Virginia Voters Reject Influence-Peddler Terry McAuliffe

McAuliffe photoBy a wide margin yesterday, Virginia voters nominated State Senator R. Creigh Deeds as the Democratic Party candidate for governor. In so doing, they rejected the candidacy of former Democratic National Committee (DNC) Chairman Terry McAuliffe, a top Clinton confidante with a long history of influence-peddling. With roughly 75 percent of the ballots counted, Deeds had received about 50 percent of the tally, with McAuliffe and State Delegate Brian Moran each with roughly 25 percent. Deeds will face Republican Attorney General Bob McDonnell, who ran unopposed, in this November’s general election. But the real news may be the defeat of McAuliffe, a powerful and ethically-challenged party fundraiser. Former President Bill Clinton, among other party stalwarts, actively had stumped on his behalf. 

Creigh Deeds, who hails from rural Bath County, had been a relatively unknown quantity. But Terry McAuliffe was anything but that. Name recognition helped him to a healthy lead in the polls as late as mid May, though he had slipped badly over the last few weeks. By the end, charisma and fundraising prowess couldn’t save the day. That may have been because underneath it all, voters sensed his character was suspect. They had reason to believe as much. McAuliffe has a long track record as a businessman and Democratic operative, one that includes involvement in labor union corruption.

During the Nineties McAuliffe had been the top fundraiser, generating some $43 million for the 1996 Clinton-Gore re-election campaign. Every ethically-challenged means of fundraising, from the White House Lincoln Bedroom sleepovers to the California Buddhist temple receptions, bore the imprint of McAuliffe’s nervy, aggressive style. A lawyer, businessman and bestselling author, he’s intimately familiar with the nexus of finance and politics. During February 2001-February 2005, he served as DNC chairman, raising $578 million in contributions and bringing the party out of the red. Probing journalists took note of his ride to the top. The Sunday Washington Post recently (May 3) referred to his legacy as “a business career built mostly on intricate land deals and dot-com investments, often with wealthy political donors – and sometimes with no jobs to show for it.”

Terrence Richard “Terry” McAuliffe grew up in Syracuse, N.Y. His father, the late Jack McAuliffe, was a local Democratic Party treasurer and powerbroker. The younger McAuliffe cut his teeth raising funds for Jimmy Carter’s 1980 presidential re-election campaign. After receiving a law degree from Georgetown, he would climb the party food chain. Early in 1988, Terry McAuliffe, still only in his early 30s, became chairman of Federal City Bank. Quickly, the bank loaned $125,000 to a political action committee for that year’s presidential campaign of Rep. Richard Gephardt, D-Mo. The bank also provided loans to McAuliffe’s prime mentor, Rep. Tony Coelho, D-Calif., and Speaker of the House Jim Wright, D-Tex.; both would step down amid separate allegations of wrongdoing. In 1991, federal regulators cited the bank for unsafe and unsound practices, and placed it under strict supervision. Suffering heavy real estate-related losses and unable to raise additional capital, McAuliffe merged his bank with a Democrat-connected institution, Credit International Bank.

While dodging that bullet, McAuliffe was starting up another venture, The Boland Group, with investor John Boland and now-former Congressman Tony Coelho. The partnership developed a list of clients that included law firms, federal agencies, and the Clinton-Gore re-election committee. Early in its years, The Boland Group specialized in picking up failed savings & loans in receivership to Resolution Trust Corporation (RTC). One of those fire-sale institutions, American Pioneer Savings & Loan, belonged to his future father-in-law, Richard Swann. He severed his ties to Boland in March 1994, claiming he was never a partner.

McAuliffe’s big payday would come late in the decade by way of an Internet startup, Global Crossing. As an angel investor, he pumped $100,000 into the fiber-optic networking company in March 1997. The firm went public the following year. Coincidentally or not, McAuliffe sold his stake right at the stock price peak, walking off with $18 million. Any number of top union officials affiliated with the union-controlled financial services firm, ULLICO, also sold their extensive stake in Global Crossing, something that eventually triggered House and Senate investigations. Global Crossing’s then-CEO, Gary Winnick, at McAuliffe’s arranging, played a round of golf with President Clinton, whereupon he pledged $1 million to the construction of the Clinton Library. McAuliffe also persuaded Winnick to invest $40 million in another telecom startup, Telergy. That firm’s board of directors included McAuliffe, who in his broker role pocketed a reported $1.2 million. McAuliffe prevailed; Telergy didn’t. In August and September 2001, the company laid off 450 employees and went into bankruptcy.

That brings us to McAuliffe’s questionable dealings with organized labor. For one thing, he played a role in the money-laundering scandal surrounding the re-election campaign of Teamsters General President Ron Carey in 1996. Carey, first elected in 1991, faced a strong challenge from James P. Hoffa, who sought an end to the union’s federal supervision under a 1989 civil RICO settlement. Of the six cited illegal schemes, McAuliffe played a role in what came to be known as “Scheme #2.” Carey’s campaign manager, Martin Davis, had the Teamsters make a soft-money donation to the Democratic National Committee in exchange for McAuliffe identifying a wealthy donor. McAuliffe found one. Unfortunately, the person in question was an “employer” and hence was barred from making a contribution. Davis, Teamster political director Bill Hamilton and several other persons eventually pleaded guilty or were found guilty of various offenses. Federal overseers nullified Carey’s close victory, eventually removing him from the presidency and then the union itself, paving the Hoffa’s presidency (Carey was found not guilty in a 2001 federal trial).

McAuliffe also fed at the trough of an International Brotherhood of Electrical Workers-controlled pension plan known as the National Electric Benefit Fund (NEBF). In May 1999, the Department of Labor filed a civil suit against a trustee and ex-trustee of the fund, respectively, John Grau and Jack Moore, charging the pair in 1992 had recklessly lent more than $6 million to a McAuliffe enterprise, Columbia Land & Development Corporation, in a sweetheart real estate deal. The loan in fact was in default during December 1992-October 1997. McAuliffe also owned American Capital Management, a partner with NEBF in a separate 1991 land deal. NEBF put up $38.7 million to buy five apartment complexes and a shopping center in the St. Petersburg, Florida area. With virtually no money down, McAuliffe and his wife, Dorothy, received a 50 percent joint stake. The partnership bought the properties from RTC, which had taken them over from American Pioneer Savings & Loan; i.e., the lender previously controlled by McAuliffe’s father-in-law. The McAuliffes managed to turn their initial $100 investment into $2.45 million. Grau and Moore each settled with the government, agreeing to pay undisclosed six-figure fines, while the IBEW had to reimburse the pension fund for $5 million. Terry McAuliffe got off luckier. With the Labor Department lacking jurisdiction, the investigation fell to the Department of Justice. But the DOJ, reportedly at President Clinton’s urging, backed off.

Terry McAuliffe, far from disavowing his high-powered dealmaker image, has reveled in it, dubbing himself a “hustler” in his 2007 autobiography, “What a Party! My Life Among Democrats: Presidents, Candidates, Donors, Activists, Alligators and Other Wild Animals” (St. Martin’s Press). He’s been untouchable largely because of his ability to prevail upon people he’s helped. More than anyone else, those people are Bill and Hillary Clinton. He and the former First Couple are indispensable to each other’s fortunes. “I am his future,” McAuliffe said of Bill Clinton to journalist Bob Woodward as part of Woodward’s 1999 book, “Shadow: Five Presidents and the Legacy of Watergate” (Simon & Schuster). He wasn’t exaggerating by much. It was McAuliffe who arranged the $1.35 million mortgage loan enabling the Clintons to buy their current home in Chappaqua, N.Y. Later, he would chair Hillary’s 2008 presidential run.

As it turned out, however, McAuliffe’s political future received a major setback in the Virginia primary, even with the former president repaying his political debt with an aggressive endorsement. Voters might not have been aware of McAuliffe’s past, but a large number sensed he was more a wheeler-dealer than a straight-shooter. He’ll remain a major player in the party. But his aura of invulnerability doesn’t shine quite as brightly as it did only a month ago.