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The Conservative Curmudgeon
June 10, 2015

What Dennis Hastert’s Case Tells Us About
Washington’s Institutional Corruption

by Allan C. Brownfeld
fitzgerald griffin foundation

ALEXANDRIA, VA — We now know that J. Dennis Hastert, who served for eight years as speaker of the House of Representatives, was paying a former student hundreds of thousands of dollars to not say publicly that Hastert had sexually abused him decades ago. According to The New York Times this information became public from “two people briefed on the evidence in an F.B.I. Investigation.”

 

in Washington … men and women of modest means are elected to public office and, before long, become very wealthy, using their public positions to do so.

 

Federal prosecutors announced the indictment of Hastert late in May on allegations that he made cash withdrawals totaling $1.7 million, to evade detection by banks. The federal authorities also charged him with lying to them about the purpose of the withdrawals.

This is a personal tragedy for Hastert and his family. But it also paints a vivid picture of institutional corruption in Washington, how men and women of modest means are elected to public office and, before long, become very wealthy, using their public positions to do so.

How, we may ask, did a former high school teacher who held elective office from 1981 to 2007 leave Congress with a fortune estimated at $4 million to $17 million? When Hastert entered Congress in 1987 his net worth was reported to be at most $270,000. The record shows that he was the beneficiary of lucrative land deals while in Congress and since leaving office he has earned more than $2 million a year as a lobbyist — influencing his former colleagues.

Writing in National Review, John Fund recalls that, “Denny Hastert used to visit The Wall Street Journal where I worked when he was speaker. He was a bland, utterly conventional supporter of the status quo; his idea of reform was to squelch anyone who disturbed Congress’s usual way of doing business. I saw him become passionate only once, when he defended earmarks — the special projects such as Alaska’s ‘Bridge to Nowhere’ — that members dropped at the last minute into conference reports, deliberately giving no time to debate or amend them.

   

How, we may ask, did a former high school teacher who held elective office from 1981 to 2007 leave Congress with a fortune estimated at $4 million to $17 million.

 

Earmarks reached the staggering level of 15,000 in 2005, and their stench helped cost the GOP control of Congress next year. But Hastert was unbowed. ‘Who knows best where to put a bridge or a highway or a red light in his district?’ I recall him bellowing. I responded that the Illinois Department of Transportation came to mind, and then we agreed to disagree.”

The Sunlight Foundation found that Hastert had used a secret trust to join others and invest in farmland near the proposed route of a new road called the Prairie Parkway. He then helped secure a $207 million earmark for the road. The land, approximately 138 acres, was bought for about $2.1 million in 2004 and later sold for almost $5 million, a profit of 140%. Local land records and Congressional disclosure forms never identified Hastert as the co-owner of any of the land in the trust. Hastert turned a $1.3 million investment (his portion of the land holdings) into a $1.8 million profit in less than 2 years.

Once he left Congress, Hastert joined the professional services firm of Dickstein Shapiro, working all sides of various issues and glad-handing his former colleagues in Congress for often controversial clients. From 2011 to 2014, Lorillard Tobacco paid Dickstein Shapiro nearly $8 million to lobby for the benefit of candy-flavored tobacco and electronic cigarettes, and Hastert was the most prominent member of the lobbying team.

Hastert also pressed lawmakers on climate change for Peabody Energy, the largest private sector coal company in the world, in 2013 and 2014 — then switched sides this year and pushed for requiring renewable fuel production for Fuels America. Lawmakers and fellow lobbyists compared Hastert's qualities as a lobbyist to those he displayed as speaker: affable and low-key, but attractive to clients. In the post-earmark world, notes Rep. Tom Cole (R-OK), a senior member of the House Appropriations Committee, Hastert pressed for policy “riders” in appropriations bills and programmatic changes that helped his client's interests.

 

Bill and Hillary Clinton have amassed millions from various special interest groups — and foreign interests. …Bill Clinton reported being paid more than $104 million from 2001 through 2012 just for speeches.

 

“As you'd expect, he was very effective,” said Cole, “Number one, he knew the process extremely well, and he knew all the players. When the former speaker calls no member rejects it.” Former Rep. Jack Kingston, a Republican who led the Appropriations Committee, says, “Yeah, it's possible, he could amass in a 10-year period a nest egg of $5 to $10 million. I'm not saying it’s easy, but it’s not that hard.”

Sadly, Dennis Hastert's use of public office as a path to wealth is hardly unique. National Review reports that, “In 2004, Sen Harry Reid (D-NV) made $700,000 off a land deal that was, to say the least, unorthodox. It started in 1998 when he bought a parcel of land with attorney Jay Brown, a close friend whose name has surfaced multiple times in organized crime investigations, Reid transferred his portion of the property to Patrick Lane LLC, a holding company Brown controlled. But Reid kept putting the property on his financial disclosures and when the company sold it in 2009, he profited from the deal — a deal on land he didn’t technically own and that nearly tripled in value in 3 years.” In addition, according to Judicial Watch, Reid, the Democratic leader of the Senate, sponsored at least $47 million in earmarks that directly benefited organizations with close ties to his son, Key Reid.

In 2009, then-House Speaker Nancy Pelosi and her husband, Paul, made the first of three purchases of Visa stock — Visa was holding an initial public offering, among the most lucrative ever. The Pelosis were granted early access to the IPO as “special customers” who received their shares at the opening price, $44. They turned a 50 per cent profit in just two days. Starting March 18, the speaker and her husband made the first of three Visa stock buys, totaling between $1 million and $5 million. Peter Schweitzer, a scholar at the Hoover Institution, notes that, “Mere mortals would have to wait until March 19, when the stock would be publicly traded to get their shares.” He points out that the Pelosis got their stocks just two weeks after legislation was introduced in the House that would have allowed merchants to negotiate lower interchange fees with credit card companies. Visa’s general counsel described it as a “bad bill.” The speaker squelched it and kept further action bottled up for more than two years. During the time period, the value of her Visa stock jumped more than 200 per cent while the stock market as a whole dropped 15 per cent.

Another former House speaker, Newt Gingrich, served as a paid consultant for the drug industry’s lobby group, and, according to conservative columnist Timothy Carney, “Gingrich worked hard to persuade Republican congressmen to vote for the Medicare drug subsidy that the industry favored. …Newt Gingrich spent the last decade being paid by big business to convince conservatives to support big government policies that would profit his clients.”

   

George Washington … had to borrow money to make the trip from Mt. Vernon to New York for his own inauguration.

 

The role of former members of Congress reaping financial gain by lobbying their former colleagues, as Dennis Hastert did, is increasingly widespread. Former Rep. Billy Tauzin of Louisiana, originally elected as a Democrat but later switching to the Republican Party, left his post as chairman of the powerful House Energy and Commerce Committee to become a lobbyist for the drug industry. In 2009, he reportedly earned $4.48 million as the head of the PHARMA drug industry lobby, a huge increase from his congressional salary.

The idea of politicians enriching themselves as a result of their holding political office is something new. Bill and Hillary Clinton have amassed millions from various special interest groups — and foreign interests — hoping to influence a future president. Bill Clinton reported being paid more than $104 million from 2001 through 2012 just for speeches. As recently as the presidencies of Harry Truman and Dwight Eisenhower it was considered unthinkable to trade upon having held high office to enrich oneself. Until 1958, former presidents did not even receive a pension. Congress finally awarded Harry Truman and Herbert Hoover pensions and funds for staff. Washington, Jefferson, Adams, Madison, Monroe and other early leaders lost a great deal of money while serving in office. George Washington, it is reported, had to borrow money to make the trip from Mt. Vernon to New York for his own inauguration. Now, public office has, for many, become a path to riches

A recent Rasmussen Reports poll finds that 82% of the American people now believe that we have a professional political class that is more focused on preserving its power and privilege than on conducting the people's business. Dennis Hastert has become the new face of this phenomenon, along with the Clintons, Nancy Pelosi, Newt Gingrich and a host of others. Whether public dismay with our current politics can be transformed into an effective effort to alter this behavior remains to be seen. Too many in Washington have a vested interest in today’s corrupt system as it exists. How to change the incentive structure for those in political life is our real challenge.

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The Conservative Curmudgeon is copyright © 2015 by Allan C. Brownfeld and the Fitzgerald Griffin Foundation. All rights reserved. Editors may use this column if this copyright information is included.

Allan C. Brownfeld is the author of five books, the latest of which is The Revolution Lobby (Council for Inter-American Security). He has been a staff aide to a U.S. Vice President, Members of Congress, and the U.S. Senate Internal Subcommittee.

He is associate editor of The Lincoln Reveiw and a contributing editor to such publications as Human Events, The St. Croix Review, and The Washington Report on Middle East Affairs.

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