May 24, 1998
Clinton-Loral: Anatomy of a Mutually Rewarding Relationship
By JILL ABRAMSON and DON VAN NATTA JR.
n the six years that Bernard Schwartz built a friendship with President Clinton -- fortified with $1.3 million in campaign donations -- the 72-year-old New York aerospace executive insists that he never asked for special treatment.
"I consider him a friend, but not the kind of friend that you can call upon for favors," Schwartz said on Friday in a lengthy interview in the headquarters of his company, Loral Space & Communications, in midtown Manhattan.
But at a glittering White House dinner on Feb. 5, there was something that Schwartz, who is Loral's chairman, desperately wanted: a quick decision approving the launching of a Loral satellite aboard a Chinese rocket later that month. Schwartz wanted to plead the case that his company was at risk of losing millions of dollars if Clinton did not act expeditiously.
Schwartz had intended to raise the issue with Samuel Berger, the president's national security adviser, but could not find him among those gathered in the East Room to honor Prime Minister Tony Blair of Britain, a gala whose guest list included luminaries like John Kennedy Jr. and Barbra Streisand.
Another Loral official relayed the company's concerns in a letter to Berger. On Feb. 18, the president gave Loral permission for the launching, despite opposition from federal prosecutors who warned that the approval would jeopardize their investigation into the satellite maker's earlier, unauthorized help to China's rocket program.
Schwartz said in the interview that there was "no linkage" between his generosity to the president and his party and Clinton's favorable decision. And he insisted that he had never personally asked the president -- or any other Clinton administration official -- for anything that would benefit his company.
"I can say absolutely, categorically, I have never spoken with the president about any Loral business, except on one occasion," he said in his 36th-floor office, which is adorned with photographs of himself shaking hands with the president. At a White House meeting with Clinton and Vice President Al Gore in 1993, Schwartz recalled, he generally described Loral's satellite work.
Schwartz had pressed the White House before on the issue of easing the government approval process for Chinese satellite launchings. In a May 1996 letter co-signed by two other aerospace executives, Schwartz urged Clinton to promptly implement a decision to transfer the export licensing of commercial satellites from the State Department to the Commerce Department. The Commerce Department, by law, must also represent business interests as it considers export licensing decisions. Clinton ultimately gave the companies what they wanted.
In 1994, Schwartz also pushed hard for a seat on a coveted trip to China led by Commerce Secretary Ronald Brown. Schwartz met in Beijing with a top Chinese telecommunications official, which led to Loral's winning a deal to provide cellular telephone service to China, an agreement that will soon be worth $250 million annually.
No businessman has been a more stalwart supporter of the president. When Bill Clinton was a lonely presidential aspirant desperately seeking endorsements from corporate chieftains, Schwartz was one of the first to embrace him. The president even feted Schwartz on his 71st birthday at a White House dinner.
These days, however, Washington has been less welcoming. Schwartz and Loral are under scrutiny by the Justice Department and Congress over allegations that Loral shared sensitive technical data with the Chinese government, data that may have enhanced the reliability of their long-range military missiles.
Schwartz said he was outraged and perplexed at being portrayed by congressional Republicans as an executive who placed his business interests before national security. "To attach words like 'treason' and 'traitor' to these activities is a deeply disturbing development," said Schwartz, a World War II veteran and lifelong Democrat.
Knowing he could face more stinging accusations, Schwartz on Friday retained Lloyd Cutler, one of Washington's most experienced lawyers, to help him navigate the numerous investigations.
All of this has been jarring for a businessman steeped in the world of money and politics, where the executives who sign the largest checks often get what they want without ever having to ask. Generous campaign contributions have become akin to a calling card, a way for businessmen to introduce themselves to politicians.
Schwartz met Clinton at a small political dinner in Manhattan in the spring of 1992. Clinton, then governor of Arkansas, conceded that he knew practically nothing about the defense industry, and the two chatted for about 20 minutes. Later in the evening, another guest asked Clinton a defense-related question, and Schwartz was impressed by how much of their conversation Clinton had absorbed. "His grasp of details, his grasp of the issues was extraordinary," Schwartz recalled.
Mel Levine, a former California congressman who knows both men, said: "Bernard clearly likes Clinton personally. And Clinton has paid a lot of attention to him." Another prominent Clinton official who paid attention to Schwartz was Brown. In 1994, Schwartz was one of 24 executives on Brown's plane to China.
Two months before the late summer trip, Schwartz wrote a check for $100,000 to the Democratic National Committee. He denied there was any link. On the plane, Schwartz said he asked Brown if he could arrange a private meeting with Zhu Gao Feng, the vice minister of China's Ministry of Post and Telecommunications. In a meeting with Chinese telecommunications officials, Brown publicly praised Loral's Globalstar cellular telephone system.
Brown did arrange the meeting for Schwartz and another executive at the Chinese telecommunications ministry. "I thought it was terrific -- a real opportunity, what a shot," Schwartz recalled. "It was a big deal. In a place like China, it was important because the next time I went, I was able to say I had met with the minister."
For Bernard Leon Schwartz, Beijing was a long way from Bensonhurst, a neighborhood in Brooklyn where he grew up grateful to the largess of Democrats. His grandfather was a Tammany Hall functionary who died while campaigning for Democrats. Schwartz's political sensibilities were shaped by the party that sent his family a turkey and two bags of coal every holiday season and the policies of President Roosevelt. He began his career in New York's financial district. In 1972, he bought Loral, a small Bronx defense contractor on the verge of bankruptcy. Despite no experience in the defense industry and his opposition to the Vietnam War, he relished the challenge.
"There's something about me that wants to grow a big company," he said in an interview in 1975. "I don't deny that. I enjoy the game, and the only way to really enjoy it is to win. I like to win. It's more fun." Schwartz transformed the $7 million company into a $15.5 billion military behemoth. Although Loral had Pentagon contracts in the Reagan-Bush years, Schwartz remained a loyal Democrat.
After Clinton was sworn into office in 1993, Schwartz cherished his many invitations to the White House. But he cited one perk that eluded him. "I'd give my eye-teeth to stay in the Lincoln Bedroom," he said. In 1996, Loral's defense business was sold to Lockheed Martin Corp., a transaction that required antitrust approval from the Clinton administration. Schwartz gave half of his $36 million bonus from the merger to Loral employees. Loral's space business is now a separate public company.
That same year, Schwartz gave $606,500 to the Democratic Party. In a 1994 memorandum, the White House deputy chief of staff, Harold Ickes, wrote to Clinton about fund-raising. "I have it on very good authority that Schwartz is prepared to do anything he can for the administration," he wrote. Two years later, there was something that Schwartz wanted -- the transfer of satellite export approval from the State Department to the Commerce Department. In the letter he co-signed with the chairmen of Hughes Electronics Corp. and Lockheed Martin Corp., he wrote, "By making possible real 'one stop shopping' for all export authorizations related to commercial communications satellite systems, your decision will greatly enhance the ability of U.S. manufacturers to retain our global competitiveness."
The decision by the president to transfer satellite export approval to the Commerce Department overruled a recommendation by Secretary of State Warren Christopher and caused friction inside the Cabinet over concerns that American security could be compromised. Hughes is under investigation with Loral for its role in a failed 1996 launching. Hughes also gave campaign contributions, though its donations were more modest and bipartisan.
The 1996 launching attracted the attention of federal investigators after Loral told the government that a report with some technical data had been given to the Chinese as part of the Chinese effort to figure out why the launching failed. Despite these problems, Loral continued its China launchings, each requiring a presidential waiver. Postponing a launching can be a costly matter, and when Schwartz set out for the Blair dinner in February, he was hoping to prod Berger to give Loral a definite yes or no answer on the launching set for later that month.
Approval was complicated by the fact that the White House knew that the Justice Department was investigating Loral in the aftermath of the failed 1996 launching. Schwartz missed Berger at the Blair dinner, but Thomas Ross, a Loral vice president, wrote Berger eight days later. "If a decision is not forthcoming in the next day or so, we stand to lose the contract," Ross wrote. Although documents made available Friday by the White House show that the president was warned that approving the launching could be seen as letting Loral "off the hook on criminal charges for its unauthorized assistance to China's ballistic missile program," later that month a Chinese rocket carrying a Loral satellite took flight.