Back in 2010, Wisconsin Democrat Russ Feingold lost his Senate seat in dramatic fashion to Republican Ron Johnson, an Oshkosh businessman-turned-Tea Party mantle-wearing political insurgent. Johnson's win came after a late-summer surge in the polls that had elite election-watchers baffled, given Feingold's long history and solid reputation in the state. Johnson, for his part was best known as one of the 2010 election cycle's many self-funders -- and one of the few successful ones.
Throughout it all, Johnson cast himself as a self-made businessman and Tea Party outsider. But if you were willing to look past the self-mythologizing, it was readily apparent that his candidacy was built, in part, on donations from businesses and individuals who were showered with taxpayer money. And now, Johnson has lucked into a very creative way of earning back the millions of dollars of his own that he sunk into his campaign.
Looks like 2010's biggest bailout baby is all grown up.
One of the more amusing features of this particular election is that it ran against a piece of conventional wisdom that everyone in the media said governed the thinking of those who comprised the membership of the Tea Party: their antipathy to bailouts. Maybe this wasn't clear to everybody, but Feingold never voted for the Troubled Asset Relief Program in the first place, twice voted to end it and was the author of a piece of legislation that would have forced unspent TARP money to be directly applied to paying down the Federal deficit.
On the other hand, Johnson was showered with largesse from a lot of institutions that should have struck TARP-opponents as ironic. As The Awl's Abe Sauer reported in September of 2010: "Now campaign finance filings found by The Awl show that despite his vigorous denouncement of the bank bailouts, Johnson's campaign has received funding from many of the same banks who received bailouts."
Much like many of this year's tea party-associated GOP candidates, one of Johnson's core campaign points is criticism of the financial bailout. Funny then that Johnson's campaign has been the beneficiary of the largess of the very corporations he believes should not have received bailout money.
For example, the cash Johnson received from the Financial Services Roundtable PAC on August 27 and the American Bankers Association PAC on July 8 and July 30 came from, amongst others, hardcore Treasury bailout beneficiaries such as JP Morgan Chase, SunTrust, Bank of America, Regions Financial, Zions and First Horizon. The money Ron Johnson received from the Bluegrass and Senate Majority Fund PACs came, in part, from one of the greatest bailout beneficiaries of them all, Goldman Sachs. Despite statements about staying out of politics this cycle, Goldman donated to both PACs on March 31 of this year. On June 24, Ron Johnson's campaign received two $5,000 donations from the Bluegrass PAC, a day later the campaign received two donations from the Senate Majority PAC in the same amounts.
To be clear, while it may not be the backbone of his funding, some of the very bailout money that Ron Johnson has criticized is now funding his campaign.
Sauer is correct that this money -- funny as it was, under the circumstances -- did not form the "backbone" of his campaign. The majority of his financial support came out of his wallet -- to the tune of $9 million.
Johnson's personal wealth is from a business he founded, PACUR, LLC, a "custom sheet extruder company" that in turn owes its success to the fact that it has a cozy relationship with packaging product manufacturer Bemis Company, Inc. If you're wondering how this cozy relationship came about, wonder no more: Bemis' CEO is Johnson's father-in-law, and PACUR's co-founder is Johnson's brother-in-law. As Jud Lounsbury reported back in September of 2010:
In the late 1970s, under the direction of Bemis CEO (and Ron Johnson father-in-law), Howard Curler, the multi-national, publicly-held, corporation was looking to open a new plastics plant in Oshkosh, Wisconsin. Here's how the Oshkosh Industrial Development Corporation (Chamco) explains it:
"In 1965 Bemis acquired Curwood in New London and in the late 1970s they decided to add another facility. Curler says they chose Oshkosh because it had a good transportation network and a dedicated and highly skilled workforce. As Bemis prepared to open the Oshkosh plant, Curler looked to the city and Chamco for help with site selection, to purchase land and to smooth out any problems along the way."
Meanwhile, at the same time, Howard Curler built a new, privatly-owned, plastic plant right accross the street from the new Bemis plastics plant. The new company would be headed up by his son, Patrick Curler, and would also be named after his son: PACUR. PACUR would be a "captive supplier" of Bemis and for the first few years, meaning that Bemis was their only customer.
Today, PACUR's relationship with Bemis is somewhat the same, with the vast majority of PACUR's business going to Bemis subsidiaries and Bemis being controlled by the Curler family. In addition, Bemis has built several more plastic plants in the area, including Perfecseal, which is a backyard neighbor (and big customer) of PACUR, and headed-up by another one of Johnson's brothers-in-law, Robert Krostue.
It's pretty easy to run a successful supply company and raise $9 million to use on a run for office when your wealthy father-in-law is giving you this kind of leg up.
But the new, exciting news is that Johnson's myriad connections are helping him recoup that $9 million investment in his own campaign. In Friday's Milwaukee Journal Sentinel, Daniel Bice reports that in Johnson's latest financial disclosure report, PACUR paid Johnson $10 million in deferred compensation. Johnson -- in terse fashion -- tells Bice that the package is "reasonable" and that he's "complied with all the disclosure laws," but Bice goes on to report that Mike McCabe of the Wisconsin Democracy Campaign says the arrangement looks "looks like a scheme to get around a century-old law," that "bars corporate donations to candidates." Per Bice:
After the election, in which he defeated Democratic U.S. Sen. Russ Feingold, Johnson said he dialed down his active involvement with Pacur and received the deferred compensation package for serving as its CEO over the previous 13 years.
Unlike most deferred package deals, however, it appears that the company had not set aside a specified amount annually that would be paid out when he left the firm. Instead, Johnson said the $10 million payment was "an agreed-upon amount" that was determined at the end of his tenure with the company.
Agreed upon with whom?
"That would be me," he said.
Johnson told Bice, "I have no idea what could be suspicious or cynical about this." Go read the whole thing, and see if you don't end up feeling suspicious or cynical!
For his part, Lounsbury seems to feel that way. There is, however, a teensy silver lining:
The good news for the state of Wisconsin and the IRS is that Ron Johnson is finally going to be paying his fair share of his taxes -- or at least part of it. Before Johnson took control of Pacur in 1997, Pacur was paying 3-400K a year in Wisconsin corporate taxes. When he took control of Pacur, however, he made Pacur into an LLC, where the corporate income "passes through" to the owner (Johnson) and the taxes are paid by Johnson as an individual. However, through a variety of tax avoidance schemes -- including loaning himself millions at nearly an interest-free rate -- he and his wife have paid only 50K-70K a year in state income taxes since 1997.
Here's the kicker: From the State of Wisconsin's perspective, before Johnson owned Pacur, they were getting 3-400K a year in tax revenue from Pacur and 50-70K from Johnson and his wife, but after Johnson took control of Pacur the State got ZERO from Pacur and still got about 50-70K each year from Johnson and his wife. In other words, the net effect of Johnson owning Pacur has been that Pacur has paid no taxes.
However, now Johnson will have to pay the Wisconsin top rate of 7.75% on the 10 million, and have to cut a check to the Wisconsin Department of Revenue for $775,000. Which is still a fraction of what Pacur would have paid if Johnson wasn't using his tax avoidance schemes, but... beggers can't be choosers!
It's okay though, because the revenue the state would have been entitled to will be collected by scuttling the public-sector pensions of middle class Wisconsinites!
"Johnson proves to be a big spender -- and taker: Firm pays him $10 million," Milwaukee Journal Sentinel
"Johnson's Ten Million Dollar Pay Check Part of Elaborate Tax Avoidance Scheme," Uppity Wisconsin
"Dystopian Wisconsin: Who is Ron Johnson?," The Awl
PREVIOUSLY, ON THE HUFFINGTON POST:
"Russ Feingold, TARP Critic, Down In The Polls To Bailout Beneficiary Ron Johnson"