEO Dag Reynolds. He says Soma told
him it would find a way to comply with the embargo.
In January, Soma's security contractors asked the U.N. for an
embargo exemption. Oh Joon, chairman of the U.N. sanctions
committee, wrote in a letter to the contractors that Soma's
armed-guards plan would be "a violation of the current sanctions
regime."
Soma's chief executive had sought advice from then-U.K. business
minister Michael Fallon, now U.K. defense secretary, who responded
in a letter that if weapons are "securely stored on the vessel and
under the master's control" in Somali waters, "it is our view that
the United Nations (UN) arms embargo does not apply."
Soma followed his advice. It also hired a Somali company whose
guards held the weapons while in territorial waters. This spring
two exploration vessels and eight armed boats gathered seafloor
data for Soma. A U.N. official says that by hiring the local
company, Soma may have found a "loophole" in the embargo and the
security council won't seek sanctions against it.
Mr. Fallon wrote a second letter to Soma, after the armed boats
had been deployed, saying the company should follow the U.N.'s
advice. His spokesman says Mr. Fallon's advice hadn't changed and
had been misinterpreted by Soma.
Lord Howard says he doesn't "quite remember" if he discussed
Soma with Mr. Fallon. Mr. Fallon's spokesman said they didn't. In a
May letter reviewed by the Journal, Lord Howard wrote to Mr. Fallon
on Soma letterhead asking that he meet with the Somali official
overseeing Soma's exploration work.
"I'm afraid," Lord Howard wrote, "this is yet another request
for a favour."
A lawyer for Soma said the earlier favor was unrelated to the
company.
Alexis Flynn contributed to this article.
Write to Justin Scheck at justin.scheck@wsj.com and Charles
Forelle at charles.forelle@wsj.com
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