Big donors dom­i­nate Obama ad­vi­sory board

The Washington Times Weekly - - Politics - BY JERRY SEPER

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.

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