The Political Business of Terry McAuliffe
In May 1999, the Labor Department brought suit against Jack Moore and John Grau, charging the two men with mismanaging the pension fund for the International Brotherhood of Electrical Workers. Moore was the longtime secretary of the union, while Grau was the vice-president of the National Electrical Contractor’s Association, which was partner in the fund. At issue was a series of sweetheart real estate deals in central Florida, which regulators labeled "imprudent", and cost the fund money. Moore and Grau eventually settled the case for more than six figures. The union was forced to kick in another $5 million to cover the losses to the pension fund. The person at the center of the scandal, however, made out in the deal very well, indeed. His name: Terry McAuliffe, now head of the DNC.
McAuliffe met Moore in 1988, when both were raising money for the doomed presidential bid of Dick Gephardt. They became close friends, allies in a campaign to redesign the Democratic Party into a more moderate political vessel, along the lines of the pre-Reagan Republicans. Moore controlled the $6 billion IBEW pension fund and had a reputation for investing money in businesses run by friends and political cronies.
So it was that in November 1990, McAuliffe approached Moore and his friend Grau with a proposal for a real estate partnership in central Florida with an investment company called American Capital Management, which McAuliffe owned with his wife Dorothy. The deal involved the purchase of the Woodland Square Shopping Center and five apartment complexes outside Orlando, Florida. It was a lopsided partnership. The pension fund put up $39 million to purchase the property. McAuliffe shelled out $100, yet he and his wife enjoyed 50 percent ownership in the project. He eventually parlayed his $100 investment into a $2.45 million profit.
Fresh from this triumph, McAuliffe approached Moore with a new proposal. He asked Moore to dip into the pension fund one more time for $6 million so that he could purchase a parcel of land south of Orlando called Country Run, which McAuliffe planned to subdivide into 500 single-family homes. Moore obliged and loaned McAuliffe the money. The development soon proved to be a bust. Only half the homes were built and many of them didn’t sell. Years passed, but McAuliffe never bothered to make a single payment to the pension fund on the loan. According to Labor Department records, McAuliffe was in default from December 1992 through October 1997. The managers of the pension fund never demanded payment or called in the loan. The only collateral they had required was the nearly worthless Country Run property itself.
Eventually, McAuliffe found a buyer for the property and repaid the loan. But the aroma of the deals attracted the attention of the Labor Department, which had been looking into the looting of worker pension funds. In May of 1999, the agency brought a suit against Moore and Grau for mismanagement of the fund. Both eventually settled, agreeing to six figure fines, and resigned their positions. The IBEW was compelled to reimburse the pension fund to the tune of five million dollars. The Labor Department didn’t have any authority to go after McAuliffe. That was up to the Clinton Justice Department and they took a pass. He wasn’t sued or otherwise inconvenienced. So a labor fund got looted and Terry McAuliffe got very rich.
This wasn’t the only time McAuliffe steered a labor union toward dangerous legal and financial shoals. In 1996, McAuliffe helped devise a political money-cycling scheme that led to the downfall of several leaders of the Teamster’s Union, including the union’s reform-minded president Ron Carey and his political director William Hamilton. At Hamilton’s trial on corruption charges, Richard Sullivan, the former director of finance for the Democratic National Committee, testified that McAuliffe asked Sullivan and other top DNC fundraisers to approach big Democratic donors who could make at least a contribution of at least $50,000 to the re-election campaign of Ron Carey, then in a pitched battle with James Hoffa, Jr. Under McAuliffe’s scheme, Sullivan testified, the Teamster’s Union would later recycle that $50,000 back into various Democratic Party accounts. Once again, McAuliffe was never charged with wrongdoing and his lawyer, Richard Ben-Veniste, repeatedly said there’s was nothing illegal in his client’s plan. He lives a charmed life.
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Terry McAuliffe was born in 1957 in Syracuse, New York. His father was a longtime Democratic powerbroker in upper state New York and a top fundraiser for the party. Terry got into politics at a young a young age. But as anyone can tell there’s not much evidence that he was ever excited about policy issues. The environment, abortion rights, civil rights, peace. These great issues didn’t turn Terry on. Instead, he was entranced by the mechanics of political fundraising, party planning and schmoozing with business elites and Hollywood celebrities.
He made a beeline for the Beltway, attending Catholic University. Through his father’s influence, he got a position as a fundraiser for Jimmy Carter. And then he was off and running, renting his financial services to House and senate races and gubernatorial elections.
In the meantime, McAuliffe managed to earn the obligatory law degree from Georgetown University. Then in 1984, he began to fine-tune his craft under the wing of Tony Coelho, the longtime House whip and master fundraiser from California. At the time, Coelho was heading up the Democratic Congressional Campaign Committee, the main DNC fundraising apparatus for House races.
More than anyone, Coelho laid the foundations for the Democratic Party’s open courting of big business. And Terry McAuliffe, working from the master’s Rolodex, served as Coelho’s chief apprentice, sprinting from one Beltway lobby shop to the next offering prime access to Democratic powerbrokers for political cash, hard and soft money, the new coin of the realm.
The young fundraiser learned an early lesson. No enterprise was off-limits, no matter how tarnished the reputation of the company: weapons-makers, oil companies, chemical manufacturers, banks, sweatshop tycoons. Indeed, McAuliffe made his mark by targeting corporations with festering problems, ranging from liability suits to environmental and worker safety restraints to bothersome federal regulators. The more desperate these enterprises were for political intervention, the more money McAuliffe knew he could seduce into DNC coffers. What about environmental groups? Big labor? The traditional core of the Democratic Party? Not only didn’t their objections (assuming they voiced any) matter, they actually made McAuliffe’s pitch more appealing to the corporadoes. After all, the Republicans didn’t have any sway over these organizations. Triangulation, the backstabbing political playbook of Clintontime, originated as a fundraising gimmick. A very lucrative one.
In the early 90s, really big money began to pour into the DNC. McAuliffe recruited robust donations from Arco and Chevron, Entergy and Enron, Phillip Morris and Monsanto, Boeing and Lockheed, Citibank and Weyerhaeuser. Many of these corporations had all but abandoned the Democrats during the Reagan era. McAuliffe lured them back with promises of favorable treatment by a new generation of anti-regulatory Democrats attuned to the special needs of multinational corporations. This was the mulch bed from which the Clinton presidency took root.
By 1994, Clinton himself had aligned himself to McAuliffe’s magic touch. He tapped him as the chief fundraiser for the 1996 reelection campaign. In this capacity, McAuliffe masterminded some of the more risqué political fundraising operations since the Kennedy era. There were the fundraisers at Buddhist temples in California. There were the notorious coffee klatches, where for a six-figure contribution to the DNC, corporate executives were brought to the White House for some face-time with Bill and Hillary, Al and Tipper, and a retinue of cabinet secretaries, with pen in hand ready to address any nagging problem. McAuliffe also devised the plan to rent out the Lincoln Bedroom to top contributors for slumber parties with the president.
Over the course of the next six years, McAuliffe was personally responsible for raising, largely from corporate sources, more than $300 million for the DNC.
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The scene: the MCI Center in Washington, D.C. The date: May 14, 2000. The Event: "BBQ and Blue Jeans Gala." It’s Terry McAuliffe’s biggest party yet. A star-studded gathering of DC lobbyists, corporate executives and Hollywood liberals, all in dressed in blue jeans, eating BBQ and listening to the blues and country music. It was also the single biggest fundraiser in history. More than $25 million was raised for the DNC in a single night.
Toward the end of the evening, Al Gore lumbered his way onto the stage and seized the microphone. He directed the spotlight turned on McAuliffe, the real star of the evening. "Terry", Gore said, "You are the greatest fundraiser in the history of the universe." The crowd thundered with applause for the man who had just lightened their wallets of several thousands of dollars.
Gore would soon come to rue those fervent words. While most Democrats blamed Katherine Harris or the Supreme Court for the loss of the White House to George W. Bush, McAuliffe pointed the finger at Gore. The fundraiser believed that Gore ran an inept campaign, misspending the precious millions he had worked so diligently to raise. McAuliffe detested the way that Gore distanced himself from the Clintons and refused to allow the president to campaign for him even in key southern states. Even worse from McAuliffe’s perspective, Gore had subtly dissed Clinton on the campaign trail, suggesting that he himself was a man of firmer moral sinew than the embattled president.
When Gore lost, the party fell back into the control of the Clintons and their chief emissary, Terry McAuliffe. The fundraiser swiftly took his revenge out on Gore. In late January, as the moving vans where pulling away from the White House, McAuliffe planned a major send off for the Clintons at Andrews Air Base. All the top Democrats were there; many were invited to give tributes to the first couple in front of the national TV cameras. Al Gore, naturally, expected to give the keynote farewell address. But McAuliffe refused to allow Gore even near a microphone. Gore wasn’t permitted to speak a single word. "McAuliffe didn’t want Gore to speak", a top aide at the DNC told the Washington Post." McAuliffe didn’t even want Gore there. The send off was about good memories, success stories. And the VP wasn’t either."
McAuliffe’s implacable loyalty to Clinton was soon rewarded. Later in 2001, Bill Clinton engineered the ouster of Joe Andrew as head of the DNC and installed McAuliffe, who only months earlier had offered to purchase the Clintons a house in Chappaqua, New York for $1.3 million, as the chief of the party. As the head of the DNC, McAuliffe was now in a position to protect the Clintons’ legacy, reward loyalists, punish party dissidents and select the next presidential nominee.
When Gore began to flirt with the notion of challenging Bush in 2004, McAuliffe went to work to kill off his campaign before it even started. He went straight to Gore’s top political sponsors and advised them to withhold funds from the Gore campaign chest. He was tremendously persuasive, convincing even some of Gore’s most loyal backers, such as financier James Tisch, to deny money to their old friend.
The sabotage of the nascent Gore 2004 campaign was just a run-up for demolition job McAuliffe directed against the unauthorized campaign of Vermont governor Howard Dean. The Dean threat had almost nothing to do with any perceived ideological heresy from the Vermonter. After all Dean was a run-of-the-mill neoliberal who pretty much aped the centrist economic policies of Clinton. The real threat posed by Dean came from his determination to raise millions in campaign contributions outside of the precincts of the DNC. McAuliffe’s control over the party stems from his role as the prime dispenser of campaign cash, the elixir necessary to keep political recipients loyal to the party leadership and its policies. Dean showed another way was possible and he had to be put down.
But after the Dean juggernaut was scuttled, McAuliffe reached out a helping hand to the defeated candidate. As usual, the hand proffered money. The Dean campaign was in debt, the legions of Deaniacs seething with rage over the demolition of their hero. McAuliffe offered to help pay off Dean’s debts and set up his new institute, Democracy for America. In return, Dean worked to calm his troops, imploring them not to abandon the party for the independent campaign of Ralph Nader.
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Terry McAuliffe didn’t just use his business contacts to fatten the accounts of the Democratic National Committee; he also deftly exploited them to inflate his own fortune, which now nudges toward nine figures. A similar fruitful intimacy with corporate cronies led to Tony Coelho’s stunning fall from grace, but McAuliffe never looked back. His trajectory has been decidedly prosperous and, to this point, utterly immune to the slumping fortunes of the economy outside the confines of the Beltway. These days McAuliffe says he wants to resurrect the Misery Index, but he’s not acquainted with any of the numbers.
In 1996, McAuliffe met a young corporate tycoon named Gary Winnick, who had once referred to himself as the richest man in Los Angeles. Winnick ran Global Crossing, a fiber-optics company chartered in the tax-friendly haven of Bermuda. At the time McAuliffe met Winnick, Global Crossing was a privately held company, poised to cash in on the deregulation of the telecom industry and the new opportunities in China. In 1997, Winnick offered McAuliffe the opportunity to purchase $100,000 worth of Global Crossing stock.
When Global Crossing shares went public in 1998, the value of the stock soared. Operating with an acute sensitivity to the fluctuations of the market bordering on ESP, McAuliffe sold his shares at the precise moment the stock peaked. McAuliffe told the New York Times he pocketed $18 million in the deal. Within a few months, Global Crossing’s stock collapsed, the company plunged into bankruptcy and more than a third of its workforce were tossed into the ranks of the unemployed.
McAuliffe also served as an on-call DC fixer for Winnick in those optimistic days following the Clinton reelection. In early 1997, McAuliffe set up shop in an office in downtown DC owned by a Winnick company called Pacific Capital Group. According to a boastful McAuliffe, Winnick hired him as a consultant to "help work some deals" with the federal government. "Gary was looking for some political action", McAuliffe told Worth magazine. "He wanted a stable of people around him with great contacts."
Few people inside the Beltway enjoyed better contacts than McAuliffe, as Winnick would soon discover. At an appearance in Los Angeles later that year, Bill Clinton lavished on Winnick his personal endorsement. "Gary Winnick has been a friend of mine for some time now and I’m thrilled by the success that Global Crossing has had."
There’s no evidence that Winnick and Clinton had even met each other before that evening. But the endorsement proved fruitful. It signaled not only Clinton’s faith in the company, but also sent a message to federal agencies that Global Crossing was a firm that they should do business with. It soon paid off. A few months later Global Crossing won a $400 million contract from the Pentagon after repeated prodding from the White House.
After the contract was awarded, McAuliffe arranged for Winnick to play a round of golf with Clinton. Shortly after the afternoon on the links, Winnick donated $1 million to the Clinton presidential library.
Winnick’s joy was short lived, however. In the winter of 2001, the Pentagon rescinded the Global Crossing deal following an investigation by the Inspector General of the Defense Department, which raised questions over how the contract was awarded and Global Crossing’s ability to fulfill its obligations. Later, the company fell into the financial death noted above.
The attack dogs in the Bush White House never really made much of McAuliffe’s ripe ties to Global Crossing. Why? Global Crossing had been almost equally generous to the Bush family.
In 1997, Global Crossing invited former President George H.W. Bush to address company executives in Tokyo, Japan. At the time, Bush’s standard speaking fee was $80,000. The morning after the speech, Bush had breakfast with Winnick. Winnick advised Bush that it would prove much more profitable for the former president to accept payment in Global Crossing stock, then privately held, than cash. Bush agreed. Soon the company went public and the value of Bush’s stock swelled to more than $14 million. Not a bad pay-off for an hour’s speech. To complete the symmetry, one of Winnick’s top executives also serves as a trustee of the G.H.W. Presidential Library Fund.
Winnick tried to cover all of his bases. Yet as with Enron and Tyco, even the most judicious dispensation of money across the political spectrum couldn’t save a company that had been looted from the inside out. Global Crossing went down and so did Winnick. But the politicians who made it all possible remain indemnified from any liability for the carnage, protected by a mutually advantageous non-aggression pact.
Never bite the hands that feed the system.
JEFFREY ST. CLAIR is the author of Been Brown So Long It Looked Like Green to Me: the Politics of Nature and co-editor, with Alexander Cockburn, of Dime’s Worth of Difference: Beyond the Lesser of Two Evils, from which this profile of Terry McAuliffe has been excerpted.