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Alibaba readies for post-IPO Washington office

Washington, D.C.
Brian Lawrence | Getty Images
Washington, D.C.

The Chinese internet giant Alibaba Group has pursued a deliberately low-profile strategy in Washington, D.C., opening no corporate office and employing only two outside lobbying firms.

But that's all about to change.

After the tech company goes public this week, it will begin searching for a veteran D.C. hand to open a new Washington office, CNBC has learned. According to a source familiar with the search, Alibaba will look to engage the nation's capital in a way it has not done before after it emerges as a public company.

That will mark a strategic shift for a company that has focused on key relationships with influential players in the nation's capital to resolve specific, narrow, disputes.

One key example: This spring, former U.S. Treasury Chief of Staff Jim Wilkinson joined Alibaba as head of strategic communications in San Francisco. In his Washington days, Wilkinson helped guide former U.S. Treasury Secretary Hank Paulson through the early stages of the global financial crisis. That stint led to him being depicted in the movie "Too Big to Fail," in which he was played by actor Topher Grace. Earlier, Wilkinson was a spokesman for Gen. Tommy Franks during the Iraq War.

Alibaba has been most focused on the Office of the U.S. Trade Representative, working to get in the official good graces of the U.S. government on intellectual property and trade secrets rules.

A particular concern has been the U.S. Trade Representative's "notorious markets" list of foreign companies. The government says that designation "identifies markets around the world that harm American businesses and undermine our workers, through the infringement of intellectual property rights."

A spokesman for the USTR said all decisions about the notorious markets list are made "based on the facts and circumstances of each case."

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In 2011, the U.S. Trade Representative added Taobao, an eBay-like online marketplace owned by Alibaba, to the notorious markets list. The USTR noted that "pirated and counterfeit goods continue to be widely available on China-based Taobao."

The designation was a political headache for Taobao and Alibaba, and it presented a possible speed bump on the way to an American IPO. So Alibaba's outside lobbyists in Washington went to work.

The company hired Washington lobbying firm Sidley Austin on a contract that has been worth $10,000 per quarter to push its agenda before the USTR. Among the lobbyists who would take on the case for Alibaba, conveniently, was James Mendenhall, former general counsel of the USTR.

Mendenhall declined to comment for this article, referring inquires to an Alibaba spokesperson. Alibaba also declined to comment on the record.

The Chinese Internet giant also hired the well-connected lobbying firm Duberstein Group on a contract that has been worth as much as $100,000 per quarter, where the key player on the Taobao effort is Steven Champlin, a prominent Democratic campaign donor. Champlin declined to comment for this article, except to say that the focus on the notorious markets list is a "longstanding effort."

That effort paid dividends the next year, when the USTR removed Taobao from the notorious markets list. In its 2012 report, the USTR said the company was removed "because it has undertaken notable efforts over the past year to work with right-holders directly or through their industry associations to clean up its site."

Since then, Alibaba's lobbyists have maintained their efforts to keep the firm off of the list. In 2013, for example, the company submitted a letter to the USTR noting all it had done to get right with U.S. intellectual property rules. Alibaba said it removed 87 million allegedly IP-infringing product listings from the Taobao site in 2012, as well as providing information to law enforcement involving 72 brands and resulting is the arrests of 324 suspects from 43 different counterfeiting rings.

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"In light of these efforts, Taobao requests that USTR continue to exclude Taobao from the notorious markets list in 2013," said the letter, which was signed by John Spelich, a vice president of corporate affairs at Alibaba Group.

That year, the USTR agreed with Alibaba. Taobao stayed safely off the list.

—By CNBC's Eamon Javers