Profiles in Corruption

by Peter Schweizer

  Other Klobuchar staffers have defended her on these matters, explaining that she holds “the highest standards for her staff.”7 But perhaps the most remarkable feature of Klobuchar’s career is not just her penchant for “punching down” at subordinates, but her willingness as a prosecutor, county attorney, or U.S. senator to go soft on powerful figures and interests that would benefit her political career. Those self-professed “highest standards” do not seem to apply to those who might be breaking the law or seeking special treatment. Indeed, Klobuchar has quietly built a legislative record that leads to the distribution of economic benefits to favored, politically connected businesses.

  Klobuchar descends from Minnesota royalty. Her father, Jim, was a legendary sports reporter for the Minneapolis Star Tribune, the largest paper in the state.8 He covered the beloved Minnesota Vikings of the National Football League but also wrote on other issues, including personal matters involving his family. At times, he would reference Amy in his columns; he would write candidly about his drinking problems and his divorce. He enjoyed a large following in the Land of Ten Thousand Lakes.9

  From early adulthood, Amy fused herself with another branch of Minnesota power players, namely Walter Mondale. The U.S. senator and then vice president of the United States under Jimmy Carter is, other than perhaps Hubert Humphrey, Minnesota’s most famous political son. Klobuchar first worked as an intern for his office in 1980 while he was vice president and volunteered for the campaign, canvassing locally for the Carter-Mondale ticket. (He ran against Reagan for the presidency in 1984 and lost.) Klobuchar graduated from Yale in 1982 and from law school at the University of Chicago in 1985.10

  After law school, Amy joined the law firm of Dorsey & Whitney in Minneapolis, where she worked on utility law and represented large telecom companies like MCI, which were challenging incumbent monopolies.11 She began immersing herself in local Minnesota Democrat-Farmer-Labor (DFL) Party politics and joined a club of young political types called Wednesday Night Democrats. Even at this age, she was calculating a political run for office. “She was always thinking of where to live, based on what office she could run for,” recalled friend Amy Scherber.12

  In 1987, she was reunited with Mondale when he joined Dorsey & Whitney. Klobuchar spent the next few years working part time with the former vice president on “business development, speeches, and other civic activities.” The bond was tight, and she entered the orbit of the extended Mondale network, which we will see included the vice president’s sons and their business ventures. How much of a role did Mondale play in Klobuchar’s career? One hint might be that she mentions the former vice president no fewer than forty-eight times in her 2015 autobiography.13

  The reunion with Mondale brought Klobuchar deep within the financial elite of Minnesota politics. By 1992 she became a Mondale Fellow at the University of Minnesota’s Humphrey Institute. As she recalls, the fellowship allowed her “the chance to meet all kinds of national political types.”14

  The following year she married John Bessler, a man seven years her junior.15 The wedding ceremony and the reception that followed oozed politics. They held the reception at the University of Minnesota’s Humphrey Institute. “Guests wandered through the permanent exhibit chronicling the life of one of Minnesota’s most beloved Democratic leaders,” recalled the Star Tribune.16

  Klobuchar clearly had the political bug. In the fall of 1993, she made plans to run for chief prosecutor of Hennepin County, the largest and most significant prosecutorial job in Minnesota. (Hennepin County incorporates much of Minneapolis.) However, she ended up deferring to a more established candidate, the incumbent Mike Freeman, just five months before the 1994 election. By 1998 she was ready to throw her hat in the ring again. Even though her legal experience at this point revolved largely around telecom companies, she went on to win a tight victory by less than 1 percent of the vote.17

  As chief prosecutor, she was in charge of more than 150 lawyers. Klobuchar paints a portrait of her tenure as one involving hand-to-hand combat with white-collar criminals. It is a central component of her message as a progressive. “We really pushed the envelope in one other area: white-collar crime,” she wrote in her autobiography. She describes how her office was taking many white-collar criminal referrals, “from investment swindles and contractor fraud to tax evasion and identity theft rings.” According to her version of events, she triumphed and operated “without fear or favor.”18

  As we will see, that depends on what sort of white-collar criminal you were, and what sort of political connections you might enjoy. Indeed, she seemed in her prosecutorial record to punch down by throwing the book at smaller fish, while avoiding prosecutions of larger and more serious criminal operators.

  Klobuchar aggressively went after small actors accused of financial crimes and fraud. There was the home remodeler in Burnsville, Minnesota, who pleaded guilty to eight felony counts for swindling homeowners out of $1 million—netting 75 percent of that. Klobuchar threw the book at him; he got two years in prison.19

  She also took on airline pilots who worked for Minneapolis-based Northwest Airlines. According to Klobuchar and her office, forty-two Northwest Airlines pilots were investigated for not paying Minnesota income taxes by claiming residence in other states even though they spent much of their time in the state. They collectively owed some $321,000 in state taxes. Klobuchar charged seven pilots with tax evasion. The pilots argued that they lived in other states and would arrive in Minneapolis for their flight assignments. Klobuchar declared the airline pilots were “white-collar crooks” in her book—further proof that she was tough on white-collar crime.20

  But the largest financial fraud by far in her jurisdiction involved a massive conspiracy that she never even appeared to investigate. It involved the second-largest Ponzi scheme in American history to date (surpassed only by Bernie Madoff).21 It involved billions of dollars, dummy corporations, and an elaborate scheme that ripped off investors for hundreds of millions of dollars. The man at the center of it, however, happened to be in business with the Mondales, was a Klobuchar friend, and one of her largest financial backers. Indeed, Petters Group International (PGI) would prove to be her single largest campaign donor when she ran for the Senate in 2006. Despite plenty of warning signs, she appears to have looked the other way.

  Tom Petters purported to be a billionaire and a philanthropist. His firm, Petters Group Worldwide, or its subsidiaries, employed family members of Minnesota’s political elite. Bill Mondale, son of the former vice president, worked for Petters as the director of international business development of Petters Consumer Brands LLC.22 Ted Mondale, the former vice president’s eldest son and a former state senator, was vice president of a Petters company from 1999 to 2003. When Ted left to launch a software company, he received a $750,000 investment from Petters. Petters also gave him a $150,000 personal loan.23

  Later, when federal officials charged Petters for his crimes, he admitted that he used the Mondale name to solidify his company’s reputation. When he was trying to drum up business in Asia, for example, he would drop Walter Mondale’s name because Mondale had served as ambassador to Japan. His ties to the Mondales “opened up incredible doors.”24

  It was his relationship with Klobuchar and her office that might have been even more important because they probably delayed his legal day of reckoning. When Klobuchar ran for county attorney in 1998, Petters and his employees gave her campaign $8,500. That was just the start. When she announced for the U.S. Senate in 2006, Petters Group Worldwide and its employees were some of her earliest and most enthusiastic donors. Just weeks after she announced her candidacy in February 2005, Petters and thirteen employees in his companies all gave her contributions in a single day (March 31, 2005). By the quarterly report released right before the 2006 election, they were her largest contributor by far—donating $71,600 or 32 percent more than her second-largest donor, her old law firm.25 By the end of 2006, Petters Group Worldwide had contributed more than $120,000 t
oward her successful bid.26

  One of the reasons Petters may have been able to operate is that the Hennepin County Attorney’s Office reportedly had worked to expunge his records of a previous arrest on fraud charges. While living in Colorado, Petters was accused of forgery and fraud, the alleged crime involving some $75,000 worth of VCRs that apparently did not even really exist. Petters moved to Minnesota and made a financial restitution payment to avoid a fugitive warrant, but the arrest was still on his record. Obviously, it would be more difficult to launch a financial firm with this lurking on his record. He went to the Hennepin County Attorney’s Office and with the reported help of an assistant county attorney named Nancy McLean got his record wiped clean. This happened under Michael Freeman, Klobuchar’s predecessor. When Klobuchar replaced him in 1998, McLean stayed on as an assistant county attorney.27 During Klobuchar’s tenure as county attorney, there appear to have been early warning signs of what Petters was doing. In January 1999, just weeks into her tenure, potential evidence of the Ponzi scheme began to cross her desk. Officers from her office raided the home of Richard Hettler and Ruth Kahn. They were Petters investors. The documents seized reportedly offered clear evidence that “Hettler, Kahn, and Petters (were) engaged in a mutually beneficial and highly illegal financial scheme.” Klobuchar threw the book at Hettler and Kahn, charging them with fraud. But she did not prosecute or apparently even investigate Petters.28

  The Hennepin County Attorney’s Office would issue a statement in 2012 defending Klobuchar’s inaction regarding Petters. “At no time was the Hennepin County Attorney’s Office presented by any law enforcement agency a case against Tom Petters.”29

  There were plenty of other warning signs as to what Petters was doing. There were numerous lawsuits against Petters for failing to repay money he owed. There were “criminal cases for allegedly writing bad checks.”30 Some clients who had invested money with Petters wanted to borrow from a bank to invest more and one of these clients openly claimed getting “in excess of 25 percent a month” return on their investment.31

  Petters’s associates also had histories that raised questions. One of Petters’s business partners was Frank Vennes, who had pleaded guilty earlier in his life to money laundering and no contest to cocaine dealing and illegally selling firearms. He was also a Klobuchar campaign donor.32

  In January 2005, when Petters’s company bought Polaroid Holding Company, an amalgam of the assets of the bankrupt camera and film company, accusations swirled that he was making the purchase with stolen cash. Richard Hettler, Petters’s convicted former investor who had his records seized by Klobuchar’s office back in 1999, made the charge. The records seized documented Hettler’s dealings with Petters. Hettler emailed information to Polaroid’s CEO, federal and state regulators, and law enforcement officials about his allegations.33

  It was not until late September 2008 that FBI agents raided both Petters’s house in Wayzata, just outside Minneapolis, and his office. Days later, the FBI recorded a conversation between Petters and Robert White, a senior executive with his company. Petters explained to White his fears about going to jail, but then noted, “We’ve helped a lot of people” (with political contributions). Klobuchar, he said, now a U.S. senator, had actually called him days after the raid. (He reports that Norm Coleman, Minnesota’s other U.S. senator, did not call him.)34 Reportedly Klobuchar’s aides suggested a close family friend, Doug Kelley, a Minneapolis attorney provide legal help. Kelley had been a longtime friend of Klobuchar’s father, both as a lawyer to help him with legal issues and as a mountain-climbing partner.35

  Lawyers who were handling the prosecution of Petters expressed shock at how he had been able to operate so long. Joe Dixon, one of the prosecuting attorneys, explained, “It was like everyone knew PCI [Petters’s umbrella company] was a fraud machine, and everyone knew here was a closet up on the third floor that only a few people could look into and nobody wanted to open the door.”36

  Richard Hettler, one of those investors arrested back in 1999 and charged by Klobuchar, claimed that she knew Petters was involved but elected to look the other way. “She took Ponzi money to get elected,” he said.37

  Others drew attention to the fact that Petters was a huge donor to Klobuchar and seemed to get favorable treatment while she was county attorney. “I mean, I know a prosecutor has discretion—and I don’t have anything against her, I didn’t know her, and I don’t have any dog in the fight as far as that goes,” attorney Garrett Vail told the Daily Caller. “But, it looks to me like he [Petters] had friends in high places. What I’m getting at is somebody was covering for him. The only way he ran a $3 billion Ponzi scheme was [that] he had politicians in his pocket.”38

  Investigator Randy Shain, executive vice president of First Advantage Litigation Consulting, was hired by four independent hedge funds to investigate Petters in the early to mid-2000s. “I’ve been doing this work since 1987, and I’ve never seen anyone who gave off more warning signals,” he said.39 It is important to note that Klobuchar’s law firm, Dorsey & Whitney, did considerable legal work for Petters at this time, including the Polaroid acquisition, and was obviously familiar with the issue.40

  Petters was found guilty on twenty counts of money laundering and wire and mail fraud in December 2009 in U.S. district court in St. Paul, Minnesota. In the end, the scam involved some $3.7 billion. He was sentenced to fifty years in prison.41

  Politicians from both political parties who had gladly accepted Petters’s checks when they were in office now felt obligated to donate those contributions to charity or send them to the Petters estate so that victims of his fraud could get some compensation. Since Amy Klobuchar had taken more money from Petters than anyone, she was obliged to return the most.42

  Klobuchar’s considerable political skills include her remarkable ability to raise money from large corporations and corporate lawyers. Early in 2006, Klobuchar recounts how the chairman of the Democratic Senatorial Campaign Committee, Senator Chuck Schumer, got in her face with his index finger and told her: “You’re going to raise one million in the first quarter.”43 Klobuchar did not need advice on raising money. Indeed, she has become one of the Senate’s most prolific fund-raisers and has done so in an unusual manner. While serving in the U.S. Senate, Klobuchar has a remarkably liberal voting record. To date in the 116th Congress, she has voted with Bernie Sanders 88 percent of the time.44 However, unlike Bernie Sanders, she has also mined corporate donations in a manner that her Vermont colleague has avoided.

  During her first term, Klobuchar was generally low profile and played it safe. Supporters touted her as a pragmatist, working the middle of the road. Minnesota critics saw her as “calculating, ambitious and gauzy on issues.” Walter Mondale, her mentor, regards her as a “moderate, progressive,” who fits perfectly the tone of Minnesota.45 Klobuchar defines herself as a “progressive.”46 Part of her strategy was using her legislative agenda as a means of extracting donations from powerful corporations who wanted work done on Capitol Hill.

  One of those techniques included the effective use of earmarks for her campaign funders.

  During the 2006 Senate run, Klobuchar pounded her opponent because of his voting for earmarks and described the taxpayer-funded dollars as wasted on “the bridges to nowhere, the rain forest in Iowa, the waterless urinals in Michigan.”47 Klobuchar pledged during the campaign to cut earmarks because she claimed they were wasteful and reeked of cronyism. But once she was in office, Klobuchar quickly went about using them to great effect for the benefit of her largest supporters. According to Open Secrets, she sponsored or cosponsored 103 earmarks totaling more than $200 million in fiscal year 2008, her first full year in the Senate. (That put her near the top third in the U.S. Senate for earmarks.) She had another eighty-eight earmarks totaling more than $133 million in fiscal year 2009. In the last year that members of Congress could officially use earmarks, she had eighty-eight earmarks in excess of $117 million (fiscal year 2010).48

  The ea
rmarks were generous to her largest and most important political supporters. A key earmark was $89.1 million for two light-rail projects in Minneapolis over the three-year period.49 The rail project would provide service for commuters running in and out of the downtown as well as to the new Minnesota Twins ballpark.50

  The major financial beneficiaries of these earmarks were mega-donors to Klobuchar. Klobuchar’s old law firm and her second-largest campaign contributor of all time, Dorsey & Whitney, was neck-deep in the project. The firm drafted the requests for proposal (RFPs) for more than $1 billion of public procurement contracts for these light-rail projects.51

  Another major beneficiary of the project was the family that owned Major League Baseball’s Minnesota Twins. The Northstar commuter rail runs right to Target Field, where the Twins play.52 The Pohlad family owns the team.53 Carl Pohlad, the patriarch, passed away in 2009, but he was a big supporter of the Northstar project because it would help bring more fans to the ballpark. He was a controversial figure in Minneapolis because he got Hennepin County taxpayers to pay for his new baseball stadium.54 He died a year before Target Field opened.55 The Pohlad family was a large financial supporter of Klobuchar and the DFL party.56 Between 2006 and 2010, the Pohlad family donated tens of thousands to Klobuchar’s campaign coffers.57