Fund Fight

Colby Underwood, a 6-foot-11, 30-year-old wunderkind who’s raised
hundreds of thousands of dollars for a stable of local, state, and
national candidates, spent 2007 as the reigning champion of Seattle’s
fundraising world and the darling of the local media. Fawning stories
from Crosscut to Seattle Weekly declared Underwood “the single
most important man in Seattle politics” and “Seattle’s best money man.”
The basis for those somewhat histrionic statements: a knack for raising
funds that has helped propel dozens of candidates, including city
council challenger Tim Burgess ($327,557), council incumbent Jean
Godden ($227,458) and Seattle mayor Greg Nickels ($537,179) into
office.

But events in mid- to late 2007 took some of the shine off
Underwood’s burnished image. Congressional candidate Darcy Burner,
running a competitive race against Republican representative Dave
Reichert, dropped Underwood, citing the need to hire an in-house
fundraiser who could dedicate the long hours the position required. In
December, Underwood lost several employees, including one, McKenna
Hartman, who gave her notice and was subsequently fired.

Things really went haywire earlier this month, when Underwood sued
Hartman, alleging that she violated an agreement not to compete with
Underwood by attempting to set up her own fundraising shop with the
help of veteran political consultant Cathy Allen. In his motion,
Underwood claims Hartman engaged in an “unabashed plot … to steal the
business of her former employer,” and accuses her of “poaching [his]
clientele and stealing [his firm’s] trade secrets.” The suit, which is
virtually unprecedented in Seattle’s small fundraising world, seeks $1
million in damages from the 27-year-old Hartman, whose own foray into
fundraising has been cut short by her former boss’s lawsuit.

Neither Underwood nor Hartman would comment directly for this story,
but their lawyers were happy to discuss the case. Janyce Fink,
Underwood’s attorney, says Underwood merely wants to prevent Hartman
from using confidential information obtained in her capacity as
Underwood’s employee—namely, lists of Underwood’s clients and
potential donors. “[The potential injunction] … does not put
[Hartman] out of business; it simply restricts her ability to use any
of the information that she was privy to as a condition of her former
employment.”

Hartman’s lawyer, Gregory Karp, says Underwood’s claims are
ridiculous. First, he says, Hartman only signed a confidentiality
agreement—not a noncompete agreement, which would be unusual in
the fundraising world. Indeed, the agreement states only that Hartman
will not “disclose” confidential information or use it to her “own ends
and gain.”

Whether Underwood’s lists themselves are “confidential” is itself an
open question; anyone, after all, can go into the database of the state
Public Disclosure Commission and find out which candidates hired
Underwood and who gave them money—a pretty close approximation of
his list.

“We will concede that [Hartman] has a confidentiality agreement, but
that doesn’t address competition at all,” Karp says. “She’s not going
to violate the terms of that agreement. On the other hand, her
agreement doesn’t say, ‘I won’t compete with Colby.’ Her former
employer has no right to regulate her business activities going
forward.”

Ironically, Underwood got his start in the political fundraising
business by doing essentially what Hartman is attempting: branching out
from an established firm—in his case, the firm run by Gary Locke
fundraiser Tracy Newman. (Newman was out of the country and unavailable
for comment.) Underwood served as deputy finance director on Locke’s
2000 campaign, helping raise more than $3.5 million; in 2002, he struck
out on his own, forming Colby Underwood Consulting with a client list
that included Mayor Nickels and quickly grew into the largest
fundraising consulting firm in Seattle.

Even as Underwood took on more clients, his prices went up, to the
point that candidates in relatively minor local races—Seattle
City Council, for example—were shelling out tens of thousands of
dollars for his services. Tom Rasmussen, who ran unopposed for
reelection, paid Underwood $35,000 in 2007. Godden, opposed by
underfunded Green Party schoolteacher Joe Szwaja, spent $42,000. A
single month’s services could cost a candidate thousands of
dollars—Burgess, for example, routinely paid Underwood more than
$5,000 a month, and unsuccessful candidate Venus Velázquez
shelled out $3,000 for six months in a row. Whether those prices are
“exorbitant,” “obscene,” or merely “middling,” as various former
clients described them, depends on who you talk to, but the fact
remains that Underwood was both commanding high prices and in
demand.

Reportedly stretched thin by so much business, Underwood
increasingly farmed out the work of dealing with clients to his small
staff, causing some clients to complain that they were paying thousands
of dollars a month to deal with underlings. (Others, however, described
this as par for the course, and developed close relationships with
Underwood’s staff, including Hartman.) Although Underwood’s staff
delivered for his clients, some expressed surprise that Underwood
wasn’t around more often. His staffers, meanwhile, were working harder
than ever. Karp says there were “a lot of unhappy people” at
Underwood’s firm—”how unhappy,
I don’t know.”

It’s hard to predict whether Underwood’s legal strategy against
Hartman will be successful. Earlier this week—after a preliminary
hearing for which Fink showed up more than an hour late—Karp
rejected a settlement offer that he said “had no basis in the law.” On
January 22, the lawyers for both sides were supposed to appear in court
for a hearing on Fink’s preliminary injunction motion, which would
prevent Hartman from competing with Underwood. At press time, an hour
and a half after the two sides had appeared in court, Fink still had
not appeared.

Currently, apart from a few small-time players, Underwood is the
only fundraising game in town. If Underwood wins his injunction, it
will stay that way. “It will be the death penalty for [Hartman’s]
personal ambitions,” Karp says.

barnett@thestranger.com