News: Analysis & Commentary
RON BROWN'S HOT TICKETS
When Texas executive E. Glenn Biggs sought a seat on Commerce Secretary Ronald H. Brown's trade mission to Latin America last June, he got a little help from his friends. James H. Fall III, a Treasury official, put in a good word for Biggs, then chairman of Texas TGV Corp. and a director of Diamond Shamrock Inc. In a May 31, 1994, memo to Commerce, Fall noted that Treasury Secretary Lloyd M. Bentsen "would be greatly appreciative of any assistance you could offer."
Fall wasn't Biggs's only well-placed connection. A few days earlier, Washington lobbyist Ronald L. Platt, a major Democratic donor and former Senate aide to Bentsen, had weighed in with a letter to Brown backing Biggs. In the end, Biggs got one of the hottest tickets in CEO-land, a seat on the Ron Brown Express. Did Bentsen get Biggs on board? "I'm sure it didn't hurt," says a Diamond Shamrock spokeswoman, who adds that the trip led to a tax ruling in Argentina that saved the company $20 million to $30 million. Biggs couldn't be reached.
UNDER FIRE. How important is political pull to landing a seat on Ron Brown's frequent trade trips abroad? Commerce Dept. documents recently ordered released by a federal judge after a suit by a conservative watchdog group show that it certainly doesn't hurt. The more than 30,000 pages suggest that influence has been an important factor for CEOs looking to seal megadeals overseas with Brown's help. Donations to the Democratic Party didn't hurt, either: A BUSINESS WEEK review of Federal Election Commission records shows that 15 of 24 executives who went with Brown to China, for instance, gave to the Democrats, either on their own or through their companies. On a trip to Latin America, 11 of 22 CEOs were donors.
It's hardly news that connections are everything in Washington. But the documents could prove damaging by raising questions about whether Brown's methods were fair and whether President Clinton kept his promise to keep politics out of such initiatives. Brown, moreover, already is under fire. An independent counsel will probe whether his personal financial dealings while a Cabinet officer violated criminal laws. The issue may also lend GOP House members firepower in their efforts to dismantle the Commerce Dept.--a move that has gained support among the business community despite Brown's success overseas, according to a recent BUSINESS WEEK/Harris Executive Poll (page 34).
Executive support for doing away with Commerce is surprising: Brown's trade junkets have been immensely successful. According to the Commerce Dept., Brown has led 9 trade missions for 170 CEOs, resulting in $25 billion in immediate deals for U.S. business and an additional $55 billion in follow-up contracts. Commerce insists it assigned seats based on genuine need for a government boost in closing deals.
The idea that politics played a role is "ridiculous, unfounded, false," says a spokesman. Adds Melissa A. Moss, a Commerce aide who oversees the CEO selections: "We have a pretty darn rigorous process in place, and there are no exceptions. Every company has legitimate deals they're working on." Also, many connected executives were turned down. The White House, for instance, unsuccessfully lobbied to get Gerald McGowan, a Clinton supporter and a board member of the Cellular Telecommunications Industry Assn., a spot on a trade mission. Says McGowan: "It didn't work for me."
Still, critics note that Commerce officials are no strangers to the world of political fund-raising. Brown is former chairman of the Democratic National Committee and Moss is a former DNC finance director. "This is what you get when you put fund-raisers and political operatives into the realm of making policy decisions," say Joshua Goldstein of the Center for Responsive Politics, a nonpartisan group focusing on money in politics. Judicial Watch, the conservative legal group that forced the release of the documents, contends that favoritism badly tainted Commerce's selections. "The role of government is to provide equal opportunity, not special treatment," says Chairman Larry Klayman.
The problem: Unlike the federal procurement process, where standards are published and contractors bid competitively, the Commerce method of selection has been shrouded in mystery. Even some executives believe that political connections may have played a role in their selection. John Allen, CEO of Allen & Associates International, an intermediary for U.S. generic-drug companies doing business in former Soviet republics, accompanied Brown to Russia. Allen, a Republican, says he had been on an early list and then asked Democratic Senators John B. Breaux of Louisiana and Ernest F. Hollings of South Carolina to "give me credibility," to win a spot. He says: "I would like to think [their letters] helped, but our own success should have given us enough momentum to get us selected."
Another well-connected CEO was James A. Harmon of Wertheim Schroder & Co. Former House Democratic Whip Tony Coelho, a managing director of the company, sent Moss a letter on July 14 recommending Harmon for a spot on a trip to China last summer. "Your help on this means a great deal to me personally," he wrote. Coelho was a top political adviser to Clinton at the time. Harmon says he didn't know until recently that Coelho wrote on his behalf.
Others relied on Friends of Bill, such as Philip L. Verveer, who attended Georgetown University with Clinton. Verveer wrote to Commerce aides to boost the chances that William B. Ginsberg, CEO of Cellular Communications International Inc., would go to India a few months ago. In his Sept. 29 letter, Verveer, whose wife is an aide to Hillary Rodham Clinton, noted that Ginsberg was a "very generous donor" to the Democratic Party.
"ANOTHER FACTOR." Ginsberg says he was a logical candidate because his company held a 50% interest in an Indian cellular license. But he adds that Verveer's letter was "Phil's way of saying, `This person is eminently qualified, but here's another factor to take into consideration."' Says Verveer: "I would like to think that if a lot of people are equivalently qualified, if someone is a friend, they should consider that. That's traditional in this town."
Commerce documents also show that Sanford R. Robertson, president of Robertson, Stephens & Co., a San Francisco investment banking firm, was added to the China guest list at the last minute. Robertson was an early Silicon Valley supporter of Clinton, who held fund-raisers at his San Francisco home. Robertson says it was his business ventures, not his political connections, that won him a seat. His company was closing a joint-venture deal with a Chinese securities firm. He says he "got a lot of things going for several clients."
Brown's Republican foes claim this pattern confirms that the Commerce chief, in the name of flogging U.S. exports, put the government up for sale. The truth is murkier: Supersalesman Brown mixed business and politics. Now he and the Clinton Administration will have to deal with the fallout.
Some executives whose Democratic ties helped them secure seats on Ron Brown's trade missions:
JOHN ALLEN CEO of Allen & Associates International, got Democratic Senators John Breaux of Louisiana and Ernest Hollings of South Carolina to put in a good word for him. He went to Russia.
E. GLENN BIGGS chairman of Texas TGV Corp., went to Latin America. Backing his trip: James Fall, an aide to then-Treasury Secretary Lloyd Bentsen, and Democratic donor Ronald Platt.
LYNN FORESTER CEO of TPI Communications International, went to Latin America after Representative Edward Markey (D-Mass.) and Senator Daniel P. Moynihan (D-N.Y.) wrote letters for her.
WILLIAM GINSBERG CEO of Cellular Communications International, went to India after Philip Verveer, a college classmate of President Clinton, wrote a note on his behalf.
JAMES HARMON CEO of Wertheim Schroder, went to China after Tony Coelho, a Wertheim managing director who was also a top political adviser to Clinton, drafted a letter on his behalf.
DATA: COMMERCE DEPT. DOCUMENTSBy Susan B. Garland and Douglas Harbrecht in Washington, with Gary McWilliams in Houston, Joan O'C. Hamilton in San Francisco, and bureau reports