Skip to comments.Daschle Friend Walked Away From Global Crossing With Millions (Tom's Bahamas "charity" trip, etc)
Posted on 02/03/2009 8:26:21 AM PST by Liz
At the center of the issues that have complicated Tom Daschle's nomination to run the HHS is his relationship with Leo Hindery, the politically connected founder of the private equity firm InterMedia. Taxes aside, we still don't know much about what Hindery got for the $1 million-a-year consulting fee he paid Daschle.
Hindery and his colleagues at InterMedia aren't speaking, and the New York Times reports only that, according to a Daschle spokeswoman, "[i]n addition to lending the prestige of his name, Mr. Daschle traveled to help raise money from investors for Mr. Hindery's new venture".
But whatever Daschle did for his very healthy pay check, his association with Hindery should raise some eyebrows. Hindery, a media entrepreneur who in 2001 founded the YES Network as the TV home of the New York Yankees, was briefly the CEO of Global Crossing, the upstart fiber-optic carrier whose collapse in late 2001, amid claims that executives had made fraudulent claims about the state of the company's finances, rocked the financial world.
To be clear, Hindery had left by the time of the meltdown, and most accounts place the largest share of the blame for the company's crackup on its founder Gary Winick. But when Hindery left, in October 2000 -- not long after predicting, inaccurately, that the company would be cash-flow positive by early 2002 -- he was definitely in the money. He had negotiated the sale of one of the company's divisions to Exodus ommunications, in a deal which netted Hindery himself nearly $250 million. How?
BusinessWeek explained at the time: Based on his contract with Global Crossing, he'll own 5.5% of the company if there's a change of control -- something that Hindery himself manufactured over the past two months by brokering the deal to Exodus. With a strike price of $54.37 a share, Hindery's stake stands to make him nearly $250 million when Exodus completes its "definitive" deal to buy GlobalCenter. Not bad work if you can get it. Though when, just over a year later, Global Crossing filed for the seventh-largest bankruptcy in American history, its investors and employees -- who in 2004 received a $325 million settlement stemming from the loss of their pensions and 401ks -- might have been less impressed. But Hindery wasn't done there. In October 2002, he went to court to force Global Crossing to fork over another $708,000 in back pay and more than $100,000 in rent for an apartment at the Waldorf-Astoria Towers on Park Avenue. Hindery had had the foresight to write into his original Global Crossing contract the stipulation that the firm would keep footing the bill for the rent on his Park Avenue pad through Oct. 3, 2002, and would keep paying him a $1-million-a-year consulting fee through September of that year.
A lawyer for Global Crossing's many creditors called the effort "laughable", telling the Wall Street Journal Hindery "can line up with all the other general unsecured creditors."
Change we can believe in!
Leo Hindery, Tom Daschle Taking Stock Of The Daschle Charges
Tom Daschle's nomination to be Secretary of Health and Human Services has hit a serious snag, in the wake of a string of revelations mostly related to his payment of taxes on income he received as part of his consulting activities since he left the Senate in 2004.
Looking at a range of news reports, there are several different charges out there, each of varying degrees of seriousness. So -- leaving aside the real-world question of which of these charges might be the most politically damaging to Daschle's nomination -- it's worth taking stock of what exactly the former Senate leader stand accused of. And of how, at least initially, might we rate the seriousness of each individual misdeed. Let's run down the list:
1. The most serious charge -- which comes from a report conducted for the Senate Finance committee, which is handling Daschle's nomination -- is that from 2005 to 2007, he failed to report on his taxes income from the use of a limousine and driver totaling over $255,000, and provided by InterMedia Advisors LLP, a private-equity firm. On January 2, Daschle, having concluded that he owed the money, filed amended returns and paid more than $140,000 in back taxes and interest.
InterMedia, whose advisory board Daschle chairs, was founded in 2005 by Leo Hindery, a politically connected media and telecommunications executive (with an apparent record of embellishing his personal story). Hindery gave at least $42,000 to Mr. Daschle from 1997 to 2004.
Daschle told the committee that he realized last June that the limo service might count as taxable income, and asked his accountant to look into it. A Daschle spokeswoman said the accountant didn't come back to Daschle until late December or early January with a finding that the taxes were owed. Only then did Daschle inform the Obama transition team. "He thought his accountant was taking care of it," the spokeswoman told a reporter.
2. The Finance committee is also probing a second potential tax impropriety stemming from Daschle's relationship with InterMedia. The committee says he failed to report on his 2007 tax return consulting income from the company of $83,333.
But this one appears to be an oversight, if a careless one. According to the committee report, Daschle received that sum per month (or a $1 million a year) from InterMedia under the consulting arrangement. InterMedia left off one monthly payment -- the one for May 2007 -- from the annual statement of income it sent Daschle. The error occurred because the InterMedia staffer normally responsible for reporting such payments was on maternity leave, according to the committee. All the other months were accounted for.
3. The issue that almost certainly has the greatest relevance for Daschle's desired new job as HHS Secretary is his work on behalf of healthcare-industry interests.
In his financial disclosure statement, Daschle reported getting paid more than $390,000 for giving speeches to groups including America's Health Insurance Plans (AHIP), a trade organization representing health insurers. He also got nearly $100,000 from health-related companies affected by federal regulation, including more than $5000 (again, the exact figure wasn't reported) for giving "policy advice" to the insurer UnitedHealth.
4. The committee is also probing Daschle's ties to Educap -- a student loan company that paid Daschle over $5,000 for "policy advice," according to his financial disclosure report. (The exact amount wasn't disclosed).
The inquiry is focused on whether "travel and entertainment services" given to Daschle by Educap and several related entities should have been reported as income. At issue, it appears, are two trips Daschle took on EduCap's corporate jet, one to the Bahamas, the other to the Middle East, to speak with members of the board of directors of a related organization. On the latter trip, Daschle and his traveling companions met with King Abdullah of Jordan, and Israeli minister Ehud Barack, according to the Daschle spokeswoman.
In addition, Daschle has worked during the last few years for Alston & Bird, the high-powered DC law and lobbying firm, which was registered as a lobbyist for EduCap. Some on the committee have suggested that Daschle should himself have registered as a lobbyist for Educap.
So what should we make of all this? Individually, each charge -- with the exception, perhaps of the until-recently-unpaid taxes on the InterMedia car and driver -- might be seen as not much more than business as usual for a former Congressional leader who has slipped through Washington's revolving door to offer his contacts and expertise to private interests. But cumulatively, they paint a picture of a Washington insider who, at best, has grown negligent about tracking the various forms of compensation he's receiving.
Perhaps more important, Daschle's coziness with corporate interests, many of whom will have key business before Congress and the Obama administration, could complicate the larger task of reducing the influence of the private sector in Washington.
For instance, there's nothing explicitly nefarious about Daschle's work on behalf of health insurers. But interests like AHIP and UnitedHealth have, by and large, stood in the way of efforts to remove our healthcare system from the grip of private interests, which many see as a prerequisite for real reform. Of course, that likely won't happen without at least neutralizing the opposition of the private insurers -- so perhaps Daschle's ties to those insurers make him ideally suited for the role. But at the very least, it would be nice to know what kind of "policy advice" he gave his corporate clients.
Late Update: One additional angle we might have noted. The Finance committee report also found that, from 2005 to 2007, Daschle overstated the deductions to which he was entitled for charitable contributions. When he filed amended returns, he reduced the deductions by almost $15,000.
(lots of goodies)
Global Crossing = Terry McAuliffe’s rise to power
And where is Terry today?
Running for Governor of Virgina
Thanks for the link.
Yeah-—McAuliffe made $18M overnight-—shorting GC stock——watta genius (gag).
Remember Global Crossing?
Has anyone looked in to the firm who supplied the car and driver and see how they accounted for the expense?
Scum of the Earth:
Many thanks for the great insight. Fox’s Glenn Beck would want to get ahold of this.
Has anyone looked in to the firm who supplied the car and driver and see how they accounted for the expense? Companies require mileage reports every month.....at year’s end employees get a 1099 form showing their portion of the mileage.
Of course, being a typical leftist democrat (excuse the redundancy) and Hussein nominee, none of the above should count.
ANIMAL FARM REDUX
These government whores make the US look more like Animal Farm----rather than a democracy. Animals with government positions get perks privileges and free passes-----at the expense of peon taxpayers.
The pig-like Animals squeal with delight while decimating the "rule of law"----- the thing that distinguishes America from Third World hellholes.
The Animals declare our laws to be meaningless.
These guys were toilet-trained at The School of Whatever Works For Me----but they still make smelly messes that peon taxpayers are forced to clean up.
ANIMAL FARM Terry McAullife, Tom Daschle, Jon Corzine, Gary Winnick
As yes Global Crossing...a major democrat piggybank.
According to McAwful... turning $100,000 into ~$16,000,000 is capitalism.
I'm still wondering why John Ashcroft's Justice Dept. didn't make all ... and I mean all insiders that got millions... do the nickle plated perp walk to a federal prison because of this GX ponzi scheme.
Taxes are only the tip of the iceberg for Tom.
Rats don’t have to pay taxes, so Tom’s dropping out is because of something even worse.
You got that right.
And you got a lot of company wondering about that.
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