The Ethical Spectacle, May 1995, http://www.spectacle.org
How to Get Rich in Government
A familiar story: we elect someone to office with a modest
net worth. A few years later, while earning a relatively
modest salary in public service, the office-holder is a
millionaire. How does this happen?
For the following, I am using a Republican example because
those are the facts I have in front of me. But note the similarity
to the story of Bill and Hillary Clinton while he was governor of
Arkansas. The propensity to get rich in the so-called public
service is found in Democrats and Republicans alike.
My source for the following is Politics for Profit: The
Rich Rise of Lamar Alexander, by Doug Ireland in The Nation
for April 17, 1995.
Mr. Alexander is the ex-governor of Tennessee who is campaigning
for the Republican presidential nomination. When he first ran for governor in 1974,
his net worth was $151,000.00. By 1991, when President Bush appointed
him Secretary of Education, he was worth between 1.5 and 3 million
(Cabinet officers only have to reveal ranges, not exact numbers.)
Mr. Alexander made most of his investments through a trustee. In many
cases, the trustee was his wife, Honey. Follow the dance:
What is the moral of the story? Public life (especially in states like
Arkansas and Tennessee) is like dancing a cotillion in which, at the
end of the mad whirl, your pockets are stuffed full of money.
While the rest of us (assuming we have money to invest at all)
struggle to select stocks or mutual funds that
will do well, and frequently suffer for our mistakes, public
officials like Lamar Alexander and Bill Clinton are surrounded by
appreciative people who will cut them in on a sure thing, helping to
support them in a comfortable manner while they helm the ship of
government. Doubtless without expecting anything in return.
- In 1981, Governor Alexander and seven other investors acquire
an option to buy the Knoxville Journal, a daily newspaper. Later,
they swap their Journal stock for Gannett Co. shares, and Mr.
Alexander nets $620,000.00 when he sells his.
- In 1984, Honey Alexander invests $8,900 in Corrections Corporation
of America, a company founded by another Tennessee politician and
friend of the Alexanders. In 1985, C.C.A. successfully makes a $250 million dollar proposal
to take over Tennessee's prison system. This proposal is championed
by Governor Lamar Alexander.To avoid any conflict of interest, Honey Alexander trades her C.C.A.
stock to another friend for 10,000 shares in South Life Corporation,
a life insurance company.In 1989, Mrs. Alexander sells the South Life stock for a gain of
$133,000.00. Note: privatiziation of Tennessee jails failed and all but one
were eventually returned to the state.
- Mr. Alexander appoints Mrs. Alexander during the 1980's to
head a Task Force on Healthy Children. The staff director of
the Task Force leaves in 1986 to found Corporate Child Care Inc.,
in which the Alexanders invest $5,000.00. By 1991, the Alexanders'
C.C.C.I. stock is worth $800,000.00. Their role in the start-up, other than
putting the money in, is unknown; Mr. Alexander in campaign speeches
claims to have "co-founded" a business employing 1,200 people but
the C.E.O. says, "if you ask, did he come to work and sit beside me at the
desk, that's not literally true."
- In 1987, Mr. Alexander takes six months off after leaving the State House,
goes to Australia and writes a book, for which he receives a $45,000
advance from the Wall Street Journal. He takes a $128,308 tax
deduction for expenses incurred writing the book.
- The same year, while working as a consultant for Whittle
Communications, Mr. Alexander receives stock worth $10,000 (he
pays for it, but his check is not cashed until much later.)
Later, Whittle repurchases the stock for $330,000.00.
- In 1988, Belmont College pays him $100,000 to help create a
"leadership institute", while Massey Birch, a venture capital firm
owned by his friend Jack Massey (who was also involved in the C.C.A.
and C.C.C.I. deals described above) pays him $44,000.00 in director's
and consulting fees.
- In 1988, Mr. Alexander is named president of the University of Tennessee,
Faculty and students can never find him during his tenure there,
while he concentrates on building his national reputation.
- In 1990, he makes $303,000; half is his University salary, while the
balance is for serving on five boards of directors, including
- While he is University president, the University spends $64,626
entertaining people at Blackberry Farms, a resort in which the
Alexanders own a one-third interest.
- In 1991, as Mr. Alexander is being confirmed as Secretary of
Education, he agrees to sever ties to Whittle Communications (which
among other business services, sells a television news service to
schools.) As a parting shot, a Whittle executive buys the Alexanders'
Knoxville home for $977,500--more than $400,000 more than they had
paid for it a year before. (Now, that's appreciation!)
- This year, a Tennessee law firm which doubles as a Washington
lobbyist (representing clients such as U.S. Tobacco and Martin Marietta)
is paying Mr. Alexander $295,000--while he attends 148 fundraisers
and otherwise spends his time running for President.
This modest proposal is the only solution: let's require a vow of
poverty from anyone who wants elective office. There is no other
way out of this.