Senator Rand Paul has preached the political peril of being too close to financiers as he gears up for a likely 2016 presidential bid.
“We cannot be the party of fat cats, rich people, and Wall Street,” the Kentucky Republican told the audience at the Freedom Summit in New Hampshire in April. “Corporate welfare should once and for all be ended.”
At the same time, the founders and employees of Mason Capital Management, a $13.6 billion New York hedge fund, have become leading contributors to Paul’s political aims. The hedge fund has offices in London and San Francisco and offers clients offshore investments through a limited partnership in the Cayman Islands, among other strategies.
Company co-founder Kenneth Garschina has also given $250,000 -- the single-biggest contribution -- to America’s Liberty PAC, a so-called super political action committee run by longtime supporters of Paul. He has contributed $15,100 directly to Paul’s campaign or to funds the senator controls. Michael Martino, Garschina’s co-founder, has given $12,600 to Paul’s campaign and funds.
In all, 17 of the company’s 33 employees have given at least $75,000 to Paul and funds he controls since he started his first U.S. Senate campaign in 2010, according to Federal Election Commission data compiled by Bloomberg. Mason Capital staff members have been Paul’s second-largest source of campaign funds, according to Opensecrets.org, a website operated by the nonpartisan Center for Responsive Politics.
While Rand Paul hasn’t declared his intent to run yet and isn’t a shoo-in for the nomination, he’s in the “top tier” of potential presidential contenders for 2016, said Kevin Madden, a former senior aide to Republican Mitt Romney in his 2012 presidential bid. The freshman senator is buoyed by a base of libertarian and Tea Party followers he inherited from his father, former U.S. Representative and three-time presidential candidate Ron Paul of Texas. Rand Paul is also hoping to pick up some of Romney’s Wall Street donors.
“Rand is looking to lots of different places for financial backing and that would certainly be one of them,” said Doug Stafford, Paul’s former chief of staff, now the executive director of RAND (Reinventing a New Direction) PAC, Rand Paul’s leadership committee. “And if he chooses to run, his campaign will be well funded.”
Garschina and Martino have built Mason Capital Management in the last 14 years into an international hedge fund with $13.6 billion in gross assets under management as of Dec. 31, according to a regulatory filing. Since the beginning of 2010, Garschina and Martino have personally donated more than $800,000 combined, mostly to Republicans, including the Pauls and others who advocate for smaller government and lower taxes.
In 2009, Garschina made one stray donation to a Democrat: $2,400 to former Senate Banking Chairman Chris Dodd, who was weighing new trading and banking rules for Wall Street.
Garschina made few political donations before 2010 and has largely kept out of the spotlight, except for a $2 million contribution last year to the Cleveland Clinic’s Digestive Disease Institute where his father-in-law and grandmother both underwent colon surgery, according to a fall 2013 article in one of the clinic’s internal publications.
In a brief interview, Garschina hinted at having a libertarian view of the world, though he stopped short of discussing specifics on issues such as taxation and regulation. “I certainly believe in liberty and the constitution, as the founding fathers did,” he said. “I don’t think any different than most Americans.”
Garschina said he likes to avoid publicity. Stafford, who’s running Rand Paul’s unofficial exploratory bid for president, declined to comment about Garschina’s ties to the effort.
“I’m not a very public person and would rather not have something written about myself,” Garschina said. His wife, designer Sara Story, and their vacation home outside of San Antonio, Texas, were both featured in an April article of Architectural Digest.
Martino, who declined to comment for this story, keeps an even lower profile. His basic biography includes a degree in political science from Fairfield University, an MBA in finance and international business from New York University and stints at Oppenheimer & Co. Inc. and GE Capital Corp. prior to founding Mason. He donated $100,000 to a super-PAC supporting Newt Gingrich’s presidential run and is on the national council of the American Enterprise Institute, a free-market think tank in Washington.
Paul’s largest donor is the super-PAC Club for Growth, which has given him about $100,000 over the last four years, according to data compiled by the Center for Responsive Politics and the FEC. Club for Growth supports Congressional candidates who “believe in growth policies, limited government, low taxes and economic freedom,” according to its website.
Garschina’s $250,000 donation to America’s Liberty PAC made him its largest donor and accounted for more than half of the $445,000 it has raised thus far, according to FEC data. The fund was founded in 2012 with $170,000 in seed money. Most of that came from three donations of $50,000 each from former Anheuser-Busch Chairman and Chief Executive Officer August Busch III, oil well executive Carl Davis and Rand Paul’s RAND PAC. Super-PACs are required to be run independently from any candidate they support, and they can, as a result, accept unlimited contributions from individuals.
Those rules don’t reflect reality, said Tara Malloy, a senior attorney at the Campaign Legal Center, a non-partisan, non-profit group focused on strengthening campaign finance laws. Super-PACs “are making a mockery of independence,” Malloy said. Every major candidate in the 2012 presidential election had his or her own super-PAC, and there was very little separation between the funds and the candidates, she said.
“The super PACs were often run by friends or family,” Malloy said. “They were often financed by the candidate’s friends, families and other big contributors.”
America’s Liberty PAC is staffed with people who worked for Rand or Ron Paul. Its director, John Tate, ran Ron Paul’s last presidential campaign, was an adviser to Rand Paul and played a “crucial role” in recruiting staff members for his 2010 Senate run, the senator said last year. The super-PAC spent $95,000 in 2012 trying unsuccessfully to unseat Senator Claire McCaskill, a Missouri Democrat.
“I believe with my friend John at the helm, America’s Liberty PAC will establish itself as not just a critical ally of the Tea Party, but a feared political force in Washington, D.C. –- something the liberty movement desperately needs,” Rand Paul told Florida’s Sunshine State News in November.
That’s not the super-PAC’s only link to the Pauls. America’s Liberty PAC paid the Campaign for Liberty, a non-profit group run by Tate that was founded and is chaired by Ron Paul, $10,000 last year to sponsor a conference. The super-PAC also paid Matthew Burrow, the director of membership at the Campaign for Liberty, $3,105 in consulting fees and $2,740 in wages since September. The Treasurer for America’s Liberty PAC, Elizabeth Newberry, is also the treasurer for the charitable arm of the Campaign for Liberty, according to FEC data and tax filings.
Tate didn’t return an e-mail or messages left for him at the Campaign for Liberty. There is no formal legal affiliation between America’s Liberty PAC and the Campaign for Liberty, Stafford said.
Garschina’s giving isn’t limited to politicians. The Ludwig von Mises Institute in Auburn, Alabama, a libertarian-education organization, got $59,000 in 2012 through a non-profit foundation Garschina established three years ago with his wife. Ron Paul sits on the Mises Institute’s board and is a distinguished counselor there.
The Story Garschina Charitable Fund also donated $75,000 to another libertarian-leaning think tank, the Federalist Society for Law and Public Policy Studies, and $100,000 to the Manhattan Institute for Policy Research in 2012, according to the most current tax data available. Garschina joined hedge fund magnates Paul Singer, founder of Elliot Management Corp., and Dan Loeb, who founded Third Point LLC, on the board of the Manhattan Institute for Policy Research in 2011, according to the Institute’s tax records.
The group describes itself on its website as “an important force in shaping American political culture and developing ideas that foster economic choice and individual responsibility.” The American Federation of Teachers last year put the three hedge funds on a “watch list” of money managers that advocated through the Manhattan Institute for eliminating pension plans in favor of private 401(k) retirement programs while taking millions in fees to manage pension investments.
“This guy has decided to make it his business to openly work with a group, and serve on their board, that wants to end pension funds,” said Dan Pedrotty, the director of pensions at the AFT. Mason Capital counted pension programs from Rhode Island, New Mexico and Florida as clients last year, he said. “We view that as a huge conflict of interest and a stupid business decision.”
Garschina didn’t comment on the AFT’s watch list.