What are some examples of how “political intelligence” can be acquired and used for investment decisions on Wall Street?

A handful of hedge-fund firms -- including Elliott & Associates, D.E. Shaw & Co. and Angelo Gordon & Co. -- arranged to receive invitations to lobbyists' meetings with lawmakers starting in late 2003. They paid about $80,000 in annual membership fees to join a lobbying coalition, the Financial Institutions for Asbestos Reform, which advocated on behalf of financial institutions that owned large stakes in firms with asbestos liabilities...

Wealthy traders on Wall Street have long been able to gain an advantage in the market by getting access to better information. In the 1980s, stock arbitrageur Ivan Boesky hired a team of lobbyists in Washington to tell him if Congress would block Standard Oil Co.'s takeover of Gulf Corp. When told that the merger would be approved, Mr. Boesky cashed in. Mr. Boesky later pleaded guilty in one of Wall Street's biggest insider-trading scandals for paying for inside information about upcoming corporate mergers.

But prosecutors didn't pursue Mr. Boesky over tips received in Washington, which lobbying firms contend are legal."

Breaux, a Louisiana Democrat, is one of a growing cadre of lobbyists being hired by U.S. hedge funds to provide instant tips on the progress of potentially market-moving legislation, from the settlement of asbestos lawsuits to allowing oil drilling in an Alaskan refuge. It's a legal way of letting investors benefit from information gleaned from private conversations with lawmakers and aides. And it's a new twist in Washington lobbying because it has nothing to do with influencing laws or policy.

Hedge funds, which often pursue high-risk, high-yield investments for wealthy clients, are taking on lobbyists such as Breaux to provide political intelligence that allows the funds to buy and sell company stock on information before it's widely known...

'It's a burgeoning area of work,' says Tony Podesta, 61, a Democratic strategist, lobbyist and the brother of John Podesta, a former chief of staff to President Clinton. Tony's firm, PodestaMattoon, has a hedge-fund client he won't name...

Federal rules prohibit Breaux from lobbying former colleagues for at least a year. There's nothing stopping him from a lunch, cocktail, workout or phone call to Capitol Hill that might yield a tradable tip for a hedge fund...

Lobbyists such as Breaux and Podesta use the connections they made while working in the government to get information or insight that's not readily available to most investors, such as whether a bill is going to reach the Senate floor or whether lawmakers are far from a compromise...

The hedge funds that have contacted lobbyist Steve Elmendorf, 44, who helped run Senator John Kerry's campaign for president, have told him they don't care which way the settlement goes, as long as they are prepared.

'They want to know whether to buy or sell,' says Elmendorf, who has a hedge-fund client he won't disclose. He works for Bryan Cave Strategies LLC, a unit of Bryan Cave LLP, a St. Louis-based law firm."

A little bemused he pointed out that Hedge Funds were for the very rich, and invested in high gain high risk stocks, why would they need political intelligence about boring politicians in Washington. The answer is of course that they really need an independent resource to give them 'Heads Up' on upcoming rule changes, legislation and the direction of the political body, especially in international affairs. It is no accident that one of the Hedge Funds participating is in Beijing, China.

The Chinese are finding that what seems good business, such as the proposed purchase of Unocal can be derailed by the lobbyists in Washington, DC. The same with many other international investments, the funds need to know the lay of the political landscape before they lay out money to invest in the project."

Heldman's report, complete with quotations from Medicare, carried bad news for specialty hospitals and the device makers and good news for hospitals in rural areas. Sources stressed that Medicare had already hinted it would move in that direction.

Nevertheless, the case highlights what securities attorneys say is a gray area in insider-trading laws: the practice of Washington insiders' — lobbyists or analysts — funneling political intelligence to Wall Street clients."

[T]he talks have grabbed their attention, according to sources in the political intelligence business, because the legislation could prove a boon to ethanol producers, timber companies and farm equipment manufacturers...

Investors are also watching a provision in the tax package, named the Tree Act, that would aid the timber industry, which is currently suffering from the housing downturn. The one-year incentive would cut taxes on traditional timber companies like Weyerhaeuser as well as clear up rules surrounding timber real estate investment trusts.

'I get a lot of people asking about legislation who appear to be monitoring it rather than lobbying it,' a Senate tax staffer said about the Tree Act."