Politics & Government

Big fund managers organize donations to candidates

WASHINGTON — More than 40 executives of hedge funds and private equity funds are listed among financiers for Democratic candidates Hillary Clinton and Barack Obama. Most raised at least $100,000, and together they collected as much as $6 million for those two presidential aspirants alone.

Altogether, partners in these loosely regulated industries, which manage trillions of dollars for wealthy private investment funds, have raised and donated more than $10 million to presidential candidates and have even helped enrich at least two of them.

Ronald Burkle, chief of the Los Angeles-based Yucaipa Cos., hosted a star-studded event last year that brought in $2.6 million for New York Sen. Clinton, while her husband, former President Bill Clinton, reaped undisclosed profits serving as an adviser and investor in Burkle's equity fund. A New York hedge fund, the Avenue Capital Group, hired the Clintons' daughter, Chelsea.

The New York-based Fortress Investment Group paid former North Carolina Democratic Sen. John Edwards $480,000 in consulting fees before he began his unsuccessful presidential bid.

The funds' donations represent only a small fraction of the roughly $300 million raised by the Clinton and Obama campaigns. Lawyers, real estate developers, investment bankers and other sectors also have contributed heavily.

One reason why hedge- and equity-fund executives may want to curry favor with potential future presidents is that their industry faces a legislative threat. Bills in Congress would close a loophole that allows fund partners to pay a 15 percent capital gains tax rate on most of their earnings, sparing them the 35 percent rate paid by most high-income Americans.

The industries argue that most of their partners' income is in distributions from businesses whose value is growing and thus should be taxed as capital gains. But Stanford University law professor Joseph Bankman argues that fund managers should pay the same taxes as ``a brain surgeon or an investment banker or a chief executive officer.''

Despite the funds' donations, both Clinton and Obama have called for closing the tax loophole. Obama's chief economic adviser, Austan Goolsbee, noted that the Illinois senator ``came out for a (tax) policy that was against their interests.''

In addition, calls are rising to regulate the funds more closely in the wake of the subprime mortgage home-finance crisis.

Goolsbee said Obama's proposal for dealing with the subprime mortgage crisis wouldn't ``bail out the financial institutions.''

Clinton's chief spokesman, Howard Wolfson, said Clinton thinks it's time for a review of the ``regulatory regime'' covering the largely unregulated funds.

Marc Lasry, founder of Avenue Capital, which hired Chelsea Clinton, said he'd be ``happy'' to pay a higher tax if required. He declined to comment on the more than $100,000 he raised for Clinton, mostly from his partners, or to discuss his firm's hiring of her daughter.

The nonpartisan Center for Responsive Politics says that hedge fund and equity fund employees donated $7.1 million to 17 Republican and Democratic presidential candidates through Jan. 31, including $1.4 million to Clinton, $1.2 million to Obama and $463,000 to Sen. John McCain of Arizona, the presumptive Republican presidential nominee.

But those figures understate the industries' efforts, mainly because dozens of partners served as bundlers, or ``Hillraisers,'' as Clinton's campaign labels hers, who also raised money outside the firms. Of course, that's how all major presidential campaigns are financed.

Donations from fund members' families provide another wrinkle.

Members of the 10 most generous hedge funds and the 10 highest-giving equity funds donated $3 million to presidential candidates last year, according to the center's figures. McClatchy found that their family members chipped in at least $750,000 more, almost always in the same amounts, on similar dates, to the same candidates, which is legal under campaign-finance law.

Carol Asness of Westport, Conn., whose sons Clifford and Bradley are the founder and general counsel of the AQR Capital Management hedge fund, said it was a coincidence that her donations to onetime candidate and former New York Republican Mayor Rudy Giuliani mirrored her sons'.

``I thought he would make a great president,'' she said of Giuliani.

In Evanston, Ill., Mary Finnegan, wife of Paul Finnegan, co-founder of the Chicago-based Madison Dearborn private equity group, gave a total of $6,500 to Obama, McCain and former Massachusetts Republican Gov. Mitt Romney, mirroring her husband's contributions. She referred a reporter to her husband, saying he guided the donations.

The hedge-and-equity-fund industries also have assembled a formidable lineup of lobbyists who last summer helped stall legislation to end the tax loophole. Sen. Christopher Dodd, a Connecticut Democrat who chairs the Senate Banking Committee and whose failed presidential campaign got $1 million from fund employees, was among those who balked at changing the law.

Among the new lobbyist hires: retired Oklahoma Republican Sen. Don Nickles, a former member of the tax-writing Senate Finance Committee; Mac Campbell, a former aide to Arkansas Democratic Sen. Blanche Lincoln, a finance committee member; and Steve Elmendorf, who was a senior aide to former House Democratic Leader Richard Gephardt.

Officials of the Managed Funds Association, a leading hedge fund trade association that hired Nickles and recently named Republican Rep. Richard Baker of Louisiana, who resigned his House seat in February, as its new chief, didn't respond to requests for comment.

Victor Fleischer, a University of Illinois law professor who tracks hedge and equity funds, said the funds' stepped-up political activity suggests that they're nervous that Congress will close the tax loophole.

(Researcher Tish Wells contributed to this article.)

  Comments