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Pawlenty dogged by telecom scandal over payments made during 2001 race Pawlenty dogged by telecom scandal over payments made during 2001 race
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The first payment arrived in August 2001, dropped into a company created by Tim Pawlenty with just one employee – Pawlenty himself.The first payment arrived in August 2001, dropped into a company created by Tim Pawlenty with just one employee – Pawlenty himself.
The money kept coming as the then-Republican leader in Minnesota's House of Representative campaigned for governor of his state: $4,500 a month for more than a year. But the voters did not know.The money kept coming as the then-Republican leader in Minnesota's House of Representative campaigned for governor of his state: $4,500 a month for more than a year. But the voters did not know.
Pawlenty did not reveal the payments to Minnesota's campaign finance board. Neither did he make any mention in his campaign biography of his close ties to the telecoms group delivering up the monthly cheques.Pawlenty did not reveal the payments to Minnesota's campaign finance board. Neither did he make any mention in his campaign biography of his close ties to the telecoms group delivering up the monthly cheques.
Perhaps Pawlenty didn't want it known that the firm paying him was run by a Republican strategist and one of his campaign advisers. Perhaps he was trying to shield the fact that the group was being investigated in Minnesota and other states for scamming customers and would eventually pay $2m in penalties.Perhaps Pawlenty didn't want it known that the firm paying him was run by a Republican strategist and one of his campaign advisers. Perhaps he was trying to shield the fact that the group was being investigated in Minnesota and other states for scamming customers and would eventually pay $2m in penalties.
Or perhaps it was, as Pawlenty later claimed, little more than a clerical error.Or perhaps it was, as Pawlenty later claimed, little more than a clerical error.
It was not until he won the election and was safely installed in the governor's mansion in St Paul that the truth began to spill out. An investigation by a local newspaper, the St Paul Pioneer Press, made public the telecoms scam, and with it Pawlenty was forced to reveal the secret payments.It was not until he won the election and was safely installed in the governor's mansion in St Paul that the truth began to spill out. An investigation by a local newspaper, the St Paul Pioneer Press, made public the telecoms scam, and with it Pawlenty was forced to reveal the secret payments.
In the ensuing scandal, many questions were raised. Few were answered to the satisfaction of Pawlenty's critics, and the governor was eventually able to block a formal investigation by refusing to appear before the Minnesota legislature.In the ensuing scandal, many questions were raised. Few were answered to the satisfaction of Pawlenty's critics, and the governor was eventually able to block a formal investigation by refusing to appear before the Minnesota legislature.
But now the whole mess once again threatens to haunt the former governor as he pursues a place on the Republican ticket as Mitt Romney's vice presidential candidate.But now the whole mess once again threatens to haunt the former governor as he pursues a place on the Republican ticket as Mitt Romney's vice presidential candidate.
In 1999, Pawlenty leapt at the opportunities offered by the deregulation of the telecoms industry and joined the board of a firm, NewTel Holdings, in which he already held stock. The company was run by a longstanding friend and Republican strategist, Elam Baer, who later advised Pawlenty on his gubernatorial and presidential campaigns and influenced his political appointments as governor.In 1999, Pawlenty leapt at the opportunities offered by the deregulation of the telecoms industry and joined the board of a firm, NewTel Holdings, in which he already held stock. The company was run by a longstanding friend and Republican strategist, Elam Baer, who later advised Pawlenty on his gubernatorial and presidential campaigns and influenced his political appointments as governor.
NewTel acquired other companies along the way including a firm called Access Anywhere and another, New Access. All were in the phone business and under Baer's control.NewTel acquired other companies along the way including a firm called Access Anywhere and another, New Access. All were in the phone business and under Baer's control.
That drew in a close circle of investors from the Republican party who later became known as the "Friends of Tim". They included Timothy Commers, who became Pawlenty's campaign manager and Victoria Grunseth, wife of the 1990 Republican candidate for governor, Jon Grunseth, until he was forced out of the race and moved to Australia after he was alleged to have invited three teenage friends of his daughter to go swimming naked.That drew in a close circle of investors from the Republican party who later became known as the "Friends of Tim". They included Timothy Commers, who became Pawlenty's campaign manager and Victoria Grunseth, wife of the 1990 Republican candidate for governor, Jon Grunseth, until he was forced out of the race and moved to Australia after he was alleged to have invited three teenage friends of his daughter to go swimming naked.
They and others associated with NewTel would later find plum jobs in Governor Pawlenty's administration.They and others associated with NewTel would later find plum jobs in Governor Pawlenty's administration.
In August 2001, as Pawlenty moved to launch his election campaign, Access Anywhere began paying him $4,500 a month – $60,000 in total – funnelled through a shell company, Bamco, set up in his name.In August 2001, as Pawlenty moved to launch his election campaign, Access Anywhere began paying him $4,500 a month – $60,000 in total – funnelled through a shell company, Bamco, set up in his name.
Only eight months after the election was Pawlenty forced to admit publicly that he failed to declare the money to the state's campaign finance and public disclosure board.Only eight months after the election was Pawlenty forced to admit publicly that he failed to declare the money to the state's campaign finance and public disclosure board.
Minnesota's other main parties, the Democratic Farmer Labor party and the Minnesota Independence party, seized on the fact that Pawlenty was being paid by a company run by his friend and political strategist. On top of that, Pawlenty was sitting on the board of the parent company of the firm he was taking money from. What, they wanted to know, did Pawlenty do for the cash?Minnesota's other main parties, the Democratic Farmer Labor party and the Minnesota Independence party, seized on the fact that Pawlenty was being paid by a company run by his friend and political strategist. On top of that, Pawlenty was sitting on the board of the parent company of the firm he was taking money from. What, they wanted to know, did Pawlenty do for the cash?
Pawlenty gave shifting answers to that question, at one point claiming he was merely on retainer. Eventually he released a five page contract that said he was hired to "assist the company with regulatory compliance issues". But throughout he declined to say whether he actually did any work for Access Anywhere.Pawlenty gave shifting answers to that question, at one point claiming he was merely on retainer. Eventually he released a five page contract that said he was hired to "assist the company with regulatory compliance issues". But throughout he declined to say whether he actually did any work for Access Anywhere.
"Is Elam (Baer) a friend of mine and in various ways trying to help me? Yes," Pawlenty said at the time. "The arrangement with Access Anywhere wasn't a gift. I provided services to this company.""Is Elam (Baer) a friend of mine and in various ways trying to help me? Yes," Pawlenty said at the time. "The arrangement with Access Anywhere wasn't a gift. I provided services to this company."
Baer told the Star Tribune of Minneapolis: "You could view anyone's occupation as an in-kind donation. I don't think it is."Baer told the Star Tribune of Minneapolis: "You could view anyone's occupation as an in-kind donation. I don't think it is."
Jack Uldrich, then chair of the Minnesota Independence Party – the party of Pawlenty's predecessor as governor, Jesse Ventura – accused Pawlenty of covering up.Jack Uldrich, then chair of the Minnesota Independence Party – the party of Pawlenty's predecessor as governor, Jesse Ventura – accused Pawlenty of covering up.
"All Tim ever said was that it was privileged information and he didn't have to disclose exactly what he was doing or what advice he was providing," he told the Guardian."All Tim ever said was that it was privileged information and he didn't have to disclose exactly what he was doing or what advice he was providing," he told the Guardian.
Pawlenty's critics also wanted to know why he had created a front company, Bamco, to receive the payments. The governor said that's how he dealt with consulting contracts but declined to release details of other arrangements to back up that claim.Pawlenty's critics also wanted to know why he had created a front company, Bamco, to receive the payments. The governor said that's how he dealt with consulting contracts but declined to release details of other arrangements to back up that claim.
Above all, Uldrich and others asked why Pawlenty had not revealed the payments on the financial disclosure form public officials are obliged to file.
Pawlenty recorded that he owned Bamco but said nothing about the money being paid through it by Access Anywhere.
Above all, Uldrich and others asked why Pawlenty had not revealed the payments on the financial disclosure form public officials are obliged to file.
Pawlenty recorded that he owned Bamco but said nothing about the money being paid through it by Access Anywhere.
"I probably should have disclosed this," he said at the time before describing his failure to do so as the result of "oversights" and "confusion" over what was legally required."I probably should have disclosed this," he said at the time before describing his failure to do so as the result of "oversights" and "confusion" over what was legally required.
Once the issue became public, he wrote to the campaign finance board saying he was refiling his disclosure forms to "allow for possible alternative interpretations" of what the law required although he maintained he had done nothing wrong. The board, made up of political appointees, did not impose any penalty.Once the issue became public, he wrote to the campaign finance board saying he was refiling his disclosure forms to "allow for possible alternative interpretations" of what the law required although he maintained he had done nothing wrong. The board, made up of political appointees, did not impose any penalty.
John Lesch, a Democratic party member of the Minnesota state legislature and a state prosecutor in St Paul, was among those pressing Pawlenty for greater disclosure. He did not believe the then governor's claim to have been confused by the requirements of the ethics declaration.John Lesch, a Democratic party member of the Minnesota state legislature and a state prosecutor in St Paul, was among those pressing Pawlenty for greater disclosure. He did not believe the then governor's claim to have been confused by the requirements of the ethics declaration.
"He was a highly paid lawyer for one of the big blue suit firms in Minneapolis. Absolutely he got it. If he was in over his head we were entitled to know he was going to be in over his head," he told the Guardian."He was a highly paid lawyer for one of the big blue suit firms in Minneapolis. Absolutely he got it. If he was in over his head we were entitled to know he was going to be in over his head," he told the Guardian.
"I understand that anyone can give anyone money that they want to in this country but they have to be accountable. If you're an elected official you need to report it. You have to declare on your statement of economic interests who you're beholden to, who you owe, where you get your money from so the people who elect you can know who bought and paid for you. He didn't do any of that.""I understand that anyone can give anyone money that they want to in this country but they have to be accountable. If you're an elected official you need to report it. You have to declare on your statement of economic interests who you're beholden to, who you owe, where you get your money from so the people who elect you can know who bought and paid for you. He didn't do any of that."
The Access Anywhere payments came to light as the result of a parallel scandal over Pawlenty's role in a telecommunications group that paid large fines for tricking its customers into changing their phone services and overcharging.The Access Anywhere payments came to light as the result of a parallel scandal over Pawlenty's role in a telecommunications group that paid large fines for tricking its customers into changing their phone services and overcharging.
While Pawlenty sat on the board of NewTel, the Minnesota attorney general's office launched an investigation of another of its subsidiaries, New Access, which eventually saw it forfeit a total of $2m to settle charges in 10 states of deceptive business practices. Half of the money went to reimburse customers for bills. Many of the victims were elderly.While Pawlenty sat on the board of NewTel, the Minnesota attorney general's office launched an investigation of another of its subsidiaries, New Access, which eventually saw it forfeit a total of $2m to settle charges in 10 states of deceptive business practices. Half of the money went to reimburse customers for bills. Many of the victims were elderly.
Pawlenty denied any knowledge of the deceptive practices, saying that while he was on the NewTel board it never came up. "I don't want to say I wasn't responsible," he told reporters. "All I want to say are the facts. Should I have known? If the answer is yes, then I am responsible, no question about it."Pawlenty denied any knowledge of the deceptive practices, saying that while he was on the NewTel board it never came up. "I don't want to say I wasn't responsible," he told reporters. "All I want to say are the facts. Should I have known? If the answer is yes, then I am responsible, no question about it."
NewTel lawyers said they reviewed the board records and said that New Access's unscrupulous practices were not discussed while Pawlenty was a member. But critics said that as a director of the company he had legal responsibility for its management and the management of its subsidiaries, and they note that associates of Pawlenty — who would later serve in his administration — were working at New Access. New Access accounted for about one-third of NewTel's income.NewTel lawyers said they reviewed the board records and said that New Access's unscrupulous practices were not discussed while Pawlenty was a member. But critics said that as a director of the company he had legal responsibility for its management and the management of its subsidiaries, and they note that associates of Pawlenty — who would later serve in his administration — were working at New Access. New Access accounted for about one-third of NewTel's income.
One person who was close to Pawlenty defended the company's practices. Baer said it was not doing anything others in the "long-distance business" were not doing. "There will always be complaints in the long-distance business," Baer told the St Paul Pioneer Press. "We do not think that they are in any way outside the norm of the industry".One person who was close to Pawlenty defended the company's practices. Baer said it was not doing anything others in the "long-distance business" were not doing. "There will always be complaints in the long-distance business," Baer told the St Paul Pioneer Press. "We do not think that they are in any way outside the norm of the industry".
Lesch, who at the time called the telecom scandal a "third-rate burglary of Minnesota consumers which rises to the highest levels of Minnesota government", said he regarded the source of Pawlenty's money and the arrangement under which it was paid to be suspect. "We called into question how he was affording to run for the governor's office and wasn't on dirty money," Lesch told the Guardian. "I still maintain that the idea of running for governor and taking a salary from a company that was engaged in certainly unethical but potentially illegal behaviour is unseemly. He didn't seem to see a problem in that at all. He called it good old fashioned American enterprise."Lesch, who at the time called the telecom scandal a "third-rate burglary of Minnesota consumers which rises to the highest levels of Minnesota government", said he regarded the source of Pawlenty's money and the arrangement under which it was paid to be suspect. "We called into question how he was affording to run for the governor's office and wasn't on dirty money," Lesch told the Guardian. "I still maintain that the idea of running for governor and taking a salary from a company that was engaged in certainly unethical but potentially illegal behaviour is unseemly. He didn't seem to see a problem in that at all. He called it good old fashioned American enterprise."
During his campaign for governor, Pawlenty made no mention of his links to the NewTel group in his campaign biography which did, however, play up other business ties, some of them quite minor, as well as his role as a youth soccer coach and membership of the Lions Club.During his campaign for governor, Pawlenty made no mention of his links to the NewTel group in his campaign biography which did, however, play up other business ties, some of them quite minor, as well as his role as a youth soccer coach and membership of the Lions Club.
Pawlenty was asked in 2003 whether he had downplayed his ties to NewTel and Access Anywhere during the campaign. "I didn't downplay them or up play them," he said. "As to the NewTel board, I didn't feel that meeting a few times in a year was a substantial thing to tout as a life accomplishment."Pawlenty was asked in 2003 whether he had downplayed his ties to NewTel and Access Anywhere during the campaign. "I didn't downplay them or up play them," he said. "As to the NewTel board, I didn't feel that meeting a few times in a year was a substantial thing to tout as a life accomplishment."
Opposition parties demanded Pawlenty release his tax returns. He persistently refused to do so, saying that to do so would be to "reward reckless behaviour" by his opponents in levelling allegations against him.Opposition parties demanded Pawlenty release his tax returns. He persistently refused to do so, saying that to do so would be to "reward reckless behaviour" by his opponents in levelling allegations against him.
Democrats said Pawlenty's objection was an attempt to shield himself from deeper scrutiny of his ties to NewTel and Access Anywhere.Democrats said Pawlenty's objection was an attempt to shield himself from deeper scrutiny of his ties to NewTel and Access Anywhere.
The scandal also drew attention to a circle of friends and business associates with close ties to NewTel who moved into Pawlenty's administration.
Baer played a leading role in selecting the head of the state's commerce department which, among other things, regulates telecommunications. He recommended a banker, Glenn Wilson, who got the post. Wilson in turn appointed Commers, Pawlenty's campaign manager, as a special assistant.
Commers was a partner of Baer's in an earlier phone company venture acquired by Access Anywhere. He was also an investor in NewTel.
The scandal also drew attention to a circle of friends and business associates with close ties to NewTel who moved into Pawlenty's administration.
Baer played a leading role in selecting the head of the state's commerce department which, among other things, regulates telecommunications. He recommended a banker, Glenn Wilson, who got the post. Wilson in turn appointed Commers, Pawlenty's campaign manager, as a special assistant.
Commers was a partner of Baer's in an earlier phone company venture acquired by Access Anywhere. He was also an investor in NewTel.
Before that Commers was marketing director of another firm, QAI, which was a joint venture between Baer and Victoria Grunseth, whose former husband had abandoned his run for governor. When QAI came under investigation in the late 1990s over deceptive practices, Baer and Grunseth sold out and launched NewTel. When NewTel acquired New Access, Grunseth became its chief information officer. After Pawlenty came to power he appointed Grunseth to head the state's Metropolitan Airports Commission.Before that Commers was marketing director of another firm, QAI, which was a joint venture between Baer and Victoria Grunseth, whose former husband had abandoned his run for governor. When QAI came under investigation in the late 1990s over deceptive practices, Baer and Grunseth sold out and launched NewTel. When NewTel acquired New Access, Grunseth became its chief information officer. After Pawlenty came to power he appointed Grunseth to head the state's Metropolitan Airports Commission.
Among others investing in New Tel who served in Pawlenty's administration was the state auditor, Patricia Awada, whose company was responsible for ensuring that customers signed up by New Access wanted to change their long distance carriers.Among others investing in New Tel who served in Pawlenty's administration was the state auditor, Patricia Awada, whose company was responsible for ensuring that customers signed up by New Access wanted to change their long distance carriers.
Regulators found she had failed to fulfil that watchdog function. She sold her company to one of NewTel's founders and was paid in NewTel stock.
Through all of the scandal, only Commers was forced to quit after New Access's scamming of consumers came under scrutiny. He resigned a few hours after the Minnesota legislature said it would hold hearings into the issue. Democratic legislators zeroed in on his role as a founder and marketing manager in a telecoms company, QAI, that paid financial penalties for deceptive practices. The company was later sold to New Access.
Regulators found she had failed to fulfil that watchdog function. She sold her company to one of NewTel's founders and was paid in NewTel stock.
Through all of the scandal, only Commers was forced to quit after New Access's scamming of consumers came under scrutiny. He resigned a few hours after the Minnesota legislature said it would hold hearings into the issue. Democratic legislators zeroed in on his role as a founder and marketing manager in a telecoms company, QAI, that paid financial penalties for deceptive practices. The company was later sold to New Access.
Commers, on resigning, said he was the victim of "baseless innuendo and insinuation".Commers, on resigning, said he was the victim of "baseless innuendo and insinuation".
A Democratic member of the state senate, Ellen Anderson, said of Commers at the time: "A person who has engaged in deceptive telecommunications practices should not be appointed as the government official charged with protecting the consumer from such activities."A Democratic member of the state senate, Ellen Anderson, said of Commers at the time: "A person who has engaged in deceptive telecommunications practices should not be appointed as the government official charged with protecting the consumer from such activities."