Culture of Corruption: Obama and His Team of Tax Cheats, Crooks, and Cronies (43 page)

In September 2007, Hsu was finally arrested after having evaded the law for fifteen years over grand theft swindling charges. Hsu pleaded no contest to those old charges and was supposed to serve jail time. Instead, he managed to remain a fugitive while raking in hundreds of thousands of dollars for Democratic candidates and officeholders—and posing openly for photographs with the likes of Hillary Clinton. The arrest took place after a bizarre train sojourn Hsu took after skipping out on a California court appearance related to a felony theft conviction. He was apprehended in Grand Junction, Colorado.

Former President Clinton, who left the White House up to his eyeballs in campaign finance scandals, retreated to Southern folksy talk when asked about the Hsu scandal. “You could have knocked me over with a straw, especially when I heard the L.A. people had been allegedly looking for him for 15 years when he was in plain view,” he said.
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Why such shock? Hillary Clinton’s campaign had been warned directly by a California businessman in June 2007 that Hsu’s investment operation didn’t smell right.
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No plausible deniability here.

In November 2007, Hsu was indicted by a federal grand jury and accused of cheating investors of at least $20 million by promising them “short-term, high-return investments.” No Ponzi scheme lasts forever, but Hsu bullied his targets into giving him every penny they had. He pressured victims to contribute thousands of dollars to political candidates, made “direct and implied threats . . . leading them to believe that their failure to make” the donations would jeopardize their business relations, and conned them into illegal reimbursement schemes for donations.
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Two months after the indictment was issued, a California judge sentenced the bagman to three years in prison for the old fraud charges. A week before Inauguration Day 2009, Hsu was back in the news (or on the Internet, anyway) to complain that press coverage of the more famous Ponzi scheme under the spotlight—the Bernie Madoff case—would prejudice his own trial. In May 2009, Hsu was convicted in a New York federal court on four campaign finance corruption counts. At trial, jurors heard a gushing voice message from Senator Clinton in praise of Hsu’s fundraising prowess:

What am I going to do with you, Norman? You are working so hard for me that I just don’t know what to say any more. I’ve never seen anybody who has been more loyal and more effective and really just having greater success supporting someone than you. . . . Everywhere I go, you’re there. If you’re not, you’re sending someone to be part of my events. You know, we’re going to win this campaign, Norman, because you’re singlehandedly going to make that happen.... Get some sleep. Slow down for a few minutes. We’re going to get to the end of the first quarter and then we can all take a little rest. Lots of love. Bye bye.
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The once-smitten Senator Clinton agreed to return $850,000 in bundled contributions gathered by Hsu—but her campaign asserted an option to re-purpose the dirty donations “by saying that it would take back the money if it clearly came from the donor’s bank account.”
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The botched attempt to pay lip service to ethics while setting up a rinse-and-spin cycle for Hsu’s tainted cash invited further ridicule. One Democratic presidential primary rival who spared Mrs. Clinton no mercy was Connecticut senator Chris Dodd. He took a dig at Hillary’s Hsu headache in a mocking press release announcing his “campaign policy on money raised by fugitives from justice.”
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“I understand that it is simply impossible for a presidential campaign to know everything about its donors and raisers, however once criminal activity of this sort—being a fugitive from justice—comes to the candidate’s attention they certainly should not keep the money linked to those criminals,” Senator Dodd stated smugly. Unfortunately for Dodd and so many of Hillary’s colleagues on Capitol Hill, they were in no position themselves to be casting ethical stones.

EPILOGUE

BIRDS OF A FEATHER

“I
can’t say it any clearer: I will be helping Chris Dodd because he deserves the help,” President Obama told the

Boston Globe
. “He just has an extraordinary record of accomplishment, and I think the people of Connecticut will come to recognize that.”
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The public endorsement of Dodd’s 2010 re-election campaign was a much-needed morale boost for the Democratic senator from Connecticut. In April 2009, his approval rating had dropped to its lowest level ever.
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Damaged birds of a feather flock together. Obama wasn’t doing the beleaguered Senator Dodd any special favors. This was business as usual. Senator Dodd, a fellow Democratic presidential rival, had endorsed Obama over Hillary Clinton after he dropped out of the race following the Iowa caucuses. Both camps courted Dodd aggressively. His endorsement came at a critical point ahead of big primaries in Texas and Ohio. Clinton had launched a full-throttle attack on Obama’s flimsy foreign policy credentials. But the veteran Democrat threw his weight behind the rookie. Declared Senator Dodd: “Barack Obama is a 21st century candidate who will express the aspirations and hopes of so many.”
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Obama’s hope-filled followers should cringe at their president’s embrace of one of the most ethically compromised politicians on Capitol Hill. The Beltway swamp is teeming with Democratic corruption scandals (Pennsylvania congressman John Murtha’s earmark factory and tax-subsidized airports and radars to nowhere; New York representative Charlie Rangel’s rent-controlled apartment scams and tax scandals; Illinois representative Jesse Jackson’s role in the Blagojevich pay-for-Senate seat debacle; California representative Maxine Waters’s business ties to a minority-owned bank that received $12 million in TARP money under smelly circumstances, for starters), which are fodder for a separate encyclopedia set.
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But Dodd’s career epitomizes the most fetid aspects of Washington’s culture of corruption. It’s a textbook case of nepotism, self-dealing, back-scratching, corporate lobbying, government favors, entrenched incumbency, and hypocrisy.

Everything you need to know about the befouling of the Beltway swamp can be found in the rise and fall of Chris Dodd—and in Barack Obama’s affirmation of his “extraordinary record of accomplishment.”

THE SENATOR FROM COUNTRYWIDE

As you’ll recall from chapter 6, Obama threw his close confidante Jim Johnson off the campaign vice presidential search committee when the
Wall Street Journal
exposed Johnson’s multi-million-dollar sweetheart deals with reviled lender Countrywide Financial. To repeat his words again: Obama excoriated Countrywide’s officials from CEO Angelo Mozilo on down as “the people who are responsible for infecting the economy and helping to create a home foreclosure crisis.... These executives crossed the line to boost their bottom line.” Johnson’s relationship with Countrywide cost him a plum spot on Obama’s search committee.

But what about Chris Dodd?

In June 2008,
Portfolio.com
published an exclusive report on the other VIPs who benefited from Mozilo’s special loan arrangements with political bigwigs. Among the beneficiaries: former Bush Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former UN ambassador and assistant Secretary of State Richard Holbrooke. Most noteworthy, two sitting Democrat senators were identified as recipients: Kent Conrad and Chris Dodd. Dodd is chairman of the Senate Banking, Housing, and Urban Affairs Committee.

Portfolio.com
reported that Senator Conrad “borrowed $1.07 million in 2004 to refinance his vacation home with a balcony and wraparound porch in Bethany Beach, Delaware, a block from the ocean.” Senator Dodd received two discounted loans in 2003 through Countrywide’s VIP program. He borrowed $506,000 to refinance his elite townhouse in Washington, D.C., and $275,042 to refinance a home in East Haddam, Connecticut.
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Countrywide helpfully waived fractions of points on the loans. The lower interest rates could have saved Senator Dodd a combined $75,000 during the life of the 30-year loans,
Portfolio.com
concluded.

While he was secretly enjoying the benefits of being a Countrywide VIP, Senator Dodd publicly lambasted “unscrupulous lenders,” milked the subprime mortgage crisis, and also championed a $300 billion mortgage industry rescue bill that would, as GOP Senator Jim Bunning put it, serve as “a bailout for borrowers and investors who made bad decisions.”
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In October 2008, when Countrywide announced its decision to refinance up to $16 billion in adjustable-rate mortgages, Dodd was happy to speak to the press—offering qualified praise for the announcement as a “welcome, if late, decision.”
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He did not, however, disclose his own unscrupulous borrowing arrangements with Countrywide to the press or to the public.

As a mini-maelstrom of outrage grew over the Countrywide VIP program, the once-garrulous Dodd went into hiding.
Roll Call
reported that Dodd had known about the preferential treatment on his loans since 2003, yet continued to deny that he was treated like a VIP and refused to acknowledge wrongdoing.
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Voters at home were paying attention. A Quinnipiac poll in July 2008 showed Dodd’s approval rating drop from 60 to 51; 59 percent of Connecticut voters polled said Dodd’s mortgage ties should be investigated.
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Heat came from left, right, and center. In the
Boston Globe
, economist Richard Parker, a senior fellow at Harvard Kennedy School’s Shorenstein Center, fumed:

A chief beneficiary of the Dodd bill is Bank of America, which has just bought Countrywide. If Dodd’s bill passes, taxpayers will take on much of the Bank of America’s risk of further portfolio default—a move worth billions to the bank.

Washington desperately needs to stanch the forced liquidation of millions of American homeowners. Yet once again, the benefits of its rescue efforts will accrue unequally—stacked heavily in favor of the wealthy and the powerful—because in American politics, as in Orwell’s “1984,” some are more equal than others.

Especially the VIPs.
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Dodd’s hometown newspaper pressed for transparency. He promised to release supporting documentation to back his claim that he received no special discounts. Obama must have approved. As public discontent with Dodd increased, the Obama vice presidential search team (sans Jim Johnson) leaked its potential picks. Among the front-runners: Senator Chris Dodd!
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The news prompted a biting response from Edith Prague, a longtime Democratic lawmaker in Connecticut: “I think Obama would be stupid at this point to put [Dodd] on the ticket,” Prague said. “This mortgage deal. Give me a break.”
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