John Edwards 2008: What’s not to like

After his 2004 run for Vice President, he joined Fortress Investment Group, a $40 billion manager of hedge funds and private equity, as a part-time consultant - for an annual salary of $480,000 (plus profit sharing).

Edwards has since resigned, but Fortress has continued its generosity. Its employees have donated $190,000 in this election cycle, according to the Center for Responsive Politics.

The hedge fund industry is itself looking for continued generosity from the government: the ability of managers to pay taxes on carried interest - that is, profits on investments - as though they were capital gains (taxed at 15 percent) and not ordinary income (taxed at 35 percent).

CNN Money

Since his stint as the Democrats’ vice presidential candidate in 2004, the tension between Edwards’ private life and his politics has been growing. In recent years, Edwards, 54, has adopted a more populist tone at the same time he’s taken on more of the accoutrements of wealth.

That tension may be one reason that Edwards has struggled against Sens. Hillary Clinton of New York and Barack Obama of Illinois.

“I think it does hurt him, because it calls into question his sincerity,” said former South Carolina Democratic Party Chairman Dick Hartpootlian, who backs Obama. “If you base your campaign on where you come from, the haircut, the corporate portfolio, all that is inconsistent with that.”

snip

As a lawyer, Edwards went for the big payoffs, making millions suing doctors, hospitals and corporations and building a net worth he’s reported at about $30 million. Edwards wasn’t an anti-poverty lawyer, and he did little pro bono work. He didn’t emphasize fighting poverty when he ran as a moderate in 1998, defeating Republican Sen. Lauch Faircloth, or during his six years in the Senate.

snip

But since his Senate election, he’s traded up to progressively tonier residences: a $3.8 million house near Embassy Row in Washington, a $5.2 million house in Georgetown and finally a $6 million house, which includes a full-size indoor basketball court, built in 2005 outside Chapel Hill.

Edwards also took a part-time consulting job with Fortress Investment Group of New York in October 2005. Fortress raises money from wealthy individuals and institutions, pools the cash in private equity or hedge funds and invests it in alternative ways - buying public companies and taking them private, for instance - to beat usual market returns.

With $43 billion under management, including $16 million of Edwards’ personal fortune, Fortress is among the major firms in its class. While Fortress was incorporated in Delaware, its hedge funds were incorporated in the Cayman Islands, allowing partners and investors to avoid or defer paying taxes. That’s a practice that Edwards frequently has criticized.
(more…)

Figure Eight Island was developed in the 1960s, when a group of wealthy men from Wilmington vowed to create North Carolina’s answer to coastal resort towns in Georgia and South Carolina.It is relatively small. About 460 houses are spread down the island’s 4 1/2 miles of landscaped roads and cul-de-sacs. Most have more than 3,000 square feet. About 50 have more than 5,000 square feet, according to property records.

Property sold in the past six months had an average value of $2.2 million.

The island has no commercial development — only a yacht club that is far more modest than most houses around it.

Its most famous homeowners are Democratic presidential candidate John Edwards and his wife, Elizabeth. Also owning a house there: Charlotte lawyer and N.C. Board of Transportation member Marion Cowell, N.C. School of the Arts founder Thomas S. Kenan III and several descendants of the Stanback headache-medicine fortune.

Unlike most other barrier islands along the N.C. coast, it remains privately controlled. There’s no sign for the island at the turn off U.S. 17. A guardhouse waits ahead, and a uniformed guard demands a pass before letting visitors cross a bridge.

The beach itself is public — for those who can get there by boat.

snip

A coalition of 14 environmental groups has sent a letter to legislators, arguing that no pilot project is needed to protect “a dozen summer mansions” because the effects of a terminal groin are well known.

“Although Figure Eight is a (private) island,” the letter reads, “its ocean beach and inlets belong to the public and should not be barricaded with hardened structures.”

Charlotte Observer 11/18/07
http://www.charlotte.com/171/story/368026.html

Clinton’s campaign responded by targeting Edwards’ previous consulting work for a hedge fund that owned a sub-prime lender.

“If John Edwards really cared about working people, he wouldn’t have taken a $500,000 salary from a hedge fund that is foreclosing on working people around the country,” said Clinton campaign spokeswoman Hilarie Grey. “Sen. Edwards should spend his time talking about how he’s going to help those people instead of launching ridiculous attacks against Sen. Clinton.”

Edwards worked part-time for Fortress Investment Group, getting paid $479,512. The former North Carolina senator redirected roughly $16 million invested in the fund after learning that two sub-prime mortgage companies it owned had sued to foreclose on 34 New Orleans homeowners. Edwards also used his own money to start a fund to help those homeowners.

He has said he won’t create a similar fund for homeowners elsewhere who were sued by the lenders.

Las Vegas Sun 11/16/07
http://www.lasvegassun.com/sunbin/stories/nevada/2007/nov/16/111610804.html

Yet at the same time, Edwards was also working for an industry that symbolized the overprivileged: a hedge fund, a partnership that specializes in high-return investments for the richest and most exclusive of clients. The firm, Fortress Investment Group LLC, hired Edwards in October 2005, several months after the poverty center opened, to help develop investment opportunities worldwide and offer strategic advice on global economic issues, according to a statement issued by Fortress in October 2005.

Edwards said in an interview that as he explored career options he talked with numerous firms, including Goldman Sachs, and decided to work as a part-time consultant to learn more about capital markets and to make money. Fortress did not return repeated calls for comment.

Edwards also said his role at Fortress was as an adviser, not a decision-maker.

“It was just being a consultant on the phone,” he said. “They would call and ask what I saw happening in Washington, sort of macro view of what was happening in Washington with the economy. What I saw happening in the world. Those were the kinds of things we talked about.”

He earned nearly $480,000 as a consultant in 2006, and stopped his work there by the end of that year; he still has about $16 million of his reported net worth of $30 million invested in Fortress funds. Employees at the hedge fund have given more than $150,000 in campaign contributions to Edwards, making the partnership one of his largest sources of funds.

After he joined the presidential race, Edwards’s involvement with Fortress became a political liability. Fortress had invested a portion of its assets in subprime mortgage lenders who recently began foreclosing on homeowners around the country, including some Hurricane Katrina victims, the poor people Edwards’s poverty center was set up to help.
more stories like this

When the Fortress investments were revealed in the Wall Street Journal in August, Edwards responded by divesting his Fortress portfolio of funds tied to subprime mortgages. He also helped the Association of Community Organizations for Reform Now, or ACORN, a nonprofit organization helping low- and moderate-income families, launch a Louisiana Home Rescue Fund. He provided much of the $100,000 in seed money for the program, which gave loans and grants to families whose houses were foreclosed on by lenders, including in some case ones with ties to Fortress.

Still, Edwards sounded defiant when he was asked whether he regrets the work for Fortress.

“I don’t apologize,” he said. “Nobody ever gave me anything. I worked my rear end off, and I’ve been able to have some good luck and success in my life. I want everybody in this country to have this chance. I wanted my kids to have a better life. My parents wanted me and my brother and sister to have a better life. There’s nothing wrong with that. That’s America.”

Boston Globe 11/15/07
http://www.boston.com/news/nation/articles/2007/11/15/a_dark_diagnosis_reaffirmed_a_commitment/?page=6

Edwards went negative on Clinton long before Obama, questioning Clinton’s integrity and her role as a Washington insider. Edwards’ campaign has made statements like: “After seven years of George Bush, the American people deserve better; they deserve the truth.” They consistently conflate Bush and Clinton.

Edwards’ history, however, hasn’t been particularly consistent. In 2004, he notably presented himself as a nice guy and refused to attack his fellow Democrats. I guess that pledge is gone.

Edwards has often chosen not to release information when silence suited his purposes. In the 2004 race, he was one of the few candidates not to disclose his bundlers. More recently, he refused to disclose how much money he was paid by Fortress Investments until required to do so by law. Nor did he come forward with information about the $800,000 he was paid for his book by Rupert Murdoch’s publishing house.

Edwards has made poverty a big issue in the campaign. In 2005, Edwards founded the Center for Promise and Opportunity to study poverty. The center raised $1.3 million dollars that year. A New York Times analysis reported that the center benefitted Edwards by reimbursing him for travel and hiring his political staff. Donors had no monetary limits and could remain anonymous, unlike in a presidential campaign.

The Street 11/8/07
http://www.thestreet.com/s/everyone-has-secrets-so-quit-bothering-hillary/markets/marketfeatures/10388967_2.html

Political Flesh Feast 10/2/07
http://politicalfleshfeast.com/showDiary.do?diaryId=577

Dennis Parrott spearheaded Edwards’ Jasper County efforts in 2004, but these days, he can’t decide between the self- described mill worker’s son and rival Barack Obama. He is not alone.

“John’s gotten very far left, more left than I’d like to see him,” said Parrott, who prefers yesterday’s genial centrist to the elbow-throwing liberal he sees today. “Maybe it’s the hedge funds, the expensive haircut, the expensive house. That’s where I’m having a problem.”

snip

Celsi had supported Edwards, even blogged for him, largely because of his “anti- poverty, two-Americas platform.” Then she heard reports of lavish living and “couldn’t reconcile it in my head.” Now, she said, she will caucus for Clinton.

Edwards’ widely derided $400 haircut and 28,000-square-foot mansion have raised eyebrows and questions alike. But perhaps more significant here is his connection to a hedge fund that invested a small amount in Whirlpool Corp. stock as the manufacturer was planning to close Newton’s Maytag plant.

Edwards earned $480,000 in 2006 working as a part-time senior advisor to Fortress Investment Group, a New York-based hedge fund that caters to select high-income investors and invests globally, his campaign aides have said.

On March 31, 2006, the hedge fund owned 9,867 shares of Whirlpool stock, according to documents filed with the Securities and Exchange Commission. The same day, Whirlpool announced it had finalized the deal to buy Maytag.

Less than two months later, Whirlpool announced that it would close Maytag plants in Iowa, Illinois and Arkansas. SEC filings from March 31, 2007, show that Fortress had purchased more than 74,000 additional Whirlpool shares after the deal to buy Maytag closed.

snip

Edwards no longer advises the hedge fund, but he and his wife, Elizabeth, still have $16 million in Fortress holdings. The fund is also a rich source of campaign money for the candidate — at least $233,000 in donations from executives and other employees of Fortress and their relatives, a review of his campaign finance reports shows.

Los Angeles Times 9/30/07
http://www.latimes.com/news/nationworld/nation/la-na-edwards30sep30,0,4910907.story?coll=la-home-nation

A few moments later, it was former senator John Edwards’ turn to be touchy about money. “Your campaign has hit some obstacles with revelations about $400 haircuts, $500,000 for working for a hedge fund, $800,000 from Rupert Murdoch,” Russert said to Edwards. “Do you wish you hadn’t taken money in all those cases or hadn’t made that kind of expenditure for a haircut?”

Edwards should have been grateful; at least Russert hadn’t mentioned that 28,000 square-foot house. Instead, Edwards put on his best Hey!-I’m-the-guy-who-talks-about-two-Americas-how-dare-you-ask-me-that-question look and launched straight into the campaign biography he has repeated in so many stump speeches. “Well, first of all, I think if you look at my entire life, I am proud of what I’ve spent my life doing,” he told Russert. “I’m not perfect. There’s not a single person on this stage who’s perfect, but I came from a family — I was born into nothing. I was brought home to a two-room house in a mill village. I have spent my entire life fighting for the kind of people that I grew up with. They worked in the mill with my father. And I don’t apologize for the fact that I have worked hard and built a life which I hope will make life easier for my children. I’m proud of that. I’m not ashamed of that. And I am proud of having stood up for the people that I grew up with. It’s what I have done my entire life. I did it for 20 years as lawyer. It’s what I’ve done every minute that I’ve been in public life. It is the reason that I’ve been going around the country helping organize workers into unions. It is the reason we started a College for Everyone program for low-income kids. It is the reason Elizabeth and I started an after-school program for kids who otherwise would have no chance to go to an after-school program, having access to technology. I’m proud of what I’ve done with my life, and I do not apologize for it. And I do not apologize for it.”

No mention of hedge funds or haircuts or Murdoch.

By the way, Edwards’s line, “I was brought home to a two-room house in a mill village” was carefully crafted, a reflection of his years of experience as a personal injury lawyer. Yes, after he was born he was brought home to a small house. But within a year his family moved to a better house as his father, a mill worker, began a rise that eventually made him a supervisor.

National Review 9/27/07
http://article.nationalreview.com/?q=NGZhMTYxZWViMWRmZDAwZDk0OGI5ZTM4ZDFhMzhlOTM=

A total of 107 Iowa homeowners were foreclosed upon by subprime mortgage companies owned by Fortress Investment Group while Democratic presidential candidate John Edwards was associated with the equity company, court records show.

Fortress foreclosures have occurred in other states, but the Iowa cases bring Edwards’ tie to subprime lending to the leadoff presidential nominating state, where he has staked his political future.

Most Iowa Democratic activists interviewed by The Des Moines Register say the foreclosures by themselves do not undermine Edwards’ anti-poverty message. However, some say he should have known that his tie to Fortress, which paid him $479,500 for 14 months of work, would be scrutinized in the campaign.

Some former Edwards supporters in Iowa say the Fortress link is another reminder of his personal activities and opulent lifestyle, which they find troubling.

snip

The 107 Iowa foreclosures were filed by Green Tree and Nationstar from October 2005, to Aug. 17, 2007 - the day Edwards pledged to divest his Fortress holdings. During this period, a national subprime mortgage crisis has led to a spike in foreclosures nationally.

Edwards said he did not know about the Iowa foreclosures until his campaign was contacted by the Register.

Edwards said he has no plans to establish a charity for the Iowans with Fortress mortgages because they were not affected by Hurricane Katrina the way borrowers in New Orleans were.

Of the Iowa foreclosures, 60 resulted in Iowans losing their homes; 20 were dismissed; 27 were pending as of last week.

DesMoines Register 9/27/07
http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20070927/NEWS09/709270393/1001/NEWS