Secrets and lies

Why Telegate matters

Early last fall, in the thick of a four-way gubernatorial race, Tim Pawlenty suffered what looked like a disastrous setback. The state Campaign Finance and Public Disclosure Board, the agency charged with ensuring that candidates who accept public financing adhere to agreed-upon spending limits, had just determined that the Pawlenty campaign and the state Republican Party had engaged in an end run--to the tune of about $637,000.

Both Pawlenty and the state GOP were found to have violated the prohibition against "coordinated" campaigns, a rule put in place to prevent the most egregious skirting of the spending rules. Pawlenty negotiated a deal. Just three weeks before election day, he agreed to pay a $100,000 fine and to accept a $500,000 reduction in his war chest. It was a hefty penalty (in fact, a state record), though less than the crippling $1 million figure of early speculation. For good measure, he fired a Washington, D.C.-based media consultant implicated in the mess.

And then, savvy politician that he is, Pawlenty began spinning.

While maintaining that he disagreed with the campaign board's findings--to do otherwise would have amounted to an admission of cheating--Pawlenty said he accepted "full, unequivocal responsibility" for the affair: "I am the captain of the team. It happened on my watch. I have to take responsibility for it, and that's what I'm doing today."

The public and the media lapped it up. Maybe that was because Pawlenty came off like a human being and not an obfuscating lawyer. In the legislature, he cultivated a reputation for being a straight arrow, routinely recusing himself from votes involving the judiciary because his wife is a judge. He even declined to vote on some school funding packages, citing his past work as an attorney for school districts.

Half a year later, the governor's squeaky clean reputation is beginning to look like so much artifice. And last year's campaign finance scandal begins to look like the first public sign of tendencies that now begin to seem familiar.

While there is scant evidence of outright illegality (save for improper paperwork, which can be easily amended), last week's revelations about Pawlenty's deftly concealed involvement in the telecom industry have cast the governor and his political partners in a far less flattering light. (His approval rating stood at only 50 percent prior to this episode.) For all his fabled openness, Pawlenty actually spent much of the week dissembling. Asked about his director role at NewTel, the parent company of a telecom accused of cheating consumers, Pawlenty said characteristically at one point, "The fault, if there is a fault to be assigned to me, is people are saying I should have known. And I guess if that's the standard then I have to take responsibility for that and say I should have asked questions or should have gone and done my own investigation."

As a lawyer, Pawlenty indisputably knew that corporate officers bear certain clear-cut oversight responsibilities. Yet just as in the case of the campaign scandal, his words owned up to very little. But he seemed happy to jabber on about the board; it deflected attention from the bigger part of the burgeoning story--the $60,000 he received while on retainer with Access Anywhere, a pay phone company owned by GOP activist and telecom entrepreneur Elam Baer.

 

What is wrong with the Pawlenty-Baer arrangement, first disclosed by Pawlenty last week after the board story broke?

To start with, there is the fundamental issue of transparency in government. When he was running for governor, candidate Pawlenty professed to recognize the value of openness, telling the Star Tribune he supported a bill expanding financial disclosure requirements for constitutional officers. "The issue is not a question of how much [money politicians have]," he said, "but what an officeholder is invested in, whether it constitutes a conflict of interest."

Yet in his statement of financial interest, Pawlenty made no mention of his hefty earnings from Access Anywhere. Instead, he reported it as investment income derived from a corporation called BAMCO (an acronym for Business and Management Consulting). BAMCO's sole function seems to have been collecting checks from Access Anywhere. When it was pointed out that this method of listing his earnings effectively prevented political rivals, the media, or the public from connecting the dots to his telecom ties, Pawlenty blamed his accountant.

Because a loophole in the state's disclosure rules excludes income earned as an "independent contractor" from reporting requirements, Pawlenty will likely face no significant legal consequences as a result of the misdirection. By Wednesday, he announced he would amend the report, which is permitted by law.

But little that Pawlenty or his operatives said last week served to diminish the suspicion that the lucrative Access Anywhere retainer amounted to a campaign contribution. The most significant question--what did Pawlenty do for his money?--remains unanswered. Late last week, Pawlenty spokeswoman Leslie Kupchella said the governor was negotiating a waiver so he could release his contract with Access Anywhere. Even if the contract materializes, it will do little to answer the pertinent questions about what services, if any, he rendered. And Kupchella continued to insist that Pawlenty would not be providing any further documentation of his labors.

So over a 14-month period, while Pawlenty was a sitting legislator and active candidate for governor, he was paid by a company with significant interest in legislative and regulatory policies--and no one but his close political allies knew about it. And he can't say with any specificity what he did for his pay.

Pawlenty's advocates have defended his use of BAMCO to collect consulting fees as standard business practice, not a calculated deception. He incorporated, the logic goes, as a hedge against personal liability. Yet, he still could have been upfront about the business relationships whether they were listed in public documents or not.

Until the Pioneer Press broke the story, Pawlenty apparently took pains to avoid any mention of his involvement in the telecom industry. As the Associated Press reported, Pawlenty called last summer for a "telecommunications summit" to bring together industry execs, explaining that "the telecom industry is in meltdown mode." At the time, he was on retainer at Access Anywhere and still an investor, though no longer a board member, at NewTel. But despite Pawlenty's well-known habit of touting his involvement with other business enterprises (such as the tech company WIZMO), he made no reference to his own links to an industry that he was openly seeking to assist. Neither did the legislature's most scrupulous recuser ever tip his hand to the ties by opting out of a telecom vote.

Why the tight lips? Perhaps because the telecom industry was already mired in scandal. Admitting to extensive involvement in it could have proven a political liability, especially with damning news about New Access already surfacing in other states.

Which raises another issue. Pawlenty has repeatedly asserted he was unaware that New Access had been implicated in the illegal practice known as slamming--the unauthorized switching of customers' long distance service. If he had known, he claims, he would have made inquiries.

There is probably no smoking gun to prove otherwise. But consider for a moment the defense that has been invoked most often by Pawlenty partisans: Sure, New Access--through its telemarketers--"slammed" customers. But in the telecom world, the argument goes, that's business as usual. (And it is. While regulators in Washington state described New Access's actions as particularly egregious, telecom companies large and small are routinely fined for slamming.)

Pawlenty's defenders thus want it both ways: Hell, everybody knows the industry regularly plays crooked--except Tim Pawlenty. Like Claude Rains in Casablanca, he is shocked. Shocked!

 

The most striking and convoluted aspect of Telegate is the staggering number of telecom-related ventures in which Pawlenty and his cabal of GOP insiders were involved, from the third-party verification business (State Auditor Pat Awada) to telemarketing (former campaign manager Timothy Commers) to long distance service (Pawlenty; Victoria Grunseth, Pawlenty's appointee to head up the Metropolitan Airports Commission; and Elam Baer).

Why the attraction? The most obvious explanation: There was a pile of money to be made in a recently, albeit only partially deregulated industry. And who is better situated to understand and exploit the details of that deregulation than a gaggle of politically connected folks with inside knowledge of the workings of government? Second, as political operators, Pawlenty et al. already knew a thing or two about telemarketing. (And make no mistake, "telecom" as practiced here is essentially one big telemarketing operation.) So the telecom business may have seemed a particularly natural fit to them.

For whatever reason, many Pawlentyites' first responses to the scandal were almost nonchalant. Then, as the controversy and headlines built, Pawlenty's defenders (particularly those on talk radio) sought to cast suspicion on the original Pi-Press story by insinuating that it was planted at the behest of Attorney General Mike Hatch, who, the theory went, was seeking an early leg up in the 2006 gubernatorial race. A less popular theory had it that Arne Carlson, still at odds with the old Jon Grunseth-cum-Pawlenty wing of the party, got wind up of the arrangement and leaked it.

Hank Shaw, one of the reporters who broke the story, denies that it came as "a tip from anyone." Neither he nor fellow reporter Rick Linsk were willing to provide much in the way of details. But Shaw did say the piece was "an outgrowth of the American Bankers story." Another intriguing Pawlenty Administration yarn, that story focused on claims that Pawlenty's Commerce Department settled on the cheap with a Florida credit insurance company accused of making illegal sales as payback for a $15,000 campaign contribution.

But how the story arose in the first place is just a curious footnote for historians. What matters about Telegate has little to do with Mike Hatch or Arne Carlson, and a lot to do with the incestuous relationship of the business culture to what used to be called the public sphere. Pawlenty and friends are giving us a glimpse of how fluid and intimate the connections between the two really are--and how well they are usually hidden from public view.

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