March 22, 2005

Mike Hatch, American Bankers and the Media, Part 2

I'm reprinting the entire five-part series I did in the summer of 2003 on Mike Hatch and the American Bankers story, one installment every day.

Next week, I'll revisit the story. By the way - if you have any inside knowledge of this story, feel free to drop me a line. The more the merrier.

Part 2: The Check

The law in Minnesota is about as clear as laws ever are; corporations may not make contributions to political campaigns in the state.

Corporate money can go to the national parties.  From there, depending on who  you ask, the money either is launched into a random void from which it may or may not ever come back to Minnesota, or it comes directly back to the state after going through the formality of a trip to the national headquarters. Both the Republicans and the Democrats have organizations that exist to take corporate contributions, and filter them back to the states.  Technically, there is no way to know if the money from any given corporate contribution will ever get to the candidate that the donor intended. One source calls the law "legal money-laundering". The upshot is this; direct corporate donations, bad.  Donations through the national office that are sent anonymously back to the state campaigns, good.

The Republican National State Elections Committee (RNSEC) is the national GOP body that accepts state contributions and recirculates them to state campaigns.

The Strategy

It's clear that American Bankers had adopted the strategy of "going political", as Attorney General Hatch calls it.  The Legislative Auditor's Report notes that it "found evidence to support the Attorney Generalís assertion that, in August 2002, American Bankers Insurance employed a "political strategy" to help the company resolve its regulatory problems with the State of Minnesota".  In a telephone interview found in the report, the company's general counsel, Jerome Atkinson, said:

WhenÖ Governor Ventura announced he wasnít running for reelection, my view was, letís do what we can to ensure that Commissioner Bernstein goes with him. And take our chances on whomever the next commissioner is going to be, because it canít be any worse than trying to negotiate a settlement on this matter. You know, our view wasnít, you know, we wanted to influence the outcome of the settlement. It was to get a reasonable mind... [and] to talk to this person about this deal. The fact that it was Republican or Democrat, we didnít care [as long as] it wasnít Bernstein.
Tim Thornton, American Bankers' local counsel, also noted:
I regarded Mr. Bernstein as a bully populist who lost sight of what was in the interest of the regulated community and the consumers of the state of Minnesota for his own self-aggrandizement. And almost anybody in the commissionerís office would have been an easier person to settle with than Mr. Bernstein.
Depending on who you ask, the "Political Tack" supplemented or supplanted the company's negotiation and litigation strategies during the late summer of 2002. "As tawdry as it seems, this is not illegal" a source at the capitol tells me, "and, in fact, is business as usual in the political world."

Part of the strategy, of course, involved hiring lobbyist Ron Jerich

The Caller

Ron Eibensteiner is the chairman of the Minnesota Republican Party

One of the main responsibilities in leading the party is raising funds When someone wants to donate money - especially a lot of money - to the Minnesota GOP, he's the go-to guy. In 2002, after the Republican state convention endorsed Tim Pawlenty to run for governor, Eibensteiner was doing a lot of it. "After the endorsement and during the Pawlenty campaign, I got a lot of calls from people who wanted to help - people who wanted to volunteer wit the campaign, and people who wanted to contribute," says Eibensteiner. I told my staff, corporate contributions are illegal. People can give to the Republican National State Elections Committee.In August of 2002, says Eibensteiner, someone began calling the state GOP office, wanting to make a donation to the Pawlenty campaign "This guy calls, and says he wants to give $15,000 to Pawlenty.  He says "I want to make a corporate contribution "We said "No, you can't do that!" says Eibensteiner. "My staff tells me this guy keeps insisting; We gave him the address for the RNSEC. But when the check came, it was addressed to the Minnesota Republican Party."  After that, Eibensteiner says, staffers sent the $10,000 check to the RNSEC office in Washington. And that's it!", Eibensteiner concluded.

The "guy," according to Eibensteiner, was Ron Jerich.

The Other Check

At about this time, another check is sent to the Democratic Party, from American Bankers, arranged by Ron Jerich.

According to sources at the state DFL who spoke off the record, no check was received. Attempts to reach DFL officials for on-the-record comment went unanswered. The apparently went directly to the national Democratic party, in accordance with state law.

The Letter

When a check is received at the GOP's office, on Cedar Street in downtown Saint Paul, the details are entered into a computer. The computer then generates a "thank you" form letter. The staff periodically brings a stack of these letters to Ron Eibensteiner. He signs them

"I sign thousands of them!" Eibensteiner exclaims, in the tone of a guy who knows the meaning of writers' cramp. A copy of the letter is among the appendices to the Legislative Auditor's Report.  It includes two marginal notes, in Eibensteiner's looping script, and a postscript at the bottom: "P.S. Since we're not sure who to thank at American Bankers Insurance, if you would do that on our behalf, I would appreciate it"

According to Eibensteiner, the postscript was added by a staff member. "We never talked with them. We never dealt with them. We didn't have their address, no phone number - no nothing! That's it!"

Eibensteiner signed the letter. "This all took place in a split second!".

The letter was mailed to the lobbyist that arranged the payment - Ron Jerich.


Ron Jerich is a registered lobbyist. He's best known, sources tell me, for working with DFL candidates, although he works both sides of the aisle.

He is not an "issues" guy", says a source at the Capitol who knows Jerich well. He is a behind-the-scenes player with extensive connections. His specialty is getting folks together.

By all accounts, including Federal Election Commission records, Jerich is fairly ecumenical - he'll work with anyone. "He is a Democrat and works mostly with the DFL but has several Republican friends, including me", says the capital source. The source also noted that "Mike Hatch was one of his closest friends". Jerich has worked for Hatch in the past. Sources also claim that Jerich and Hatch own a condominium together in Naples Florida - a claim that Hatch's press secretary Leslie Sandberg says is completely false.

On Saturday, October 5 (according to Attorney General Hatch's testimony to the Legislative Auditor's office), Hatch went to Ron Jerich's house (note: this is transcribed from the testimony transcript. Errors in spelling of names are transcribed directly. Ellipsis means I've taken out some garbled, conversational text).

That morning, I went over the Ron Jerich's home. He was acting as a host for a number of people who were door knocking for ... Senator [Jim] Metzen, and Representative Pugh. And when you do these door knocks, you show up and they hand you a map and a bunch of literature, and you drive out and knock on doors...And usually beforehand, the host...or hostess will have coffee and orange juice and some donuts. And which Val Jerich [Ron Jerich's wife] did have, what I recall was quite a spread.
In other words, a fairly typical campaign-season literature drop. Hatch continues, from the transcript.

And I was drinking coffee, talking to Ron Jerich, and noticed...We were in his office talking. And there was a bust of Ronald Regan (sic) on his desk. And I said, gee, that's an interesting bust. Why have you got Ronald Regan (sic)? And he said he just got it from the Republican Party for a ten thousand dollar contribution. I asked him why were you making a ten thousand dollar contribution, and he said that he had been retained by American Bankers Insurance Company. That they wanted to get involved in Minnesota. And that they wanted to make contributions to the Moe campaign and to the Pawlenty campaign. He had indicated that he had contacted Tim Commers... and I said, well, who made the contributions. And he said, the company. I said, well, what do you mean, the company? I mean, was it an officer of the company? Was it you? How did you...? And he said no, the company made the contributions. I said, well, how did they do that? And he said...and I said, more out of curiosity, how did you make a corporate contribution?
Hatch continues, talking about campaign law:
I had been chair of a political party. This was news to me. And he that, well, he called Tim Commers, who was the campaign chairman o the Pawlenty campaign, and Vic Moore, who was...I don't think he was active on the campaign, but certainly a close associate of Roger Moe. And he had commented that Commers knew how to get it done. He told them where to send the contribution, but that the Moe campaign really didn't know how to do it, because they cut a check and he sent it to the DFL party and they refused it. And he said they really screwed up. They don't know how to take corporate contributions. And I'm thinking the whole time, what the hell is going on here? ...So how does the Republican Party send you a bust if you send corporate contributions to the Pawlenty campaign?
The letter returns:
And he hands me this letter. Pulls a letter out of a desk and hands it to me and it's a letter from Ron Ebensteiner (sic), who is the chairman for the state Republican Party. So now I'm trying to figure out how does the state Republican party send a thank you letter when it was a contribution to Commers?...I'm looking at this and I"m thinking, this doesn't make sense. The letter itself says it's from American Bankers, because there is a note at the bottom saying let me know who I should thank at America Bankers. And then I look at it, you know. I'm just kind of reading it and trying to figure out what this is all about. And it says it's to the Republican National State Committee.
Hatch acts:
I take the letter. [Emphasis added] Do the door knock that day. I mean, I'm tring to figure out what's going on here. This is troubling to me. I know that mischief is afoot here. I know why American Bankers is doing this. I don't think Jerich did. He wouldn't have told me if he...I mean, they knew. I mean, it's not any secret my feeling about many insurance companies, and it's not secret what I think about a company like American Bankers. And I really don't think he knew.
Hatch took Ron Jerich's letter from Ron Eibensteiner. Accounts differ as to whether Hatch took it with or without Jerich's permission, or active connivance. According to the Legislative Auditor's report:
Mr. Jerich acknowledged that he showed Attorney General Hatch and others who had come to the "door knocking" event the letter from Mr. Eibensteiner. However, he said that the letter subsequently disappeared, and he didnít know who took it.
Sources close to this story with personal knowledge of Hatch and Jerich's relationship, however, say that it's "equally likely" that Jerich gave Hatch the letter. Jerich did not respond to several attempts to reach him for his comment.

In any case, that was the last anyone heard of the check, at least publicly, until after the inauguration of Tim Pawlenty.

On Election Eve

So, let's recap what happened between the beginning of August and October 5, 2002:

  • American Bankers retains Ron Jerich.
  • The company withdraws from negotiations with the Commerce Department.
  • Ron Jerich sends checks to the Minnesota GOP and the Democratic National Committee. The Minnesota GOP forwards their check to the RNSEC.
  • The check's receipt generates a form letter, which Ron Eibensteiner signs.
  • ne fine October morning, Mike Hatch happens to start discussing the subject with Ron Jerich. He reads the form letter from Ron Eibensteiner, and, depending on whose account you're reading, either palms the letter or Jerich slips it to him under the table. This letter forms the basis for much of the future brouhaha on this case.
November, 2002

In November, Tim Pawlenty won the gubernatorial election. He appointed Glenn Wilson, a mortgage banker who'd been president of Ginny Mae in the eighties, as his Commerce Commissioner.

This takes us to January 6, 2003 - Inauguration Day for the Pawlenty Administration, and, according to Mike Hatch, the day a new plan was hatched to deal with American Bankers Insurance.

[Previous - Part 1: If a Settlement Falls In The Woods, And Nobody Signs It...]

Posted by Mitch at March 22, 2005 05:49 AM | TrackBack
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