March 24, 2005

Mike Hatch, American Bankers and the Twin Cities Media - Part 4

Part 4: "Confusing, deceptive, inappropriate, inconsiderate"

Once you get past the January 6 meeting, things get confusing.

In February, Patrick Nelson (Deputy Commerce Commissioner) finally negotiated a settlement with American Bankers. There would be a $200,000 fine, and a $1.8 million reimbursement for investigative expenses.

According to the Attorney General's office, the machinery set in motion by American Bankers' donation to the Republicans (but, apparently, not the one made to the Democrats) led to a huge reduction of the settlement - from the $3.5 million agreed to in the summer of 2002.

But according to sources at the Commerce Department that are familiar with the inner workings of this story, Commissioner Wilson felt that, since American Bankers had backed out of the original settlement on August 7, the next stop would be trial. The source says that, rather than waste Commerce Department resources on a trial, the Department would be better off settling for a lower amount, while still exacting a fine, as opposed to a gift to charity (which would not be listed as a fine).

The Media Chimes In

At some point after the settlement was finally reached - in late February or early March of 2003 - Ron Eibensteiner got a call from "a reporter". He wouldn't say which one.

"He asked me if I'd gotten a check from American Bankers", says Eibensteiner, who say he denied getting the check. "The reporter told me he had a copy of the thank you letter for the check", says Eibensteiner. "I asked him to fax me a copy - he wouldn't do it".

Eibensteiner continued "the reporter asked me if I knew Ron Jerich. I said no".

According to Eibensteiner, he then had a staffer find a copy of the letter in the outgoing correspondence file. "I called the reporter, and clarified our process" - the process by which checks are sent to the RNSEC office, and generate an automatic form letter to the donor.

On March 5, 2003, the Pioneer Press ran the first story on the subject. The article relied heavily on statements by Jim Bernstein, the former Commerce commissioner.

After the story ran, Eibensteiner says, he got a call from another reporter. "He was howling with laughter", says Eibensteiner. "He had a copy of the letter. He asked me, do you know who this [Ron Jerich] is? Ron Jerich is a friend of Mike Hatch!".

"It was a clear setup from the start", Eibensteiner says. "Hatch tried to blackmail [Glenn Wilson] with my letter. The whole thing was contrived between Hatch and Jerich, to play in case Tim Pawlenty won the election".

As this is written, nobody involved with the Pioneer Press story has responded to my request for comment.

The Audit
On March 10 and 12, the Senate Commerce and Utilities Committee held hearings on the brouhaha, hearing testimony from Bernstein, Hatch and Wilson. They referred the matter to the Legislative Auditor.

On March 14, Governor Pawlenty and the legislative leadership (Republican House speaker Steve Sviggum and Senate Minority leader Dick Day, and DFL House Minority leader Matt Entenza and Senate majority leader John Hottinger) also sent a letter to Jim Nobles at the Legislative Auditors Office, requesting an audit of the settlement.

The Audit Report was released on May 21, 2003. It's 33 pages (plus about fifty pages of appendices) that reads like...well, an audit report. But it reached some interesting conclusions. It agrees with Hatch's assertions that American Bankers had reached an agreement "in principle" with Bernstein, and that the company opted for a political approach. It found no evidence that the Department of Commerce had had contact with Ron Jerich after January 8 that might have influenced the settlement. It also was bothered by the lack of publicity for the settlement until after the story broke in the media.

The report also concludes that Hatch's actions in this case were not illegal, but were troubling nonetheless.

The report was concerned that the Attorney General apparently presented an illegal settlement to Wilson.

"Attorney General Hatch told us that on January 8, 2003, he was he was fully aware that it was not legally possible for American Bankers to make a contribution to to a charity as part of a settlement, but he did not disclose that fact to those attending the January 8, meeting. According to Attorney General Hatch's testimony to us, he did not make more of the he legal problem associated with a charitable contribution from American Bankers Insurance because he wanted to get the proposal "on the table" . And he said he invited Mr. Neimeic (sic) and Ms. Brainerd to the meeting with Commissioner Wilson and Mr. Jerich so there would be "witnesses" that an offer had been made.
The Legislative Auditor found this troubling. While Hatch presented this in his testimony as merely presenting the offer, saying "Lawyers are like realtors", he said in his testimony to the Auditor, and "All offers have got to be presented to the client. It was important to me that they make their offer to the client immediately. I wanted to get the bar set", the legislative auditor noted the Attorney General is not a neutral agent. According to his own statements, he was aware that the "charity" proposal was illegal under Minnesota law (which, the Auditor noted in his report, forbids state officials from even pursuing such arrangements).

The Audit Report also noted the impropriety of inviting Commissioner Wilson to the January 8, alone and unprepared for anything but a "meet and greet", for such a complex matter.

Finally, the report noted with little comment the Attorney General's claim to have taken the letter from Ron Jerich during the October 5th lit drop, except that the evidence tended to support Ron Eibensteiner's statements, that the check was sent to the RNSEC (as per Minnesota law) and that the letter was an automatic form letter. Legislative Auditor Jim Nobles noted in a phone interview that the letter was quite obviously a form letter. "Form letters have a certain generality, with details interspersed", said Nobles. "In the report, we characterized the letter as a form letter, and I concur with that. The letter had no specificity."


Mike Hatch says that he invited Dick Niemiec and Mary Brainerd - representing Blue Cross and HealthPartners, both major players in mental health care in Minnesota - to the January 8 meeting to serve as witnesses to the deal. So if what was going to be presented required "witnesses", why did the Attorney General call the meeting a "meet and greet" to Commissioner Wilson? Why did he not tell Wilson that "witnesses" were going to be necessary?

And indeed, wouldn't a "witness" from either the Attorney General's Office or the Department of Commerce - or both - have been more appropriate than bringing in people who happened to be from two organizations that would benefit from the proposed illegal settlement?


Ron Eibensteiner met Attorney General Hatch at former Senator Bob Lessard's annual fish fry - a bit of a Minnesota government institution, by most accounts. The fish fry happened sometime after the story broke in the media.

According to Eibensteiner, he approached Hatch about the brouhaha - especially the form letter. Eibensteiner says Hatch smiled and answered:

"Welcome to Politics in Minnesota, Ron."

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