As underwriters and attorneys were putting the finishing touches on a $210 million bond deal for Cook County government last September, they found in their mailboxes a surprising request from Richard Phelan, the County Board president.
The letter did not concern the bond deal for the county construction projects. Instead, it was a plea from Phelan’s chief political fundraiser seeking contributions on Phelan’s behalf to three separate funds.
“Please send any and all checks to my attention at” Phelan’s downtown political headquarters, the fundraiser, Mary Beth Sova, urged in the note on Phelan’s political committee letterhead.
Some recipients were struck by the timing of the appeal. One source said the memorandum was received on Sept. 12, three days before the $210 million bond deal went to market.
A participant in the deal said that he received the note as well as a follow-up telephone call from Sova and that other lawyers and underwriters involved in the transaction also were “touched” for contributions.
“I know the general feeling among the participants was that this went beyond the realm of aggressive fundraising,” said the person, who received the memo and spoke on the condition of anonymity. “It was like saying, `Do this or we won’t consumate the transaction.’ Basically, it was a strong-arm tactic for raising money.”
There apparently was nothing illegal about the solicitation by Citizens for Phelan, the County Board president’s campaign apparatus. Indeed, the public finance industry has become a favorite source of campaign funds for politicians. Securities firms and lawyers whose livelihoods depend in large part on government dealings in Illinois are swamped with campaign solicitations, often at the same time that they are seeking government contracts.
But the Phelan memo provides an unusual glimpse of the sensitive, behind-the-scenes fundraising practices that are typically handled verbally and rarely receive public scrutiny. It is an example of the cozy but legal relationships that exist between government vendors and government officials in need of funds for expensive, media-oriented campaigns.
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“There’s something wrong when public officials are asking for money from individuals when at the same time the public officials are deciding on contracts or bonding or legislation” that affects the would-be donors, said Tracy Litsey, executive director of the watchdog group Illinois Common Cause.
“It has that subtle seal of strong-arming, and it’s not right.”
The letter calls into question Democrat Phelan’s reform credentials as he gears up to run for governor next year. The correspondence was on stationery with Phelan’s name and County Board president title at the top and his political committee identified on the bottom.
“Hope you can help,” said the tersely worded message from Sova, who still works under contract for Phelan but no longer serves as his full-time political fundraiser.
The letter specified donations of $1,500 to Illinois House Speaker Michael Madigan’s campaign fund; $500 for 40th Ward Ald. Patrick O’Connor’s campaign for state’s attorney; and $500 for the Abigail Potter Wolff Irrevocable Trust.
Charles Wolff, the University of Illinois board of trustees president who died of cancer in 1991, was a member of Phelan’s transition team after the 1990 election. The trust was established to benefit his disabled daughter.
Wolff also had been a longtime adviser to multimillionaire commodities trader Richard Dennis, who has made substantial contributions to Phelan and other Democrats and who had agreed to match charitable donations to the Wolff trust from a group of people that included Phelan.
Although the Sova memo did not solicit contributions directly for Phelan’s political coffers, the fundraising could undoubtedly boost his political prospects by currying favor with a pair of influential Democratic organization regulars and a leading party contributor.
Sova, Phelan and his chief of staff, William Filan, all acknowledged that the memo went out but said they are not certain who received it. The appeal was not an effort to coerce campaign contributions from participants in the lucrative bond transactions, they said.
“There’s nothing improper about it, no. It is, unfortunately, a fact of life that you have to do it,” Phelan said.
The dozen underwriters chosen for the county bond deal in September split $2.2 million in fees, including expenses. Another bond issue for $159.8 million, to refinance debt, was issued two weeks later and generated $1.6 million in fees, including expenses, for 16 bond dealers.
Of the 34 underwriters, law firms and financial advisers listed in offering documents for the two bond deals, 16 contributed to Madigan or O’Connor or both in the last four months of 1992, according to a Tribune review of campaign disclosure reports. Those donations totaled $47,450 to Madigan and $16,750 to O’Connor.
The figures include contributions by high-profile officials of the firms, but the amounts are a minimum because state law does not require individual contributors in those firms to list their employers.
The firm whose official acknowledged receiving the memo wound up contributing to both Madigan and O’Connor. Some bond deal participants contacted by the Tribune said they didn’t receive the memo, and some others said they could not remember seeing it.
Some said they do not feel pressure to make political contributions to obtain county bond business. Peter Fox, public finance chief at Bear Stearns’ Chicago office, said the memo “wouldn’t affect our participation. We try to develop a rapport with the elected officials and their staff.”
The Wall Street firm contributed $1,000 to Madigan last October.
Kemper Securities, a unit of Long Grove-based Kemper Corp., donated $1,500 to Madigan and $500 to O’Connor last fall. A spokeswoman said the firm supports many candidates and does not believe contributions are required to obtain business.
But the head of a small firm involved in one of the deals disagreed. The message is “real clear,” said the official, who is frequently invited to political fundraisers. “Your participation is anticipated.”
Filan called it “unfortunate” that the memo went out just days before a final agreement was signed with underwriters. But he contended that nothing could have altered the terms of the bond deal at that time, because the underwriting and legal teams had already been picked by Phelan and approved by the County Board.
Putting the request in writing was an apparent blunder. Filan said he was unaware of the memo’s existence until last week. “This would not have happened if we knew she planned to send something like that,” Filan said.
Sova said it was “just sort of a casual follow-up to people who wanted something on paper” and “not something I paid much attention to.” At the time, she was also planning two major fundraisers for Phelan in December.
Filan said Phelan has improved the county’s bond practices by spreading the underwriting business among more firms and negotiating a 30 percent reduction in fees paid to legal advisers on bond deals.
The Phelan administration issued $847 million in debt in his first 24 months in office, including $326 million in refinancing and $304 million to pay for unfunded capital projects from the previous regime, according to county chief financial officer Woods Bowan.
An analysis by the Tribune showed that bond dealers and their well-known officials have contributed $280,733 to Phelan’s campaign coffers since September 1989.
Phelan, who has raised $4 million in political funds for himself since 1989, said he does not consider the amount of contributions from those doing business with the county to be excessive. He insisted that no one gets county business in exchange for contributions.
But Commissioner Maria Pappas (D-Chicago) said that proposals for a county ethics ordinance with caps on campaign contributions have languished and that her calls to require bids or formal proposals from underwriters and bond counsel have been rebuffed.
Filan said Phelan plans to sponsor a countywide ethics and campaign financing ordinance at a County Board meeting Tuesday or later in April and expects it to pass. The measure would limit the amount of a donation to a county elected official from somone doing business with the county to $1,000 or $1,500, he said. The City of Chicago has a $1,000 limit, and New York City has a $1,500 limit.
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The County Board president has been aggressive in his fundraising for himself and for prospective allies in next year’s primary race for governor, which Phelan has said he is likely to enter this summer.
Phelan has said he expects it will cost $3 million to $4 million to wage a successful primary campaign, and his top political lieutenant, Eric Adelstein, has said the goal is to have $1.5 million in hand by June 30.
Absent a political network of his own, Phelan will find it necessary to align himself with more established Democrats.
Madigan is the powerful 13th Ward Democratic committeeman who built a statewide field operation that has enabled him to maintain a House majority and his status as the most influential member of the General Assembly.
“Mike Madigan has done a lot of things to help the taxpayers of this county,” Phelan said in explaining his effort to help Madigan.
Ald. O’Connor of Chicago’s Northwest Side handed off his Democratic committeeman’s post to a relative last year when he challenged and lost to Republican State’s Atty. Jack O’Malley.
“Our friend Pat O’Connor, a fine Democrat, would have been an excellent state’s attorney,” Phelan said.
Finally, Richard Dennis has figured prominently in Phelan’s career as well as the campaigns of other Democrats. He made a $100,000 loan and gave $200,000 in contributions to Phelan’s campaign in 1990; the loan was repaid last year. Dennis helped bankroll Democrat Adlai Stevenson III in his 1986 gubernatorial bid by giving him $300,000.