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Rahm Emanuel: How he made his fortune

The Sun-Times Watchdog column on Monday outlined the finances of the main Chicago mayoral contenders. Frontrunner Rahm Emanuel made a bundle leveraging his government connections when he went from the Clinton White House to the private sector, the basis of the fortune the Watchdogs reported on in their Monday column.

When Emanuel first ran for the House in 2002, he was casting himself as a populist and he worried that voters might be turned off by his mega million salary, so he tested whether there was a backlash in a focus group.

Emanuel made $6,491,000 in 2001 as a managing director of Dresdner Kleinwort Wasserstein. One of Emanuel’s clients was Loral Inc., whose CEO, Bernard Schwartz, has been one of the Democratic Party’s biggest donors. Another Emanuel client was Slim-Fast, whose founder S. Daniel Abraham, has been another giant Democratic donor.

Emanuel’s official biographies have always been selective about his job history: most bios even skip that he was a member of the Chicago Housing Authority Board, a curious omission for someone running for Chicago mayor. Emanuel rarely brings up–his rivals do –his boondoggle service on the quasi-governmental Freddie Mac board, which paid him $231,655 in director’s fees in 2001 and $31,060 in 2000. Former President Clinton appointed Emanuel to Freddie Mac.

Also never noted: Young and Rubicam, the ad agency, named Emanuel to its advisory board and paid him $128,500 and $124,750 over two years in the early 2000’s. Emanuel in 1999 joined the board of, and the Chicago Mercantile Exchange.

Below, columns I wrote about Emanuel’s finances in 2002 and 2003:

August 14, 2003 Thursday

Emanuel’s cash clash

BYLINE: Lynn Sweet

HIGHLIGHT: Emanuel’s trust is supposed to be blind, not stupid.

Freshman Rep. Rahm Emanuel (D-Ill.), a former Freddie Mac board member, sits on the very House subcommittee that has oversight of the federal government-sponsored enterprise at the same time that he has outstanding options for 2,500 shares of the company.

Emanuel told me he has no problem because he put his holdings into a blind trust and plans to recuse himself from any votes relating to Freddie Mac. “I chose to do something you don’t have to do,” he said, as if he deserved extra points. “I feel good about the actions I’ve taken to date,” he added.

Emanuel had no business getting on the Capital Markets, Insurance and Government Sponsored Enterprises subcommittee as long as he had the Freddie Mac options–in blind trust or not.

It would have been better if Emanuel sold the Freddie Mac shares he already owned before being sworn in last January and told Freddie Mac to forget about any future options to which he may be entitled. It’s not like Emanuel did much to earn those options, and he already has received more than $300,000 from Freddie Mac just for attending a few meetings.

Emanuel’s former boss, President Bill Clinton, appointed his former senior adviser to the plum seat, and Emanuel served from March 2, 2000, to May 3, 2001. The main job of a board member, Emanuel told me, is to attend quarterly board meetings and take part in committee meetings, either on the phone or in person.

For a mere 14 months on the board, Emanuel was paid director’s fees and given stock as a gift. The package totaled $292,774 in 2001, according to the disclosure statement Emanuel filed in 2002.

That’s not all. A Freddie Mac appointment is the gift that keeps on giving.

The disclosure Emanuel filed on May 15 reveals that Emanuel exercised a Freddie Mac stock option in 2002 that resulted in $27,280 in income.

Emanuel’s office confirmed that the options for 2,500 more shares will come up this fall and next spring. That means that the administrator of Emanuel’s blind trust over at LaSalle Bank will have the option of buying the 2,500 shares at the “strike price” of $40.09, no matter how high the stock is selling. I can’t imagine why any administrator of a blind trust would buy shares if the Freddie Mac stock was selling for less than $40.09 or if the company, created with a congressional charter, faced a dubious future.

Emanuel’s trust is supposed to be blind, not stupid. On Wednesday, Freddie Mac shares closed at $50.20.

The Freddie Mac pop is on top of $9,678,775 in deferred income from what was Emanuel’s regular job before coming to Congress, as a deal maker in the investment banking firm of Wasserstein Peralla. Emanuel made most of that money in the three years after he left the White House.

Freddie Mac and its better-known cousin, Fannie Mae, are enterprises chartered by Congress, formed to stabilize the U.S. housing market by buying mortgages from the original bankers. The companies are publicly traded, even though they are quasi-governmental entities. Of the 18 members of the Freddie Mac board, five are named by the president.

For some time, Congress has been considering whether Freddie Mac and Fannie Mae still deserve to have a leg up in the marketplace because their financings are backed by the full-faith guarantee of the federal government. Congressional inaction, maintaining the status quo, is a win for Freddie Mac and Fannie Mae.

The biggest news this summer–and drawing more congressional interest–has been about the shakeups and investigations over at Freddie Mac, where the top executives were dumped after they were suspected of cooking the books. Freddie Mac was forced to restate earnings for 2002, 2001 and 2000.

Emanuel was on the board during some of the period where questionable practices occurred that caused Freddie Mac to restate its earnings. I asked him if he had any responsibility for what happened. Said Emanuel: “I think I did my board service well, and I am proud of what I did.”

LOAD-DATE: August 25, 2003


Chicago Sun-Times, January 3, 2002 Thursday

Too much money a bad thing?

BYLINE: Lynn Sweet

HIGHLIGHT: 5th District House candidate Rahm Emanuel tested voter reaction to $6 million salary

Rahm Emanuel is positioning himself as a populist in the Democratic primary campaign for the House, but the brash former Clinton White House senior adviser earned an astounding $8 million in the last two years, with at least another $2 million on deck for 2002.

On top of that, financial disclosure statements filed with the U.S. House dated Dec. 20 reveal that Emanuel’s extensive portfolio was valued between $4 million and about $12 million, under rules which only require a general range of assets to be reported.

Emanuel’s campaign is concerned about potential voter backlash to a candidate who earns millions three years after leaving the White House, mainly doing investment deals. To find out about how Emanuel’s sudden wealth plays, his campaign conducted a focus group on Nov. 13, paying the male participants $75 each to take part in the session at 8725 W. Higgins.

I interviewed one of the men in the focus group, who was afraid to let me use his name since his nonprofit agency gets money from the city and he feared he would jeopardize his funding if he talked on the record. The source said the focus group was told that Emanuel made millions “setting up deals,” and they were asked if they had any problem with it or if they minded that he was an “insider” who helped corporations. The general reaction to Emanuel’s money issue, the source said, was “sure he can get things done; is it going to be for the district?”

Emanuel, 42, a former fund-raiser for Clinton and Mayor Daley, is making his debut as a candidate in the 5th Congressional District March 19 primary, where his main rival is former state Rep. Nancy Kaszak. Her earned income amounted to $203,712 for the last two years. Her assets were valued at between $64,000 and $260,000. She also is making public six years of income tax returns. Emanuel said he will also release his tax returns.

Most of Emanuel’s income in 2001 came from a $6,491,000 salary he pulled down as managing director of the investment banking firm of Dresdner Kleinwort Wasserstein. In the preceding year, the firm paid him $1,006,510.

If he stays with the company for most of 2002, he’ll pocket another $2 million, he said.

Clinton’s going-away gift to Emanuel was a seat on the quasi-governmental Freddie Mac board, which paid him $231,655 in director’s fees in 2001 and $31,060 in 2000.

Young and Rubicam, the ad agency, named Emanuel to its advisory board and paid him $128,500 last year and $124,750 the year before. Adjunct professors, take note: Northwestern University paid alum Emanuel $20,000 in 2000 to teach a course one quarter on the press and the presidency. He also made $33,500 on the lecture circuit in 2000.

Much of the big cash came from Emanuel’s work on the merger between Chicago-based Unicom Corp., Commonwealth Edison’s parent holding company, and Peco Energy. Yes, 2001 was a very good year for Emanuel. While the deal that created Exelon bestowed a windfall on Emanuel, the newly merged utility ended up laying off 3,350 workers, or 10 percent of its work force.

The disclosure also shows that another client Emanuel brought to his firm was Avolar, the new time-share business jet subsidiary of UAL Corp., the parent of United Airlines. Avolar’s CEO is Stuart Oran, who is a friend of Emanuel’s campaign treasurer, William Singer. Singer, based in Chicago, is a Washington lobbyist, and United is one of his clients. Singer is also a fund-raiser for Senate Democrats.

I know Singer and Emanuel are close pals, but installing Singer as campaign treasurer shows a lack of political judgment or an ethical blind spot or both. O’Hare expansion is one of Chicago’s biggest issues before Congress; at a national level, Congress is very involved in keeping the airline industry safe and solvent. United has a big stake in Congress.

“I don’t see the conflict you see,” Emanuel told me. He’ll put his holdings in a blind trust if elected. He said he would never hesitate to turn down Singer or anyone else because “I’ll call it like I see it.” Emanuel, who has raised about $1 million so far, has created a perception problem for himself by allowing Singer, the Washington lobbyist, to have a key role in his campaign.