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Penchant for press releases ensnares Ed Markey

Senator Edward J. Markey’s actions in the Herbalife controversy risk making him appear as an instrument of wealthy interests, rather than defender of the little guy.

Pat Greenhouse/Globe Staff/File

Senator Edward J. Markey’s actions in the Herbalife controversy risk making him appear as an instrument of wealthy interests, rather than defender of the little guy.

WASHINGTON — Hours after Amazon chief executive Jeff Bezos predicted on “60 Minutes” that he would someday deliver packages via drones, Senator Edward J. Markey issued a critical press release that was picked up by news outlets around the country.

Last week’s fatal natural gas explosion in Harlem? It, too, prompted a Markey response. Cellphones on airplanes? Daylight saving time? Markey has it covered, with statements, bills, and of course press releases.

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No member of Massachusetts’ congressional delegation pounces as persistently on current events as Markey. The strategy has helped the Massachusetts Democrat gain valuable exposure over four decades in Congress, making him a hero for consumer advocacy and environmental groups.

But recent scrutiny of his letters to the Federal Trade Commission and other regulators urging an investigation into the health supplements distributor Herbalife reveal the perils of Markey’s quick response strategy. His intervention against Herbalife has drawn criticism because he became embroiled in a high-stakes Wall Street clash, coming down on the side of a wealthy hedge fund manager and big Democratic donor who is trying to leverage political connections in Washington for his own financial gain.

Markey’s actions in the case risk making him appear as an instrument of wealthy interests, rather than defender of the little guy.

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“He’s a press release machine,” said Ralph Nader, the consumer advocate who has known Markey since 1976 but is no longer close with him. “When you put out a lot of press releases, you don’t pay all that much attention to each one.”

Nader noted that Markey is running in this November’s Senate election, even though he has not drawn well-known or well-funded opponents.

‘ He’s a press release machine. When you put out a lot of press releases, you don’t pay all that much attention to each one.’

Ralph Nader, Consumer advocate 
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Markey, in a phone interview Wednesday, said it is not unusual for his actions to hurt or help wealthy interests; that is often part of politics. As an example, he pointed to a recent letter he wrote to federal regulators demanding greater scrutiny of potential automobile safety problems. The letter, which followed a safety-related recall of the Chevy Cobalt, could have broad financial implications for the entire industry, he said.

“There are billionaire interest on both sides” of the Herbalife issue, he said. “But it’s the individual families caught in the middle who are getting hurt. Constituents in Massachusetts reported that they were harmed by this company’s business practices, and they lost a lot of money, and that’s why I wrote those letters and that is consistent with all my advocacy on behalf of consumers throughout my career.”

He said that the FTC’s agreement to launch an investigation demonstrates that his concerns about Herbalife were valid.

Markey wrote his letters to regulators in January after his office was lobbied by William A. Ackman, a hedge fund manager who has a $1 billion “short” position on Herbalife that will pay off if the company’s stock drops. Ackman donated $32,400 to the Democratic Senatorial Campaign Committee in April, received the same day Markey won a special election primary to replace John Kerry in the Senate.

Markey’s office has acknowledged that his staff met with Ackman or his representatives twice before Markey’s letters were issued in late January. But he has not provided details of how he made his decision to involve himself in a fight that other senators — including Senator Elizabeth Warren of Massachusetts — shunned.

Markey said that he did not know about Ackman’s financial stake in the Herbalife battle — even though it has been public knowledge since last year — because his staff did not inform him that Ackman had met with them. Even if he did know about Ackman’s interest in damaging Herbalife’s stock price, Markey says, he would have taken the same action against what he believes could be a pyramid marketing scheme.

Markey said Wednesday that he wants his staff to focus primarily on consumer issues, but “they should be aware that there could be a political distraction from that agenda if they haven’t factored in the totality of the political environment.”

“I think that will be something they will be factoring in from now on,” he said.

A Republican challenging Markey in this year’s Senate election filed a Senate ethics complaint against the incumbent this week, tying Markey’s action to the contribution Ackman made to the Democratic Senatorial Campaign Committee in last year’s special election. Markey and Ackman deny any connection between contributions and official action.

As is the case with many of Markey’s actions on consumer protection issues, the nexus between the issue and Markey’s constituents is not clear. In the Herbalife case, Markey cited two alleged Massachusetts victims of the company, which is based in Los Angeles, in his letters to regulators. But those constituents, in interviews with the Globe last week, said they had never made any complaints either to Markey or to other officials before they were contacted by Markey’s staff.

One of the constituents, 60-year-old Norton resident Michael Araujo, said he believes Ackman had given his name to Markey. Markey’s office could not cite any examples of constituents who went to the senator of their own volition demanding action.

Several consumer advocates who are big fans of Markey give him the benefit of the doubt.

“If you’re going to be a consumer advocate, you have to be aggressive and creative,” said Mark Cooper, research director Consumer Federation of America, who has known Markey since the late 1970s.

Cooper said federal agencies often fail to regulate on their own, so the handful of Congressmen who fight on consumer issues must err on the side of overreach at times.

“If, every now and then, you raise an issue and it didn’t pan out — and here, there’s something else going on — its no great sin,” Cooper said.

But the ethics complaint could be a problem for Markey, even if his accuser is not prominent. Republican Brian Herr, a Hopkinton selectman who says he plans to challenge Markey, wrote a letter to the Senate Ethics Committee asserting that Markey “has improperly used his public office and betrayed the public trust.”

Herr cites Ackman’s contributions to the Senate Democrats’ main fund-raising committee, and also notes that Ackman hired Rasky Baerlein, a communications and lobbying firm headed by a former Markey aide, Larry Rasky.

Both Markey and Rasky say the senator has not discussed Herbalife with anyone in the lobbying firm, which is listed in public records as receiving $115,000 in 2013 to represent Ackman’s hedge-fund firm, Pershing Square Capital Management, on Massachusetts state government issues. Rasky does not represent Pershing before Congress or federal agencies, according to the records.

The Senate Ethics Committee does not answer questions about specific investigations. The vast majority of complaints are dismissed, but the panel has authority to issue subpoenas and conduct interviews, according to its website and annual reports.

Based on the few complaints and investigations that have been made public, the committee has not delved into allegations that lawmakers worked closely with financial players to move markets, even as Wall Street has placed a higher premium on gathering intelligence on Capitol Hill.

Herr’s ethics complaint notes that Herbalife stock dropped more than 14 percent on Jan. 23, the day Markey sent his letters to the Federal Trade Commission, the Securities and Exchange Commission, and Herbalife. The company’s stock dropped another 7 percent last week, the day the company disclosed it was being investigated by the FTC.

Herr questions whether Markey’s letter demanding an investigation was “released in advance to those that could benefit by a ‘short sale’ of Herbalife stock.”

Days before Markey made his letters to regulators public, there was a spike in purchases of so-called “put” options of Herbalife stock. Those options, the subject of a New York Times report in January, are bets against the company’s stock. Ackman would not say whether Pershing Square Capital Management was responsible for the purchases.

Ackman and Markey’s office have both said Ackman was not tipped off that Markey was writing the letters.

The newspaper also reported that copies of Markey’s letters to regulators were posted on the website of Ackman’s company, originally dated Jan. 22, while Markey’s office sent out copies with a Jan. 23 date. Ackman and Markey have both said Ackman obtained his copies of the letters on Markey’s website, which at one point posted earlier versions of the letters.

Peter Molk, a University of Illinois Law School professor who has written about the 2012 law barring members of Congress from insider trading, said market players are increasingly eager to get information from Capitol Hill.

“You’re definitely going to try to spend some money to find this information out to the extent that you’re going to be able to trade on it,” Molk said.

Noah Bierman can be reached at nbierman@globe.com. Follow him on Twitter @noahbierman.
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