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Mike Stark Headshot

Don't Do This, Virginia...

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Earlier this week I wrote about a blogger's dinner with Terry McAuliffe that I attended last Friday. Something I didn't mention (because I had forgotten about it) was T-Mac's pledge to run a fully positive campaign -- to reserve all negativity for the general election.

Under normal circumstances, that sounds pretty good, right? We progressives remember what happened in Iowa in 2004 -- Howard Dean and Dick Gephart fought each other tooth and nail, opening up the door that John Kerry (and John Edwards after him) waltzed through. The mudslinging came at a cost.

I suspect Creigh Deeds and Brian Moran will approximate McAuliffe's pledge and minimize the negativity, but I fear that, in this case, a sanitized campaign may work to their detriment.


Because minimizing Terry McAuliffe's record works very well for Terry McAuliffe. A lot of things seem to work out very well for McAuliffe; it's kind of uncanny.

Let's review.

I've been reading the late Marjorie Williams' Reputation: Portraits in Power -- specifically the chapter on Terry McAuliffe. I recommend it to anyone that wants to know more about influence in Washington -- it's a gripping read.

Anyway, I'm going to pull a few nuggets from her book, a 1999 Jeff Gerth article for the New York Times (yeah, I know... that Jeff Gerth. All I can say is that even a stopped clock is right twice a day) and a Paula Dwyer article that appeared in a December, 1997 issue of BusinessWeek.

After assimilating this data-dump, I'll leave you to your own devices to figure out why Terry McAuliffe might find it in his interest to run an unexamined (read: negativity-free) campaign.

Before we begin, I think a little contextualizing is important. The dawn of the nineties saw the bursting of the S&L bubble. The crisis was perhaps the first time that American politicians at the federal level realized that there were fortunes to be made for themselves and their benefactors through exploitative deregulation and regulatory tweaks. Essentially, the scandal boiled down to two key elements: the FDIC protection was increased to $100,000 and regulations restricting the investment vehicles available to S&L managers were eviscerated. The changes resulted in several newly minted millionaires, politicians with overflowing campaign coffers (and sometimes personal bank accounts) and a tax-payer bill of over $50 billion dollars. Particularly sweet for the criminals that perpetrated the scam? The corruption was bi-partisan, so we never saw any sort of meaningful investigation or accountability.

This was the environment in which T-Mac rose to prominence. And as you may suspect, McAuliffe found a way to take advantage of the tax-payer's misfortune.

As part of the clean-up of the S&L mess, the government formed a company called the Resolution Trust Corporation. Its primary mission was to take ownership of insolvent S&L's and sell whatever assets remained at the best price they could get. One of the S&L's they took ownership of was American Pioneer Savings Bank. Its owner? Richard A. Swann. Significance? Swann was Dorothy Swann's father. Dorothy Swann is now better known as Dorothy McAuliffe.

A set of properties that had been owned by American Pioneer Savings Bank (APSB) included "5 apartment complexes and a rundown shopping center." In 1991, McAuliffe put together a deal in which the properties were purchased by a union (The International Brotherhood of Electrical Workers) for $38.7 million. McAuliffe put up none of his own money, but received a 50% ownership stake for structuring the deal. The next year, he used the same property as collateral for a $5.8 million loan from the same union that participated in the first deal. You may or may not find it interesting that the union's International Secretary and co-Chairman of its pension fund was Jack Moore - a close friend of McAuliffe's since they both worked on Dick Gephart's 1988 presidential run.

The story devolves from there. The union's pension fund was investigated and sued by the United States Department of Labor. It turns out that the union members got a raw deal; the return on the investment was paltry by any objective standard. Furthermore, the union ended up divesting itself of the properties.

The properties were sold to Terry McAuliffe and a new business partner, Carl H. Lindner Jr.

Maybe you've heard of Lindner.

Carl Lindner and his family have been strong supporters of the Republican Party for quite some time. During the 2004 election cycle, the Lindner family contributed tens of thousands of dollars to various Republican groups, including the Republican National Committee and several Republican politicians. In 2004, the Republican National Committee named Lindner as one of 62 "Super Rangers", the highest level of fundraising recognition, accorded to those who raise $300,000 or more for the Republican Party.[5] Lindner, a close ally of George W. Bush, secured the use of Great American Ball Park for Bush's re-election campaign on October 31, 2004, two days before the 2004 Presidential Election.

In 2005, Lindner was among 53 entities that contributed the maximum of $250,000 to the second inauguration of President George W. Bush.

Or maybe this is how you know Carl Lindner:

The co-host of a recent top-dollar fundraiser for Sen. John McCain oversaw the payment of roughly $1.7 million to a Colombian paramilitary group that is today designated a terrorist organization by the United States.

Carl H. Lindner Jr., the billionaire Cincinnati businessman, was CEO of Chiquita Brands International from 1984 to 2001, and remained on the company's board of directors until May 2002. Beginning under his tenure, Chiquita executives paid hundreds of thousands of dollars to the United Self-Defense Forces of Colombia (known by the Spanish acronym AUC), which is described by George Washington University's National Security Archive as an "illegal right-wing anti-guerrilla group tied to many of the country's most notorious civilian massacres."

Following a Justice Department indictment last year, Chiquita admitted to illegally funding the paramilitaries and agreed to pay a $25 million fine. Chiquita's payments to the AUC began in 1997 and lasted seven years; roughly half of the funds came after the group was designated a Foreign Terrorist Organization by the U.S. State Department in 2001.

According to the Justice Department, the payments "were reviewed and approved by senior executives" of Chiquita, who knew by no later than September 2000 "that the AUC was a violent, paramilitary organization."

Late last week, Lindner co-hosted a $25,000-per-person fundraiser for McCain and the Republican Party in the wealthy Indian Hills neighborhood of Cincinnati, Ohio. The event raised about $2 million; Lindner also serves on McCain's Ohio Victory Team.

I'm thinking that if I was running for Governor and I had intimate business relationships with people that had looted our nation's treasury and financed terrorism... well, there just might be a reason to make a big show out of promises to avoid negative campaigning.

Of course, I'm just scratching the surface here. There's a LOT more I'm about to get to in the weeks ahead.

Before I sign off for now though, I do want to address one question that some of you may be raising... And that is: Why am I sullying someone who very well may be our party's standard-bearer in a crucial election?

The answer is multi-faceted:

  1. This information wasn't hard to dig up. Lexis-Nexus and Westlaw are as available to the McDonnel campaign as they are to me. They must be salivating at the prospect of running against Terry McAuliffe. If this stuff doesn't get aired now, it gets aired then.
  2. I really don't think a person that seems to see morality as something fungible... someone that seems to value money and personal net worth over the lives of those of us that work for a living... Well, I just don't think that is was the state of Virginia needs right now.
  3. Simply put: it's time to turn the page on the corporate Democrats that gave us George W. Bush.

I'll have more for you next week.

A postscript: For the sake of fairness, I reached out to the McAuliffe campaign for comment. In fact, I violated a pretty sacrosanct tenet of journalism in that I sent them the entire article so they could respond to the fullest extent possible. In addition, I spoke with the campaign on the telephone as they sought to do some damage-control. In that conversation, I specifically asked when the McAuliffe association with Lindner ended - if it had. Below, you'll find the response I got from McAuliffe's shop - in nested blockquotes, I'll add my personal comments to their response. You will note that the Lindner issue was not addressed.

"McAuliffe put up none of his own money, but received a 50% ownership stake for structuring the deal."

Terry sourced the deal and brought it to IBEW for its consideration. IBEW then negotiated a partnership agreement where Terry would be the managing partner, IBEW would be the capital partner - a very common arrangement.

Under Florida law, a partnership is established by paying a nominal fee of $100.

The agreement stipulated that IBEW received a "preferred return" on the invested capital, meaning that Terry would not make any money on the deal until IBEW made its money back, plus a return of almost ten percent. Any money made after that was subsequently split 50/50.

So McAuliffe's risk was? Zero. The substance of the story is that McAuliffe took inside information from his father-in-law (that may have looted the S&L he ran), leveraged that information to structure a deal that he then brought to a crony he got chummy with a few years earlier that now co-chaired a union pension fund.

"The union's pension fund was investigated and sued by the United States Department of Labor."

That investigation focused on how the union structured its investments. It never targeted Terry or accused him of doing anything wrong. [Pensions and Investments, 11/12/01]

As you'll see in forthcoming articles, McAuliffe has absolutely led a charmed life. It seems everywhere he's gone, he walks away with millions of dollars while his business partners walk away with subpoenas and lawsuits. Whether it is turning $100 into millions, or $100,000 into many millions or nothing into lots and lots of money, McAuliffe always wins. The same can't be said for the pensioners, union members, retirees and even peasants that find themselves on the other side of his deals.

"It turns out that the union members got a raw deal; the return on the investment was paltry by any objective standard."

This is nothing but hyperbole. Both Terry and the IBEW made money. Terry's projects with the IBEW pension fund made a return of about 10.5 percent. Other large pension funds made a median return of 10.9 percent on their investments in the early 1990s. [Brewer, Beemer, Kuehnhackl & Koon, 12/12/97; Associated Press, 9/30/99]

We aren't talking about McAuliffe's "projects". What I wrote was specifically focused on the project involving the 5 apartment projects and the rundown shopping center.

"Lexis-Nexis and Westlaw are as available to the McDonnel campaign as they are to me. They must be salivating at the prospect of running against Terry McAuliffe. If this stuff doesn't get aired now, it gets aired then."

This has already been aired, which is why it's easily available on Lexis-Nexis and Westlaw. The right wing tried to attack Terry on this before, and the attack fell flat.

What was McAuliffe running for at that time? Was it a democratic primary? Was it a governor's race? Could these issues be more salient now than they were then?

"It's time to turn the page on the corporate Democrats that gave us George W. Bush."

Quite the opposite. This is a smear that Republicans used when Terry vociferously attacked George W. Bush's shady business dealings and legislative agenda.

National Review printed a Byron York column shortly before the 2002 elections attempting to attack then DNC chairman McAuliffe in response to questions posed by McAuliffe as chairman of the Democratic Party about President Bush's energy dealings. York noted in the article: "He is perhaps the most aggressive and public critic of George W. Bush's record in business... Much of this might have escaped public notice had McAuliffe not chosen to attack George W. Bush on the issue of business ethics." [National Review, 9/16/02]

National Review printed a column just before the 2002 elections that attempted to use the pension fund incident to attack McAuliffe and the Democratic party on Social Security, thus scaring a major constituency - seniors. "Democrats are spending the days before the November election scaring retirees about Social Security. But what should spook seniors is Democratic National Committee chairman Terry McAuliffe's record... The DNC's claim that Bush, therefore, endangers seniors rings hollow when compared to McAuliffe's adventures in retirement-asset management." [National Review, 10/31/02]

I really haven't even begun with the detailing of McAuliffe's record that is warranted. For now, if you haven't made up your minds already, I guess we'll have to see how well T-Mac's record stands up when exposed to the klieg lights. I don't think people know half of the story, even if it has been reported previously in second-rate rags like the Weekly Standard. In the end, the record is the record. McAuliffe has every right to spin his version of the facts, but he shouldn't look to escape accountability for choices and decisions he's made. I think his choices have exploited working people - sometimes egregiously. In the end, the primary will be the final arbiter.