This is a small story about why there are no big stories about presidential adviser Terry McAuliffe’s real estate dealings.
There are two such stories out there for the plucking. One of the potentially big stories is about how McAuliffe, after more timid souls balked, gave a $1.35 million personal loan guarantee for Bill and Hillary Clinton’s New York home. And the second real big story, the one that is before the U.S. District Court in Maryland, may have something to do with just why McAuliffe had that kind of coin to throw around in the first place. More on that later.
There are plenty of reasons why no one grabbed a significant piece of the story about the house in Chappaqua. True, as National Journal media critic William Powers pointed out Sept. 18, the story was a low-hanging peach with much to recommend it. There was the fact that the scandal-plagued Clintons were so weighed down by legal bills that they couldn’t make a down payment on a Dutch colonial. And then there was McAuliffe, “a rich businessman and Clinton fundraiser who played key supporting roles in a few of those scandals. Throw in the fact that federal campaign funding laws and various ethics rules are designed to prevent any one person or interest group from using financial largess to gain undue influence over a public officeholder, and you have an obvious, and obviously significant, story.” (Other lenders have since stepped in, and McAuliffe will reportedly not end up signing on the Clintons’ loan.)
But even those reporters who gave the story a whack—like Don Van Natta of the New York Times and Ruth Marcus of the Washington Post—avoided the greasier implications of a sitting president tin-cupping his way out of office. Inherent conflicts were blithely raised and tossed aside. Marcus helpfully pointed out, “The White House said it was going beyond the legal requirements in revealing McAuliffe’s role…” And Van Natta, who reportedly shares a Thursday night cocktail with McAuliffe every week, didn’t exactly spoil the beer-buddy ambience with anything he wrote. (“I don’t discuss my relationship with my sources,” said Van Natta when asked about the ritual.)
Powers’ theory is that the press couldn’t get it up for Chappaqua because they “just don’t have the stomach for another Clinton scandal. There have been so many for so many years, and chasing them—even nailing them cold—has brought journalists few rewards, and lots of calumny.”
That’s accurate enough. But a glance at how many political beat reporters get stories should lead a more cynical observer to suspect that it is McAuliffe’s presence, as much as the unsinkable Clintons, that slices the legs off of those stories. McAuliffe has a tendency to share his insider access with press friendlies—and punish those who don’t fall in his camp.
A man with a conflicted personal business history (McAuliffe was chair of Federal City Bank, which was cited in 1991 by the feds for unsafe banking practices) and a controversial career as Clinton’s campaign ATM, McAuliffe has skated through two terms without getting hit hard once. Particularly in the Post, he’s been painted as a roguishly charming business savant. The Post’s former heavyweight puncher, Bob Woodward, called him “[t]he first cheerleader…a boyish, outgoing entrepreneur” earlier this year. Not exactly words used to nail a scalp on the wall.
But it is precisely those supposedly guileless impresario ways that have garnered the interest of Clinton’s own Labor Department. As a consequence of both that lawsuit and his decision to fund the Clintons’ second honeymoon, McAuliffe’s skateboard is about to be repossessed. Both the Times and the Wall Street Journal are reportedly working on stories about McAuliffe’s allegedly inappropriate mixing of his public and private careers.
One data point in the stories will no doubt be a 1990 Florida real estate deal in which McAuliffe convinced trustees of a pension fund managed by the National Electrical Contractors Association (NECA) and the International Brotherhood of Electrical Workers (IBEW) to invest close to $50 million in residential and commercial properties. Although some parts of the deal performed, other components tanked, and the union was stiffed on million-dollar loans to McAuliffe’s enterprises. In a recently filed civil suit, Labor Secretary Alexis Herman goes after the respective union heads for failing to recognize that the deal “was not a prudent investment for the Fund.”
McAuliffe is not a defendant in the suit, but he was involved in many of the transactions that resulted in the Labor Department’s decision to sue.
We’ve all read endless gushy profiles of McAuliffe and his unmatched ability to separate people from their money. But Herman has taken an interest in other ways that McAuliffe ends up with other people’s cash. It’s a complicated, many-layered story—and an old one at that.
Back in October 1997, the Washington City Paper ran a story by Stephanie Mencimer about McAuliffe that included the following paragraph: “Since 1990, IBEW’s $5 billion National Electrical Benefit Fund (NEBF) has contributed $48 million to McAuliffe’s risky real estate ventures. McAuliffe received extremely generous terms from the pension fund, including a 50 percent interest in a real estate partnership for which he put up none of his own money. The union didn’t make out so well. Seven years after going into business with McAuliffe, the pension fund has realized meager returns on its investments, and one of McAuliffe’s companies defaulted on a $7 million pension-fund construction loan.”
A venture banking official quoted in the story suggested: “That’s not venture capital, that’s just risky investing.”
Yet the blows from pikers like the City Paper have been like spitballs against a battleship. McAuliffe continues to elude the putative bloodhounds of the Washington press corps without so much as breaking a sweat—much as he did when fundraising he had masterminded blew up all over everyone but him. The Post did hire Mencimer on contract to continue her investigation—she produced one small story about McAuliffe—but she says higher-ups at the paper never seemed interested in truly pursuing him. (She has since been re-hired by the City Paper.)
Perhaps the Beltway hounds lack a taste for McAuliffe’s blood type because he has their number. He has few peers in Bill Clinton’s Washington when it comes to the domestication of the savages who inhabit the press room at the White House.
Press corps members describe McAuliffe as an invaluable source for the kind of tidbits that make reporters’ stories shine. Tidbits like who got called at 3 p.m. and told he’d better get on board or his career was over. Who wants to bite the hand that doles out those nummy little factoids?
“He is full of the inside skinny—the shit that you drop into a political story that makes you look like you really know what is going on,” says one national-politics reporter, who declined to speak if so much as his organization was identified. “He’s important because he has access and because he can be something of a blabbermouth. It’s all about the care and feeding of people who can help you and people who can hurt you.”
That’s why beat reporters are rarely the source of tough stories in their bailiwicks. Big media outlets drop in fresh talent when it’s time for a hit because it gives the people on the beat plausible deniability. That way, they can continue to share a table, some crab cakes, and plenty of found-nowhere-else dish at the Palm with McAuliffe.
As a measure of reporters’ loyalty to their one-of-a-kind source, consider that both Mencimer and the unnamed reporter, who has done some reporting on things besides McAuliffe’s fabulousness, say they believed at the time that other reporters on the political side of their respective organizations were updating McAuliffe on the progress of their stories.
Another member of the Washington press corps says that if the nice-cop stuff doesn’t work, McAuliffe knows how to play hardball—a skill that came in handy back when his fundraising innovations seemed to be the worst of Clinton’s problems: “He is very sensitive to what is written about him, and he complains bitterly to editors.”
That method has been known to work. After New York Daily News reporter David Eisenstadt wrote a story three days before the 1996 election that suggested that McAuliffe was connected to the by-then-scandal-ridden Democratic National Committee fundraiser John Huang, McAuliffe called Eisenstadt’s boss, Mortimer Zuckerman. The News ran a white-flag correction the following day, saying Eisenstadt’s sources “could not substantiate the allegations.” Eisenstadt’s editor flew down to Washington a week later and fired him.
“McAuliffe has cemented relationships with the most powerful interest groups in Washington: the press, members of government, and the business community,” says Eisenstadt. “And he knows how to leverage each of those relationships to his advantage.”
Daily News columnists Jimmy Breslin and Lars-Erik Nelson protested the dismissal, saying that the story was a 400-word deadline item that had not been proved false. At the time, Eisenstadt was a rising young star famous for busting Newt Gingrich over whining about not getting a front-row seat on Air Force One. That story still hangs large in the lobby of the newspaper, but Eisenstadt is out of the business and getting ready for a move to Poland. It doesn’t pay to cross McAuliffe.
And instead of rallying around a colleague who was getting the bum’s rush, the Post used Eisenstadt’s firing as a cute anecdote in another story about their pal, the “Macker.” In a postelection Style profile in early 1997 about the man who can make money fall out of trees, Lloyd Grove chummed it up thus: “‘I lit [Zuckerman] up for 20 minutes,’ McAuliffe says with a grin, describing his chat with the media mogul with undisguised glee….The next day, the newspaper retracted and apologized for the story, and the ‘relevant editors’ ultimately fired the reporter who wrote it up. Chalk up another win for the apparently charmed McAuliffe.”
You’d think some of his legend would have been annealed by the reality of exactly what kind of Washington operator McAuliffe is, but in the current issue of George, NBC correspondent Claire Shipman shines him up for the next millennium: “As with dragon slayer and Internet stocks,” she writes, “the precise value of top Democratic fundraiser Terrence [sic] McAuliffe is incalculable. But through the looking glass of the nation’s capital, in the last autumn of the twentieth century, he is viewed as a man of unparalleled talent….”
OK then. Ignoring the wildly conjugating metaphors, it’s clear that as long as McAuliffe maintains access and the ability to pick the pockets of willing donors (the accompanying picture shows him brandishing a fistful of checks), some reporters will refuse to pull back the blankets on the rest of McAuliffe’s dealings (although the New York Post reported Tuesday that McAuliffe could be a witness in a corruption case involving money swaps between the DNC and the Teamsters in a few weeks).
Even the Post’s Marcus, in the midst of what her editor described as a “tough story” about McAuliffe’s service as piggy bank for the Clintons’ homestead, couldn’t stay away from the fairy dust of access. “Last February, as the Senate debated the articles of impeachment against the president, Clinton invited McAuliffe to the White House to celebrate McAuliffe’s 42nd birthday with Dom Perignon and an overnight stay in the Lincoln Bedroom,” Marcus wrote. Ah yes, the same bedroom that, in a moment of fundraising epiphany, McAuliffe decided to rent by the hour to really dedicated donors.
Jackson Diehl, national editor at the Post, defends the paper’s coverage of McAuliffe as nothing out of the ordinary. “I thought [Marcus’ piece] was a pretty strong story. I’m sure if you ask McAuliffe, he would have some strong opinions about it,” Diehl says, responding only with a laugh when I ask him whether he has heard from McAuliffe—who has in the past asked for and received a meeting with Post Editor Leonard Downie—since the story ran.
Roger that. We know from reading Woodward’s Shadow: Five Presidents and the Legacy of Watergate that McAuliffe has enormous juice at the Post, some of it having derived from his willingness to be one of the more reliable flies on the wall when it came to assisting Woodward’s breathless reconstructions of contemporary history. We just don’t know what kind of institutional regard he may have received in return.
A Washington reporter at one of the major dailies says that in the waning days of Clinton’s presidency, McAuliffe’s decision to guarantee the president’s loan “has changed the equation. Perhaps his half-life has been reached. And he has raised his profile so much that the cost-benefit analysis has changed. His immunity has ended.”
But while the Post may maintain great access well into the ’00s, the price of admission—softball coverage no matter what he’s up to—will probably leave the paper out of the biggest McAuliffe story so far. —David Carr
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