Big donors dominate Obama advisory board
President Obama’s newly named Economic Recovery Advisory Board, the real-world Americans being asked to help solve the nation’s financial crisis, includes a union executive who took the Fifth in a federal probe, a billionaire whose failed bank pioneered the subprime mortgage market, and deep-pocket donors who gave or gathered nearly $1.2 million for the president’s campaign.
In all, 11 of the 16 board members donated or raised money for Democrats in the last election, according to a Washington Times review of campaign finance records. They include the president and chief operating officer of the American arm of UBS Investment Bank, the Swiss-based bank now at the center of a widening tax evasion probe by the Justice Department and the Internal Revenue Service.
In announcing the board’s creation, Mr. Obama described its members as “distinguished citizens outside the government” who were qualified on the basis of achievement, experience, independence and integrity to “bring a diverse set of perspectives and voices from different parts of the country and different sectors of the economy to bear in the formulation and evaluation of economic policy.”
The board is headed by former Federal Reserve Chairman Paul Volcker, whose only political contribution last year was $2,300 to Mr. Obama.
“It is distressing to see the president turning to his heavy finance hitters as consultants,” said Craig Holman, legislative director for Public Citizen, a nonpartisan watchdog group that tracks political fundraising and its influence on government policy.
“These appointments do resemble the type of political practices we’ve seen running Capitol Hill and the federal government for a long time,” he said. “Advisory committees often pretend to be heavy hitters, but the real question here is how much influence this board will have. My hope would be that this is an advisory board largely in name only, bringing in the fundraisers to participate without having that much of a role.”
White House spokeswoman Jennifer R. Psaki described members of the Economic Recovery Advisory Board as “outside advisers with decades of experience in government and the financial industry.”
“They were selected for their expertise on many of the economic challenges we are facing and their ability to provide recommendations from outside the walls of the White House on the appropriate steps for the administration,” she said.
One board member, Richard L. Trumka, secretary-treasurer of the AFL-CIO, surfaced during a Clinton-era federal investigation into a money-laundering scheme involving the Democratic Party and Teamsters President Ron Carey. Court documents and a congressional report claimed that Mr. Trumka helped divert $150,000 in union funds to Mr. Carey’s 1996 re-election campaign through a liberal consumeradvocacy group known as Citizen Action.
Mr. Trumka, former head of the United Mine Workers, invoked his Fifth Amendment right against self-incrimination in refusing to testify on three occasions before a federal grand jury in New York, the House education and the workforce subcommittee on oversight and investigations, and a federal elections appeal master called in to investigate the Carey campaign. He was never charged, however, by the Clinton Justice Department.
A spokesman for the AFL-CIO did not returns calls seeking comment on behalf of Mr. Trumka, who has denied any wrongdoing.
Asked about Mr. Trumka’s ties to the probe, the White House’s Ms. Psaki said, “As the president of the United Mine Workers and later as the secretary-treasurer of the AFL, Richard Trumka has been a tireless advocate on behalf of working people for more than 20 years.”
According to federal records, investigators who targeted suspected campaign fraud in Mr. Carey’s re-election bid against James P. Hoffa focused on Mr. Trumka’s ties to a Washington consulting firm headed by Martin Davis, a top campaign consultant. In pleading guilty to conspiracy, wire fraud and embezzlement charges, Mr. Davis told a federal judge that Mr. Trumka agreed to launder Teamsters funds through Citizen Action.
A separate indictment against William N. Hamilton, the Teamsters’ former political director who was convicted on charges of embezzlement, fraud and perjury in the diversion of $885,000 in union funds to the Democratic Party, said Mr. Trumka agreed with Mr. Davis to transfer $150,000 to Citizen Action, which then routed $100,000 to Mr. Davis and the Carey campaign.
The election appeals master, Kenneth Conboy, a former federal judge, said in a 72-page report that Mr. Davis also asked Mr. Trumka to raise an additional $50,000 for the Carey campaign and that “Mr. Carey was agitated that Mr. Trumka had not yet provided the $50,000 that he had agreed to raise.”
The report also said that Mr. Carey’s campaign manager, Jere Nash, who also pleaded guilty in the case, testified Mr. Carey thought “it was unreasonable that Mr. Trumka was taking so long to provide his contribution because Mr. Carey, as general president of the [Teamsters], had helped Mr.
Trumka get elected secretarytreasurer of the AFL-CIO.”
According to the report, Mr. Trumka eventually raised the money, which was “funneled into the Carey campaign.”
“Mr. Trumka was subpoenaed by my office, but refused to testify, asserting his Fifth Amendment right against self-incrimination,” the judge wrote.
Another member of Mr. Obama’s advisory board is Penny Pritzker, chairwoman of Classic Residence by Hyatt, a chain of luxury senior living communities. Listed among Forbes magazine’s 2008 richest Americans with a net worth of $2 billion, she served as the campaign finance chairwoman for Mr. Obama and was one of his bundlers, personally raising $200,000.
Ms. Pritzker saw her Chicagoarea bank shut down after it pursued a failed strategy of subprime loans. The Office of Thrift Supervision, a Treasury Department agency that regulates federal savings associations, closed Superior Bank and its 18 branch offices in July 2001, after the Federal Deposit Insurance Corp. said its financial condition had “rapidly deteriorated” and its management was “unable to resolve existing problems.”
A 2002 FDIC report said the bank “paid dividends and other financial benefits without regard to the deteriorating financial and op- erating condition of Superior.” It said the bank’s high-risk business strategy focused on the generation of significant volumes of subprime mortgage loans for securitization and sale in the secondary market.
Her attorney, Kevin Poorman, said Ms. Pritzker had stepped down from day-to-day management before the closure for a role on its parent company’s board of directors, but confirmed she did write a letter as late as May 2001 urging the bank to make an expanded push into subprime loans in an effort to save itself.
Critics have cited that letter as evidence of Ms. Pritzker’s continuing stewardship of the bank and her advocacy for a subprime lending practice that Mr. Obama has criticized. In the letter, Ms. Pritzker wrote that her family was recapitalizing the bank and pledged to “once again restore Superior’s leadership position in subprime lending.” The bank was shut down two months later.
Superior was one of the first banks in the 1990s to turn to the emerging practice of subprime lending, where loans are targeted to high-risk borrowers at higher interest rates. A dramatic rise in those defaults and foreclosures is blamed, in part, for the recent financial crisis.
Barbara Casey, a spokeswoman for Ms. Pritzker, said Mr. Obama had sought experienced business people for the board and “certainly Penny is a proven business leader.” Ms. Casey said Ms. Pritzker chaired four businesses, three of which she founded.
Obama spokesmen have not dis- puted her advocacy of subprime lending as the bank was failing but said she was “never accused of any wrongdoing nor did she receive compensation in relation to the closing of Superior Bank.”
They noted that instead of “walking away as millions of homeowners and stockholders suffered, the Pritzker family entered into a voluntary settlement and agreed to pay the government” $460 million that the bank cost taxpayers over 15 years to defray its losses.
Nonetheless, about 1,400 underinsured Superior Bank depositors ultimately were paid the FDICguaranteed insured amount of $100,000 but are still out of pocket a total of about $18 million.
Ms. Pritzker and two other advisory board members — Robert Wolf, president and chief operating officer for UBS Investment Bank and chairman and chief executive officer for UBS Group for the Americas, and Mark Gallogly, director of Dana Holding Corp. — are listed as bundlers for the Obama campaign, meaning they pledged to personally gather a large number of campaign contributions from political action committees and individual contributors for his presidential campaign.
Bundlers, who are often corporate executives, lobbyists, hedge fund managers or independently wealthy people, are able to funnel far more money to campaigns than they could personally give under campaign finance laws. Mr. Wolf raised $500,000 for Mr. Obama; Mr. Gallogly bundled $200,000; and Ms. Pritzker also raised $200,000.
If you’ve got the money: President Obama