Democrats are spending the days before the November election scaring retirees about Social Security. But what should spook seniors is Democratic National Committee chairman Terry McAuliffe’s record.
A recent, animated DNC ad shows President Bush pushing an old lady in a wheelchair down a falling growth curve symbolizing the sagging stock market. She quickly plunges to the ground, presumably dying from her wounds.
It is instructive to see the DNC — reputedly the best friends the elderly ever had — treat a senior citizen with such violent disrespect.
President Bush wants to give Americans the freedom to place part of their Social Security taxes in individually owned investment accounts. The DNC’s claim that Bush, therefore, endangers seniors rings hollow when compared to McAuliffe’s adventures in retirement-asset management.
Back in November 1990, McAuliffe contacted Jack Moore, then a leader of the International Brotherhood of Electrical Workers. Moore handled IBEW’s $6 billion union pension fund. McAuliffe and Moore plowed some of that capital into a risky scheme involving Florida real estate.
As Byron York explained in the September 16 issue of National Review, McAuliffe’s deal was sweeter than a sugar-cane plantation. Moore devoted $39 million of electrical workers’ retirement assets to their partnership while McAuliffe allocated just $100. Despite this 390,000-to-one disparity in their respective financial commitments, their agreement let Moore and McAuliffe divide their profits 50-50 after IBEW earned 9.75 percent on its initial outlay.
This enterprise soon bought a shopping mall and five apartment buildings in central Florida. In 1992, the pension fund loaned McAuliffe $10 million to purchase Country Run, a parcel later split into lots for 500 single-family homes. For collateral, McAuliffe offered that acreage plus his $100, 50-percent share in the partnership.
Then McAuliffe moved on. The pension fund paid him $450,000 in June 1992 for 6.8 percent of his interest in the venture and $2 million in August 1993 for another 31.3 percent. (McAuliffe kept 11.9 percent of his share.) This $2.45 million jackpot on a $100 bet makes Hillary Clinton’s notorious cattle-futures deal look like a municipal bond.
Meanwhile, Country Run ran nowhere. Sales to contractors lagged behind projections. McAuliffe did not make loan payments to IBEW between December 1992 and October 1997. He and an associate finally retired the loan that year.
Bill Clinton’s Labor Department sued Jack Moore and John Grau, another IBEW officer, on May 5, 1999. Its complaint asserted that IBEW’s National Electrical Benefit Fund “lost money as a result of the [Country Run] loan in 1992 and the purchases of additional partnership interests from [McAuliffe] in 1992 and 1993.” Labor’s filing continued: “if the fund had not made these investments, it would have had the money it invested in Country Run and the additional partnership purchases available to invest in prudent investments that would have earned a greater return.”
Under an October 16, 2001 federal consent order, Moore and Grau paid a $550,000 civil penalty to the pension fund for their escapades with McAuliffe. IBEW also had to reimburse its pension fund $4.95 million for not employing “the care, skill, prudence, and diligence…that a prudent person acting in a like capacity and familiar with such matters would use.” McAuliffe walked away clean.
“Terry McAuliffe is in no position to castigate anyone else about an alleged lack of concern for retirees,” says Stanley Greer, senior research associate with the National Institute for Labor Relations Research in Springfield, Virginia. “The evidence shows that he conspired with union officials to fleece a union retirement fund out of millions — and got off Scot free.”
Against this acrid backdrop, McAuliffe’s party remains disconnected from the public on Social Security choice. Americans want to own and invest their retirement money even as corporate board rooms have become crime scenes and stocks have withered. A poll of 1,109 likely voters for Washington’s libertarian Cato Institute discovered that 68 percent favor private accounts (margin of error: +/- 3.1 percent). Zogby International polled July 8-12, as the Dow average slid 695 points.
Voters deserve a thoughtful debate on Social Security. Instead, the DNC offers them frightful rhetoric worthy of Halloween and hopes they never learn about the horrors to which their chairman subjected the nest eggs of blue-collar workers.