Tuesday, December 22, 2015

Lamar Alexander: Privatization, Cronyism, and the Big Bucks

The rich are not like you and me. In fact, many of the rich get rich through avenues not remotely available to you or me. Would you like to see how it works?

Let's take a look at Lamar Alexander.

These days Alexander is the reasonably amiable, semi-avuncular senator currently known for helping to whip up our newest version of the ESEA. But once upon a time, Alexander was an up-and-comer with White House dreams. That kind of career sparked some big-league attention, most notably captured in an article by Doug Ireland that ran in the April 17, 1995 issue of The Nation. "The Rich Rise of Lamar Alexander" is available online only through The Nation's subscriber archives (though the bulk of the content is repeated here).

Ireland's opening gives you an idea of where this was headed:

If repeated White House leaks suggesting that Bill Clinton views Lamar Alexander as his toughest potential Republican opponent next year are true, it may be because it takes on to know one. The two ex-governors are both masters of the Permanent Campaign.

Ireland suggests that as a lifelong political insider, Alexander "is even less encumbered by principles than the man whose job he covets." Alexander is repeatedly characterized as a man whose political leanings are less stable than a sapling in a hurricane. He has often remade himself to suit the campaign he was running. He has made many friends. And Ireland gave him credit for excelling in one other area.

And in one respect he has clearly surpassed Clinton: Alexander has shamelessly used his political connections to make himself a wealthy man.

It would seem that Alexander has become a millionaire either through brilliant investments, incredible luck, or generous connections. Ireland reports that when Alexander was first elected governor of Tennessee, he was worth $151,000. When George Bush appointed him Secretary of Education, he was worth somewhere between $1.5 and $3 million. More recently he has remained among the wealthiest of senators, with a net worth as high as $28 million (2004). He took a huge dip in 2012, but in 2014 he was back up to $13 million.

What sorts of genius deals has he made? Well.

In 1981, Governor Alexander got in on a deal to buy the Knoxville Journal. He swapped his stock for some Gannett stock, and sold that stock for $620,000.

In 1987, he took time off from politics to go to Australia and write a book-- Six Months Off. The Wall Street Journal gave him a $45K advance, and he wrote off $123K as a tax deduction (he also sold the movie rights). And he was on the payroll of Belmont College in Nashville, which had hired him to create a leadership institute.

But Alexander's greatest gains have come from privatization of two public sectors-- education, and prisons.

Education and Big Bucks

Alexander scored big with an investment in Corporate Child Care, Incorporated in 1987. Alexander often liked to campaign as a co-founder of the company, but that co-founding didn't seem to involve doing any work there. But in about five years, Alexander's $5K turned into $800K. Ka-ching. A biography of Alexander's wife Honey (she'll be turning up again) calls the couple "co-founders" along with Bob Keeshan (yes, that Bob Keeshan). CCCI was launched with a $2 million investment from Massey Birch, a venture capital firm whose head, Jack Massey, we shall also meet again. Actually, we've already met him-- that leadership institute Alexander was setting up was for Belmont's Massey School of Business, named after Jack Massey.

Ireland quotes a former CEO of the company saying that Alexander was instrumental as a money-raiser, but not so much daily hands on. CCCI appears at some point to have disappeared into Bright Horizons Family Solutions. 

Alexander also logged some time as "CEO" of the University of Tennessee, where by many accounts he was something of an absentee president. It paid a nice six figures, though at the same time he was making about the same money from various corporate board of director's stipends. Ka-ching.

Alexander's other big education venture was Whittle Communications. By 1995, Chris Whittle had already built and destroyed the proto-privatization empire in education. He had launched Edison, a pioneering for-profit education adventure, along with Channel One, a plan to put a television in every classroom thereby giving advertisers access to every set of school student eyeballs. But in 1994 he was trying to explain why he wasn't a huckster, and Business Week was writing his professional obituary. (That turned out to be premature-- Whittle had a few more second acts in him).

In the eighties, Alexander worked as a consultant for Whittle and that earned him the right to buy some stock. Which he did. In Honey's name. With a check for $10K that nobody cashed. Until after the company was sold and Whittle bought Honey's stock back for $330K. Ka-ching.

But we're not done yet. When Alexander was being confirmed as Secretary of Education, he promised to cut ties with Whittle, which he did. Then he sold his house in Knoxville to a top Whittle executive, who paid $977,500 for the house that Alexander had bought for $570,000 the year before. Ka-ching.

The Prison Biz

Alexander has gotten plenty of negative press for his ties to the for-profit prison business.

Around 1983, Corrections Corporation of America was founded by Tom Beasley, former Tennessee GOP chair and, according to Ireland, a guy who in college had rented an above-the-garage apartment from the Alexanders. Financing came by way of Jack Massey. Honey invested $8,900 in CCS in 1984. In 1985, Tennessee prisons were in a mess, and CCA had an idea. Tom Beasley declared that "the market is limitless" and proposed that CCA could "lock them up better, quicker, and for less."

Governor Alexander pushed for CCA to take over the entire Tennessee prison system, a ballsy move in 1985. But there was a conflict-of-interest problem, so Honey traded her $8,900 share to Jack Massey for 10,000 shares in South Life Corporation, a life insurance company. When Honey cashed that out in 1989, she was paid $142,000. Ka-ching. As for privatizing Tennessee prisons, that was a massive fail-- eventually the state had to take the prisons back-- but CCA continued to try to spread its influence. But the privatized prison move started some commenters worrying about the issues still before us thirty years later-- if profits become privatized and liabilities remain with the public, who gets screwed and who gets rich? And do you actually get the service you paid for?

CCA is still alive and kicking. Its history has been scrubbed of any reference to Alexander (Lamar or Honey), but on its board we find Charles Overby, a man who has his own intriguing history. On the CCA board since 2001, he also has a history as a Pulitzer Prize-winning journalist and head of the Newseum. He has worked for the Gannett chain, and more than a few people see a serious conflict between a journalist's devotion to the First Amendment and transparency versus the private prison industry's hard work to keep their operations hidden.

Oh, and Overby has held down another job-- special assistant for administration to Governor Lamar Alexander of Tennessee.

So what have we learned? 

None of this is news. None of this is new. All of this is why some folks throw phrases at Alexander like "one of the biggest non-entities in the history of modern American politics" and write posts entitled "Why I hate Lamar Alexander Today."

This is the guy who helped bring us the New! Improved! ESEA. This is a guy who has made a career and a personal fortune out of privatizing public institution, and done it largely through his personal connections. And in all the reading I've done, I've to find someone accusing him of taking a hard stand on any issue as a matter of principle.

So if it seems as if the new education law is filled with opportunities for well-connected privatizers to get their hands on public education tax dollars-- well, it's not hard to see how Alexander might have been inclined to head in that direction. After all-- what's the point of getting involved in public service if you can't cash in?

And even if Lamar Alexander is a great guy, a wonderful father and husband, and a decent human being (and I don't know the guy from Adam, so hey-- he could be all those things) his career points to a world view that is both scruple-impaired and lacking in a sense of how public goods should be preserved and maintained for public benefit. If this is how he thinks the world works-- you call some friends, you make some deals, you look out for the Right People and they look out for you, and it's all cool if this gives you an inside lead on making some huge profits from nothing but your connections-- how can that worldview not infect the legislation that you create and support?

This is not about public service or responsibility. This is a guy who regularly ranks in the top 13-14 richest Senators who has no inherited fortune and no actual job, but who has gotten rich simply by being a well-connected politician, and by using those connections to push privatized solutions that erode necessary public institutions and make life worse for the people who depend on those institutions. This is about finding new ways the Right People with the Right Connections can cash in. Ka-ching. Not the sound we're looking for in public education or a US Senator.

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