Delco GOP rips wealth, environmental policies of Dems
The fall campaign season is decidedly underway and Delaware County Republican Party Chairman Andy Reilly came out swinging this week with a blistering critique for Democratic county council candidates Kevin Madden and Brian Zidek.
“Kevin Madden and Brian Zidek have records of putting personal and corporate profits ahead of a clean environment and the health and welfare of middle class families and taxpayers,” said Reilly at a press conference Thursday. “Their priorities will be extremely harmful to Delaware County taxpayers, working men and women and our environment.”
Madden, a Media native and third-generation Delaware County resident, is cofounder and CEO of NightOwl Technologies, a mobile technology company. He replaced fellow Democrat Jen Leith after the May primary, in which she garnered 17,387 votes.
Zidek, of Nether Providence, is the owner of New Jersey-based Excess Reinsurance. He also founded Excess Management Company, where he served as the managing partner before selling the company in 2014, and is president of Bermuda-based Argo Capital Group, Ltd.
They face two Republicans — former longtime Magisterial District Justice John Perfetti and incumbent Councilman Dave White, as well as Libertarian candidates Thomas Carey and Edward Clifford, in the Nov. 9 general election.
While Perfetti and White both have solid records of local community service, said Reilly, Madden and Zidek appear to have no local service on record and have funded their campaigns mostly with money from outside the state, according to financial disclosure forms filed with the county.
Reilly noted Madden served as vice president of private equity firm KPS Capital Partners from February 2004 to November 2012. During that time, KPS acquired a metals business called Global Brass and Copper Inc., where Madden served as vice president, secretary and treasurer, according to Securities and Exchange Commission filings.
A 2009 report by the University of Massachusetts Political Economy Research Institute found KPS ranked as the 45th most toxic polluter in the United States. GBC operations in Woodbury, Conn., were found to be out of compliance with the Environment Protection Agency in seven of 12 quarters from 2004 through 2009, with seven effluent violations between 2007 and 2012. The company had not received any fines or enforcement actions, however, according to a New York Times interactive index.
Reilly also cited another KPS property, the Blue Ridge Paper Company in North Carolina, which was identified by a local activist group as “the region’s largest toxic air and water polluter” in 2005 due to the “enormous scale and toxicity” of that facility’s releases.
KPS also has a track record of buying, turning around and reselling distressed businesses, often for a handsome profit. But Reilly said workers of those companies pay the price by making wage concessions and seeing their pensions and other benefits evaporate.
He pointed to the Blue Heron Paper Co. in Oregon, which KPS bought for $1 million in 2000. KPS later sold the business for $30 million after bringing it under an employee owned stock program, but not before workers there saw millions in wage and benefit cuts. Blue Heron closed its doors in 2011.
Reilly additionally questioned the 2014 opening of Excess Reinsurance offices in Woodbury, N.J., which was granted a 30-year tax abatement by the city, and the legitimacy of Zidek’s Bermuda business, founded by his father.
Reilly said Zidek needs to explain whether the reinsurance company and its clients are taking advantage of a “Bermuda reinsurance loophole” to avoid paying their fair share in taxes.
The loophole essentially allows insurance companies to hold funds in reserve for future loss payments without having to make income tax payments on received cash. Hedge funds have reportedly exploited this wrinkle by using reinsurance companies as through-puts for investments because any profits made by the insurer are not initially taxed. Typically, any taxes that are eventually paid on those funds come in at the lower, long-term capital gains rate, rather than the higher income tax rate.
Democratic candidate spokesman Joel Coon called Reilly’s jabs “sloppy, misleading and inaccurate” in a rebuttal statement.
“It is disappointing that the first press conference of this campaign turned out to be nothing more than a false and misleading stunt led by the local party boss,” said Coon.
In response to the GBC environmental issues, Coon pointed to a 2016 SEC filing that says the selling entity, Olin Corporation, agreed to retain liability for all existing environmental issues and indemnify KPS for all or part of a number of other environmental liabilities.
Coon noted that KPS nonetheless spent five years and $22 million reducing dioxin levels in Pigeon River by the Blue Ridge facility, where fish were deemed too toxic to eat in 1988. That advisory was lifted in 2007 after dioxin levels dropped below U.S. Food and Drug Administration safety limits.
Coon additionally cited increasing costs at Blue Heron as the main contributor to that company’s downfall some three years after KPS left. Coon noted KPS was heralded for saving hundreds of jobs at the plant with its acquisition and is estimated to have saved thousands of jobs at similar companies nationwide.
Thomas Buffernbarger, president of the International Association of Machinists, said in a 2009 Financial Times article that KPS tries to work with unions and share information instead of sidelining them.
Coon said Madden’s work with KPS strengthened the union pension funds that have backed the firm, and those funds receive the vast majority of the profits when KPS buys and turns companies around.
As to Zidek, Coon said Argo Capital and Excess Reinsurance are not involved in any “hedge fund” tax dodges, and Zidek pays the highest individual rate on his personal income tax. Argo was formed in Bermuda decades ago because the legal framework for a reinsurance company did not exist in the United States at that time, said Coon.
The rebuttal statement also noted that Zidek spent $1 million renovating a disused former Freemason temple for Excess Reinsurance offices in New Jersey and the company will make gradually increasing payments to the city over the 30-year abatement period. The payments begin at $6,000 for the first three years and grow to $30,000 in the final four years, under the financial agreement.
The rebuttal statement added that implying Zidek and Madden do not have Delaware County values or connections is “asinine.” Madden is a third generation Delco native and Zidek has lived in Delco for 19 years, where he is raising three children.
Though they did raise much of their campaign capital from out of state, Coon said both candidates have friends and associates all over the country, like most successful business people.
“Brian Zidek and Kevin Madden are two successful small businessmen challenging a machine that will say and do anything to keep their pay-to-play schemes running so they can continue lining their pockets and those of their political cronies and campaign contributors,” said Coon. “Party boss Reilly knows that their gravy train is coming to an end and they are desperate to cling to power at any cost. Voters just can’t trust any words that come out of their mouths after this ridiculous stunt.”