Political Consultant Firm Files for Bankruptcy and the Details are Juicy

This is a story about a broken partnership, a really big debt, and a legal fight that brought a once-thriving public affairs firm near the brink of collapse. 

On Monday, Strategies 360, which is one of the largest public affairs and communications firms in the West, filed for Chapter 11 bankruptcy protection. S360, as it’s called, was founded by veteran consultant Ron Dotzauer, who still owns most of the company — at least for the moment. Dotzauer is famous for the successful campaigns of the late Gov. Booth Gardner, who ousted Washington’s last Republican governor in 1984, and Sen. Maria Cantwell, who defeated incumbent GOP Sen. Slade Gorton in 2000. 

But before we go on, here’s a conflict of interest disclaimer:

From 2011 to 2019 I was vice president of communications for Strategies 360, which involved a handsome paycheck, a lot of fine food and top-shelf booze on somebody else’s tab. As I noted in the introduction to the Observer the following year, the firm and its clients are entitled to my silence on matters that were told to me in confidence. Telling such secrets would also be unethical in a journalistic sense because that’s information obtained under false pretenses.

Happily for journalism, there’s more than enough in the open court files to build a great story without breaching any confidences. Many of my former colleagues are savoring significant schadenfreude as they follow this drama because they have grievances with Dotzauer, who can be a hard man to work for. I myself am saddened by the prospect of the firm’s demise. I have close friends who still work at the firm. At its best, S360 was a place full of smart people doing interesting things. 

Also, we should note that while Tim Gruver and I have been tracking this drama for months, Jeff Manning of The Oregonian broke the gist of this story Monday, and Jim Brunner of The Seattle Times did yeoman’s work mining the Chapter 11 filing on Wednesday. There’s much more to add.

The bankruptcy move, which would allow the firm to restructure $10 million in debt, is intended to block a takeover by Dotzauer’s former business partner, Eric Sorenson, who’s looking to collect millions Dotzauer owes him for purchasing Sorenson’s share of the firm. It also puts the firm’s financial laundry on full display for anyone inclined to wade through the filing — fat salaries, payments for a lavish boat, payouts for business deals that went south. It’s gripping reading if you’re into that kind of thing: 

	Strategies 360 Chapter 11 Filing4.5MB ∙ PDF file
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With dozens of well-connected operatives working across the region, S360 has its fingers in so many interesting fights in so many places that we’d still be writing next week if we listed them all. For example, while I was there in the 2010s, the firm helped helped in the effort to block the Pebble Mine in Alaska and worked to kill a planned basketball arena in the Seattle’s SoDo neighborhood. (You’re welcome, Kraken fans. Climate Pledge Arena likely doesn’t get built if that SODO arena gets built.)  

Today, S360s works for the developer of the massive – and massively controversial – Horse Heaven wind and solar project in Benton County, among many other projects. Their Olympia lobbying crew – which recently added Nick Streuli, Gov. Jay Inslee’s former policy director, reps a list of high-profile clients. They rank 9th among Washington lobbying firms by reported compensation at just under $1M for 2023, per the latest filings with the Public Disclosure Commission. (The kind of work S360 does involves all manner of local public-affairs work that falls outside the PDC’s rules, so this number is likely dramatically low.) They’re similarly big in Alaska, Oregon, Idaho, Nevada, and elsewhere in the West. 

Dotzauer built S360 on the momentum of Cantwell’s victory, but he didn’t do it alone. Sorenson owned 49 percent of the firm and largely handled the business side of the work while Dotzauer roamed the West in his trademark cowboy hat and boots, drumming up business and recruiting operatives adept at politics, strategic communications, and lobbying. Until 2018, the pair had matching corner offices at the firm’s headquarters, the top floor of a fancy office building overlooking Lake Union in Seattle.  

By then, the firm was riding high, with offices in more than a dozen states and the Other Washington and more than 100 employees. Along with that fancy space in Seattle — the deck is particularly a popular spot for big-dollar political fundraisers — far-flung outposts of the empire, from New Mexico to Hawaii, occupied similarly posh digs. But eventually the relationship between Dotzauer, by then in his 70s, and Sorenson, who was in his early 50s, soured. Dotzauer forced Sorenson out of day-to-day operations in 2018. 

But Sorenson retained his 49 percent interest in the company. That complicated any attempt to sell the firm to one of the giants of the industry or execute a planned employee-ownership scheme aimed at sending Dotzauer into the sunset aboard a boatload of cash. Who wants to buy something that’s half-owned by a banished junior partner? We note that “estranged junior partner” isn’t generally a great position. The  majority owner can engineer the operation of the business in such a way that the  junior shareholder never sees a dime, incentivizing him or her to sell at a discount. 

Sorenson eventually agreed to sell his share for about $6 million. (Whether that’s a discount or a premium is open for debate; professional service firms are tough to value.) S360’s gross annual revenue is over $40 million, per the Chapter 11 filing, but its expenses — including all that fancy real estate — are very high.

But here’s the thing: Dotzauer and S360 never made good on the buyout deal, even as the company continued to expand aggressively, with moves into Texas and British Columbia. Dotzauer, meanwhile, was taking roughly $1 million per year in salary from the company, which was also covering – to the tune of about $5,000 a month – the payments on a top-of-the-line Lexus and a lavish boat. (This is all in S360’s Chapter 11 filing.) 

So this summer, Sorenson went to court in King County, and the bad blood between the two men began to spill out in elaborate and detailed court filings. Sorenson accused Dotzauer of trying to force him out ahead of a lucrative sale and of running a once-profitable business into the ground. Dotzauer accused Sorenson of trying to destroy his life’s work and essentially pleaded poverty, filing a declaration that neither he nor S360 have the money to settle up. (The Chapter 11 filing doesn’t cover Dotzauer’s personal assets, which Sorenson is still pursuing.)

Ultimately, the court sided with Sorenson in October and ordered S360/Dotzauer to cough up the dough. That prompted KeyBank to call the firm’s line of credit, which has a balance of some $3.6. million. In a matter of days, the firm was $10 million in hock. 

Sorenson moved to appoint a receiver, with the ultimate goal of either selling the company to settle the debt or shifting control of the company to himself in lieu of payment. Dotzauer argues that such a takeover would result in a mass departure of staff and clients, resulting in the firm’s collapse and nobody getting paid. Hence Dotzauer’s Chapter 11 filing, a federal proceeding that effectively freezes the state process. In theory, Chapter 11 will result in Sorenson and KeyBank getting paid off over a five-year period. Whether that works is an open question. 

A firm like S360 is reliant on the relationships between its clients and the talented human beings who do the work. Those humans are tied to the firm by sometimes-tenuous bonds of loyalty and non-compete agreements. The Chapter 11 process — which came as an unpleasant surprise to many S360 staffers — could result in a massive exodus of talent. Clients will likewise look askance. Fewer talented humans + departing clients = cratering revenue. 

After Chapter 11, the monthly nut on that $10 million will be north of $200,000, substantially more than the payments Dotzauer originally agreed to make to Sorenson for his share of the business. That kind of drag on the bottom line could make it hard to retain the staff, who enjoy getting paid, and could make it even harder to operate in a world that sometimes requires a ton of ready cash to, for example, salvage a ballot measure campaign that’s headed sideways. 

Some folks have already jumped ship. While the state court case was at full boil a few weeks ago, the firm’s top two operatives in California quietly left to start their own firm. We’re told others are eying the exits, and competitors are no doubt circling both talent and clients like hungry sharks. 

We’ll have more on this in the weeks ahead. One of the downsides for a business that uses the Chapter 11 process is that it has to show the world a whole pile of information about how the business actually works.

This article first appeared in the author’s political website, The Washington Observer. Tim Gruver contributed reporting to this story.