Monday, March 31, 2008

Flashback: Thanks to Dwayne Andreas’ Management of Hubert’s Blind Trust, Hubert Becomes A Rich Man. Then Scandal, Mostly Posthumous.

[More than 50 years of politics written as a memoir for my kids and grandchildren].

Hubert Dies a Rich Man.

Hubert Humphrey’s lust for the presidency was not slaked. He decided to run for president in 1976 at the age of 65, not terribly old by current standards (Reagan was 68 when he first ran; McCain is 71) but privately he thought he could detect by a feeling in his gut that his health was not the best—but he said nothing, not even to his doctor. The fire for the presidency consumed him—but we interrupt the saga here to analyze his financial status and the extraordinary good choice he made by handing his financial affairs over to Dwayne Andreas and forgetting about them. Andreas through his superior management made him a rich man—although Hubert never knew how rich, since he abided by the rules of a blind trust.

Like many politicians obsessed with trying to become president, Hubert Humphrey was always hamstrung by lack of campaign funds. However despite this he was …more than most people I ever knew …personally uninterested in amassing wealth, just concerned that enough money was on hand to pay his bills. When he arrived in Washington as a newly-elected senator, his furniture sat in a van for two days until his father in South Dakota could rustle up enough money to pay the cartage and get it unloaded. From that time on, in addition to his Senate salary, he relied on out-of-town speaking engagements that paid honoraria (acceptable under the Senate rules of the time). His campaigns were in the main floated by contributions from labor unions and small business—but also were heavy with contributions from the Jewish community which he assiduously courted. A loan from Morris Ebin of Minneapolis helped him finance the first house he bought in Chevy Chase, Maryland. Another friend, Ray Ewald, a rich dairyman sold him a plot of land in the town of Waverly west of the Twin Cities for a giveaway price that was a favor ($200). Two other wealthy friends, Bill Benton (the former Connecticut senator and multi-millionaire ex-owner of the Manhattan ad firm Benton & Bowles) and Dwyne Andreas (then of Honeymead, later to become the enormously successful CEO of Archer-Daniels-Midland) jointly paid his sons’ tuition at Shattuck Military Academy in Faribault, Minnesota.

Hubert’s tax returns which can be examined in his personal papers showed deductions for an average middle-class head of household—deductions for getting his kids’ teeth straightened. He bought some government bonds and had a scattering of stock. Finding funds to build his Waverly, Minn. house was tough and he had to borrow money from his longtime friend Freddie Gates, himself a rather modestly endowed manufacturer of pinball games (who held the Bible when Hubert was sworn in as vice president). In 1959, a typical year as a Senator, his speech-making additional income registered $27,648 but he had to ask for an extension to pay his income tax. In 1960 he had an even tougher time because he was running for president against multi-millionaire legatee JFK and couldn’t charge for speeches. He was dismayed when his property taxes on his Waverly house were hiked by $225 and he sent his buddy Freddie Gates to rush to the courthouse and protest.

By 1964 when he was running for vice president, it was required that he file a statement of his personal worth. He and his aide Norman Sherman were very worried—worried that it was so small in number he would be embarrassed. Sherman wanted to pad the net worth but Hubert yelled, “Christ no, Norman! The IRS will think that I’m slipping something by them! I’ll go to jail! Do you want that?” When he did file the disclosure it showed $171,396 in net assets consisting of a $36,000 equity in hjis Chewvy Chase house, $28,000 in his Waverly property, a $3,900 share in the family drug store in Huron, S. D. and a helter-skelter list of securities adding up to
about $40,000. It looks skimpy by today’s standards and indeed it looked skimpy also by 1964 ratings.

When he became vice president Lyndon Johnson who was always his growling, malevolent “boss,” ordered him to heighten his lifestyle. How to do it? He sat down with Dwayne Andreas and Andreas agreed to take over his finances and put them in a blind trust. That was the best decision Hubert ever made on his finances. Andreas became CEO of ADM in 1966 and was an exceptionally astute investor. He took Hubert’s stocks and bonds, then worth $80,000 and put them in a blind trust. He was smart enough to insist that it would be a blind trust in fact and deed. Hubert didn’t care and he never inquired as to what it grew to, only to ask Andreas if he had enough money to pay bills. Unknown to Hubert—and not known by him throughout his life—Andreas who was probably the most bipartisan guy there ever was (having given to Richard Nixon in 1972 and a host of Republicans as well as Democrats) got the advice of one of his top buddies—Thomas E. Dewey, the former New York governor. Dewey told him not to handle Hubert’s money separately but pool it with other Andreas family funds in an equity called Mutual Income Fund (this could be criticized if known today but it wasn’t known until quite recently and in fact Hubert didn’t know it: actually he was so preoccupied he didn’t care).

Dwayne Andreas and Tom Dewey were the best financial things that ever happened to Hubert although he died not knowing the facts—his money was pooled and Mutual Income Fund invested in ADM stock which rose phenomenally thanks to Andreas’ entrepreneurial talents. From that time on, the commingled fund grew spectacularly as ADM stock alone increased 12-fold over the next decade. One day at lunch Andreas told Hubert, “Hubert, you’re a wealthy man!” Hubert said, “if you say so, Dwayne.” He was so caught up in the chase for the White House, he didn’t comment after that. The fund grew so fast that Andreas set up trust funds for Hubert’s kids and grandchildren and made annual gifts to them up to the maximum tax-free limit of then $3,000 a year. Within a few years the trust funds for his kids had grown from $100,000 to $200,000. Andreas gave Hubert an inkling of this but there was a nod and no comment. . Hubert’s own trust fund grew more slowly because Andreas tapped them to pay some heavy expenses which he assured Hubert he could afford. In 1975 Andreas withdrew $240,000 to pay taxes and penalties after the IRS ruled Hubert was not entitled to take $199,000 ij deductions for the years 1969-73 for donating his papers to the Minnesota Historical Society. Andreas was furious at the ruling and told Hubert this but there was scarcely a comment.

Hubert asked Andreas if he could afford to purchase title to 14 acres of land around his Waverly, Minnesota house and Andreas said yes, drawing sufficient funds to cover the outlay. You must remember that the dollar figures are not contemporary but are by 1970s standards. When Hubert ran for reelection as a Senator for the last time in 1976 his lawyers had to accommodate a law that required a declaration of net worth. By that time his share of the Mutual Income Fund was $388,000. By the time of Hubert’s death, 18 months later, the total Fund, including trusts for some 88 persons had grown to a value of well in excess of $100 million. His share was about 1-1/2% of the pie or $500,000. This was exclusive of the funds he had transferred to his four children and ten grandchildren and exclusive of the proceeds—close to $1 million—of sale following his death of the Waverly estate and his Washington condo. On his death bed, Andreas bent down and whispered into Hubert’s ear, “Anyhow, Hubert, I can tell you you die a rich man.” There was a soft murmur of thank you.

Scandal with Aides.

But the fortunes of some of his aides were not so blissful. His top aide, Herbert Waters, who virtually made Hubert a success in his early days in running his Senate office as well as his campaign manager in a masterfully astute way, ran into trouble. When Kennedy became president, in 1961, Herb Waters went to Hubert and said he thought he wanted to do something else (he had been Hubert’s top man since `1949). Hubert enthusiastically endorsed him for the job of assistant administrator of the Agency for International Development (AID), a key foreign service post. But Waters discovered the internal auditing by the feds is tough. He had to resign under fire after a charge was made that three assistants had accepted gratuities including the favors of women form a Belgian firm that held a $2.8 million AID contract.

Another involved Universal Fiberglas of Two Harbors, Minnesota which got a $13.3 million government contract through the Small Business Administration at Hubert’s behest. SBA was then headed by one of Hubert’s supposed best and brightest, Eugene Foley who overruled a field report criticizing the company. Well, the field report was right. Universal was supposed to build 3-wheel “Mailster” trucks for the Postal Service but shut down after building fewer than a third of the promised 12,714 Mailsters. “Your friends are using you for their personal gain, Hubert” warned Mrs. Katherine Graham of the “Washington Post.”

A third involved Andreas which didn’t involve Hubert but was embarrassing. As soon as Watergate broke, it came out that funds used by the White House burglars included a $25,000 check to the Nixon Committee to Reelect the President by Dwayne Andreas. After Nixon resigned and two Republican attorneys general—John Mitchell and Richard Kleindienst—went to jail, the Senate committee turned to investigate Democratic fund-raising and subpoenaed Humphrey’s 1972 campaign records. They found that Hubert’s campaign manager, Jack Chestnut, just like Maurice Stans, had destroyed all the pertinent campaign records before April 7, the date the new law went into effect. Investigators working with the records that survived the Chestnut purge found that one of Hubert’s top supporters, John Loeb, of Loeb, Rhodes, the New York investment banking had responded to Hubert’s plea for funds by supplying his own money in the form of $5,000 each to nine of his subordinates, laundering the money to them to make the contribution. Loeb said he was ignorant of the law and paid a $3,000 fine.

Incredibly, the Watergate probe targeted Hubert’s most liberal adviser who was also involved in forensic campaign duels with me—Norman Sherman, a good friend. The Senate investigators found that Associated Milk Producers, Inc., a large farm co-op, made donations to Hubert as well as to Nixon. Two of Hubert’s aides, Bill Connell and Ted Van Dyk, became consultants to the company. Connell recommended that Jack Chestnut, Hubert’s campaign manager be retained to handle Associated’s legal business in Minnesota. Sherman was hired to supply computerized voter lists by Chestnut who manipulated it to appear that Associated did not pay for Sherman’s work although it did. AMPI’s checks to pay the Humphrey 1972 campaign obligations went through Sherman’s company. Sherman’s company drew up false invoices but it was found that the company made unlawful $82,000 worth of corporate contributions to Humphrey’s campaign. The probers found Chestnut’s memos setting up the deal. Chestnut, Humphrey’s campaign manager, pleaded 5th amendment, declined to answer all questions, was tried, convicted and sentenced to four months in prison in 1974. Sherman was tried separately and fined $500.

While documentation of Hubert’s pre-April 7 fund-raising had been destroyed, the Senate probers zeroed in on how Hubert got the dough to effectuate a start-up in the first place. There was no record in the file turned over to the probers. Under pressure his lawyers came up with the answer. In December, 1971 when he decided to run Hubert asked Andreas if he could tap his own blind trust for the start-up money. Andreas said yes and he did for $116,000. Then Andreas, his daughter and a friend of his daughter sold blocks of ADM stock adding a further $348,000 to the treasury.

A Howard Hughes Scandal and Other Questions.

The worst disclosure then occurred. In probing Nixon’s contributions, the Senate investigators found that a Howard Hughes contribution had been stashed in a safe belonging to Bebe Robozo. Now a Hughes aide, Robert Maheu, charged that he had given $50,000 in cash to Humphrey on July 31,1968 as Hubert was leaving Los Angeles’ Century Plaza hotel after a rally. Maheu said he jumped into the vice president’s limousine and left a briefcase containing the cash at Humphrey’s feet. Hubert said he didn’t remember it and denied that the contribution had found its way into his campaign fund. Indeed, in April, 1968 Hughes wrote Humphrey asking for his help in getting nuclear tests stopped near his home in Las Vegas. Watergate investigators put into the record Maheu’s handwritten notes of a July 31,1968 saying

$25,000 Kennedy

50,000 Nixon

50,000 Humphrey

…along with a cancelled check dated June 27. 1968 to Robert Maheu Associates signed Howard Hughes to which was clipped a note from Maheu saying, “received for non-deductible contributions.” “Kennedy” in the note meant Bobby. There is little doubt that the money reached the campaign treasuries of all three.

Hubert’s campaigns for president were money-starved and it is reckoned as certain that he cut corners—but there are no grounds to imagine the checks went to his personal needs but to his campaigns. . When as a legacy of Watergate, big corporations began confessing unlawful contributions, Hubert’s name i.e. his presidential campaigns was almost always on the list of recipients-- from Gulf Oil, Ashland Oil, American Airlines and others including Minnesota Mining & Manufacturing. When the confessions from big business came out, Hubert was dying and incommunicado but it was clear that he was so hard up for campaign money he would from time to time grab checks and stuff them in his pocket, not checking where they were from but it is a certainty he knew better. As his life was slowly snuffing out, probers found that the corrupt Korean importer Tongsun Park may well have made inroads. Humphrey’s name was found on Park’s lists with mysterious numbers after it. At one time Park was dating Humphrey’s niece and hads given $10,000 to Hubert’s 1972 campaign so that the niece could fly out to help in the California primary. But there is no evidence that Humphrey helped Park land government contracts.

Before the bad news got out as he lie on his death bed, Hubert was planning one last hurrah—a run for the presidential nomination in 1976.

1 comment:

  1. For Flashback-

    It puts so many things in perspective that occured when I was either scratching for job turf, or just plain not interested in politics.

    Both Hubert and Gene could have been portrayed by the Bard in a great tragedy.

    You have done the job for Will.