John Edwards Accidentally Made Millions from Katrina Victim Abusing Subprime Lenders
WSJ’s Christopher Cooper reports on what appears to be serious hypocrisy on John Edwards’ part:
As a presidential candidate, Democrat John Edwards has regularly attacked subprime lenders, particularly those that have filed foreclosure suits against victims of Hurricane Katrina. But as an investor, Mr. Edwards has ties to lenders foreclosing on Katrina victims.
The Wall Street Journal has identified 34 New Orleans homes whose owners have faced foreclosure suits from subprime-lending units of Fortress Investment Group LLC. Mr. Edwards has about $16 million invested in Fortress funds, according to a campaign aide who confirmed a more general Federal Election Commission report. Mr. Edwards worked for Fortress, a publicly held private-equity fund, from late 2005 through 2006.
The rest of the piece is behind a subscriber wall but Ed Morrissey has additional excerpts. He observes that “Edwards has spent plenty of campaign time talking about the Bush administration’s callousness towards the victims of Hurricane Katrina” and has “hurled some invective at the latest economic villains for the Democrats, subprime lenders,” making this a two-fer.
I’m not sufficiently familiar with Fortress Investment’s business practices to condemn Edwards just yet but I must admit this smells fishy. Last month, David Swanson of Democrats.com reported that, “The bulk of John Edwards’ wealth is invested in, his recent income derives from, and his biggest contributors are employed by Fortress Investment Group. Fortress, which paid Edwards almost half a million dollars to advise them, deals in hedge funds and private equity.” He observes that, “The list of companies invested in is large, but presumably well known to Edwards as a result of his well-paid advising and his massive investment in Fortress. It includes companies from a variety of industries, creating all sorts of conflicts of interest for a would-be public official.”
Still, it’s quite conceivable that Edwards was hired mostly as a rainmaker and for his connections on the Hill and is not conversant with every aspect of Fortress’ business. A 2005 Business Week story on Edwards’ hiring quotes Edwards spokesperson Kim Rubey as saying her boss would be “providing support in developing investment opportunities worldwide and strategic advice on global economic issues.” The piece also noted that Edwards’ work was “part-time.”
Indeed, Edwards claims to be shocked by these revelations. More from the WSJ piece via Betsy Newmark:
The candidate has said he had no involvement in Fortress units’ subprime lending when he worked for the private-equity firm and wasn’t aware of it at the time. He has said his job at Fortress was to provide information about what he saw happening economically in the U.S. and overseas. He has also said he was there “primarily to learn” about finance.
In the interview yesterday, Mr. Edwards said that when he first joined Fortress, “I made clear that I didn’t want to have anything I was investing in to be antilabor or involved in predatory lending practices.” But he added that he didn’t fully understand the firm’s complex operations, saying: “They’re diverse. They’re very diverse.”
And goodness knows, Edwards values diversity. On the other hand, MSN’s Tim Middleton reported on this a month ago.
Former Sen. John Edwards has exploited the middle of his famous three H’s — his $400 haircuts, his hedge-fund consulting and his new 28,000-square-foot home — to spread his fortune around a maze of trusts and accounts that total something between $29.5 million (his campaign’s estimate) and $62 million (the high end of ranges described in his federal disclosure).
Edwards’ sprawling, 48-page campaign-finance disclosure for 2006 (.pdf file) reveals substantial investments in limited partnerships, subprime-mortgage lenders and an offshore hedge fund. The latter two run contrary to stands he has taken as a candidate.
Among his other investments, this is rather notable, too: “Schlumberger, the chief rival to Halliburton (HAL, news, msgs), where Vice President Dick Cheney was once CEO.” One presumes he doesn’t mention that when he attacks Halliburton in his speeches.
Oh, and there’s more:
Edwards generated most of his wealth as a trial lawyer, but last year his principal employment was as a senior adviser to Fortress Investment, a large hedge-fund operator, for which he received $479,512. His and his wife’s investment in Fortress Investment Fund III (Fund D) totaled between $1 million and $5 million.
Fortress, based in New York, owns subprime lender Nationstar Mortgage, formerly Centex Home Equity. The Dallas company calls itself “one of the nation’s leading mortgage lenders offering nonprime mortgages and home-equity loans.” As a presidential candidate, Edwards has lashed out at subprime lenders, saying they are “pulling a fast one on hardworking homeowners.”
Fortress Investment Fund III is based in the Cayman Islands. Edwards’ campaign said he opposes offshore tax havens and, “as president, he will end them.”
Now, of course, offshore tax havens aren’t illegal now and there’s no reason he can’t exploit the system as it now exists. But it sure doesn’t look good.
Oh, and there’s this:
According to Federal Election Commission records, Fortress employed more of Edwards’ campaign donors than any other company, with combined contributions of nearly $125,000 in the first quarter. Fortress also hosted a fundraiser for Edwards in March that garnered him more than $1 million.
Again, perfectly legal. And several of the other candidates are getting major contributions from hedge funds, too. Then again, they’re not campaigning against hedge funds. Indeed, it’s rather odd that a hedge fund would work to put together over $1 million to back a longshot candidate who is running against hedge funds.