Before Rahm Emanuel got elected, he got rich.
The former Clinton White House aide turned investment banker turned Chicago Democratic congressman followed a well-trod path from government service to private-sector wealth. But he did so on a scale and with a speed that are rare.
The story of how the wiry, hyperkinetic 43-year-old made more than $16 million in just 2 1/2 years is a tale of money and power, of leverage and connections, of a stunningly successful conversion of moxie and a network of political contacts into cold, hard cash.
The revolving door between government and business turns constantly in Washington, but seldom has a Washington insider made so much money so quickly.
Seldom has someone been able to amass a fortune to last a lifetime during so brief an interruption in a political career. Seldom has someone done so on the way between positions of such influence, sandwiching it in as he moved from trusted confidant of a president to House freshman already using his prodigious fundraising ability to position himself for a top strategic role for House Democrats.
In doing so, Emanuel provides a portrait of the often murky, below-the-surface intersection of money and power and politics.
Deftly tapping the contacts he made as a senior adviser to former President Bill Clinton, Emanuel went to work for one of Clinton’s most active fundraisers after leaving the White House in late 1998. He took on a client base many of whom were his party’s most important financial backers–Democratic donors of such clout that they have slept in the Lincoln Bedroom, flown on Air Force One and, in one case, even celebrated a birthday in the White House with Clinton.
Congressional disclosures filed this year show Emanuel earned $16.2 million as an investment banker, largely by brokering high-profile mergers and acquisitions. That is more than twice what was reported when he ran for office last year–before millions of dollars of deferred income poured in.
It’s a striking sum even in the richly paid world of corporate deal-making, let alone for someone without an MBA or any prior business experience other than running a small political consultancy.
Top of profession
Russ Gerson, global head of financial markets for A.T. Kearney Executive Search, said Emanuel’s compensation would put him “in the top 3 to 5 percent” of the highest-paid investment bankers during that time.
Emanuel’s path to wealth stands in stark contrast to the image he is cultivating as a populist champion, the architect of vote-getting reforms designed to underscore what Democrats contend is Republican protection of wealth and privilege.
In recent weeks he has been working in tandem with Democratic Gov. Rod Blagojevich, the man Emanuel replaced in Congress, to orchestrate a public relations campaign aimed at toppling Bush administration opposition to cheap Canadian drug imports. (An erroneous statement as published has been deleted from this text.)
In the House, Emanuel serves on the Financial Services Committee, which handles legislation involving financial markets and banks, matters that directly affect his former employer and many former clients, including one whose firm recently purchased the American Stock Exchange.
Though only in his first year in Congress, Emanuel’s proven talent for cultivating relationships with deep-pocketed donors has made him a go-to guy for Democrats. He is rapidly gaining influence with party leaders impressed by his ability to raise money for colleagues as well as devising political strategies and spinning the media.
In Washington, he widely is considered a probable choice to chair the Democratic Congressional Campaign Committee. That would put Emanuel at the forefront of the party’s struggle to regain control of the House and give him primary responsibility for raising the necessary financial backing.
Emanuel owes his investment banking job to Bruce Wasserstein, a high-rolling Wall Street dealmaker who was one of Clinton’s most active fundraisers in the financial community.
Emanuel’s two biggest deals involved politically connected utilities: one representing Commonwealth Edison’s corporate parent in a merger and the other representing a buyer in the purchase of a home security business from telecom giant SBC Communications. Shortly afterward, SBC hired as its president William Daley, the commerce secretary of the former Clinton administration and the brother of Chicago’s mayor.
He gained other commissions by pitching such major Democratic donors as S. Daniel Abraham, the press-shy billionaire and former owner of Slim-Fast, and Bernard Schwartz, a defense industrialist who was a central figure in a scandal over the export of missile technology to China. Taken together with their wives, the two men were the party’s largest individual donors in the last presidential election, according to the Center for Responsive Politics, a non-partisan research group.
Another key former Emanuel client is headed by the largest individual contributor to Mayor Richard Daley’s last election campaign, Bruce Rauner, who is more a supporter of conservative Republicans on national issues.
Executives and bankers involved in some of Emanuel’s key transactions portray him as an active participant whose role extended well beyond that of a door-opener, although they acknowledge his connections were crucial to his success.
Emanuel is a 5-foot-8, 150-pound triathlete who earned the nickname “Rahm-bo” during the Clinton administration for his forceful personality and take-no-prisoners attitude. Former clients describe him as an unusually energetic advocate for his customers who was attentive to their needs highly. In many cases, they said, he phoned daily to take their pulse on an ongoing deal, share a well-chosen war story from White House days or offer a pithy insight on current political news.
“Fundamentally, I brought in business and worked on business that was very successful,” Emanuel said. “I didn’t work on one deal. I didn’t work on two deals. I think it was close to six or seven, of which a couple of them were over a billion dollars.”
Emanuel, who frequently is on his cell phone cajoling friends, adversaries and the undecided alike, makes no apologies for turning to contacts that he developed during his political career to further his prospects in business.
“That relationship and that exposure and that prior experience no doubt helped. But that ain’t enough to get you over the goal line. At the end of the day, you’ve got to perform,” he said.
Emanuel is hardly the only political insider to go directly from government to a well-paid position in commerce. The practice is common among Republicans as well as Democrats.
For example, Vice President Dick Cheney went to the oil services firm Halliburton as chairman and chief executive officer after serving as defense secretary in the administration of the first President Bush. Former Secretary of State James Baker III went to the Carlyle Group, a private equity firm laden with Washington insiders. Just last year, former Senate Banking Committee Chairman Phil Gramm (R-Texas) left office to take a position as vice chairman of UBS Warburg, the investment banking arm of Switzerland’s largest bank.
Still, the Democratic politician’s brief but rewarding foray into high finance offers an illustration of the way power in America is intertwined at the pinnacles of business and government.
Throughout his career, Emanuel has anchored his success in the spheres of public life where political and economic power are joined together most closely. He rocketed into national politics because of his proficiency as a fundraiser, helping Richard Daley secure resources to win his first mayoral term in 1989 and later spearheading fundraising for Clinton’s 1992 campaign.
In the White House, he was Clinton’s political director and later a senior adviser to the president. One of his signature successes was his work with William Daley in securing passage of the North American Free Trade Agreement, marking a turning point in the Democratic Party toward the free-trade interests of corporate America and away from the protectionist demands of labor unions.
During the short break from politics he took after leaving the Clinton administration, Emanuel chose in investment banking a field that allowed him to take full advantage of the contacts he developed with corporate titans during his political career. Timing also was helpful. The then-soaring stock market spawned a rush of mergers and acquisitions during the late 1990s and into 2000, making investment banking extremely profitable for major players.
All of that already was clear when Emanuel left the White House in October 1998 and three months later took a job as a Chicago-based managing director for Wasserstein.
“Bruce was always anxious to bring high-profile, well-known people into the franchise,” said Rolfe Kopelan, managing partner of Capstone Partnership, a firm that specializes in Wall Street recruiting. “That varnishes your own image. Bruce was very involved in Democratic politics. So Rahm Emanuel would have been attractive to him.”
In a statement issued through a spokesman, Wasserstein, now the chief executive officer for the investment bank Lazard LLC, said: “Rahm did a great job for our firm. Energetic and extremely popular in the Midwest, he had a keen understanding of the interplay of regulatory aspects and corporate activity in financial advisory work, particularly in the utility and bank industries.”
According to congressional disclosure statements, Emanuel received $16.2 million from Wasserstein, based on fees that the bank earned from eight clients. In each case, he worked to land the business either through a key executive he had come to know during his political career or was provided an introduction by a contact he developed through his political work.
Three of those clients were corporations controlled by major Democratic donors who developed relationships with Emanuel through their involvement in national party politics: Loral Space and Communications Ltd., headed by Schwartz, who celebrated his 71st birthday at the White House; Slim-Fast, headed by Abraham; and GenTek Inc., a telecommunications manufacturer headed by Paul Montrone.
Schwartz said Emanuel contacted him shortly after leaving the White House, and the defense industry CEO responded with an invitation to meet at his New York office. He said he hired Emanuel to explore potential deals with other companies, which he declined to describe.
“He knew a lot of high-level people in U.S. corporations, and they respected him,” Schwartz said. “So he can get to the high level of corporations to present ideas. And that’s half the battle: to get to the right people, so you don’t waste a lot of time.”
Another Emanuel client, medical equipment manufacturer Lumenis, is controlled by Arie Genger, a financial backer and confidant of Israeli Prime Minister Ariel Sharon who has served as a back channel between Sharon and the Bush administration.
Emanuel said he forged a relationship with Genger through work on health-care policy, first encountering the Israeli-American businessman at a talk Emanuel gave on the topic while on the White House staff.
Genger did not return repeated calls, but Emanuel and the company’s former CEO both said he led a Wasserstein team representing Lumenis in the acquisition of Coherent Medical, a California-based laser manufacturer.
Two more clients were institutions with deep ties in the Daley administration: the Chicago Board Options Exchange and Avolar, a since-disbanded business jet subsidiary of United Airlines. Emanuel was hired at CBOE by Chairman William Brodsky, an active player in Chicago politics. At Avolar, it was CEO Stuart Oran, a former chief lobbyist for United who had come to know Emanuel through his lobbying work and through local political and cultural activities.
Brodsky said he hired Emanuel to represent the exchange in negotiations with the Chicago Board of Trade over a governance issue. Brodsky said he based the decision largely on impressions of Emanuel that he formed through contacts they had while Emanuel was a Daley fundraiser and White House aide.
“It was really because I had such confidence in Rahm from my previous dealings with him,” Brodsky said. “There were political dimensions to this. It wasn’t just crunching the numbers. In membership organizations, you have to deal with personalities.”
Oran declined a request for an on-the-record interview.
By Emanuel’s account, he benefited most from two big deals. One was representing Unicom, the former corporate parent of Commonwealth Edison, in an $8.2 billion merger with Pennsylvania-based Peco Energy Co. The other was representing GTCR Golder Rauner, a Chicago-based venture capital fund managed by Rauner, in its purchase of the SecurityLink home security unit from SBC Communications.
Rauner said he first met Emanuel for lunch at the suggestion of Erskine Bowles, the former chief of staff for Clinton. For Unicom chairman and CEO John Rowe, it was breakfast at the suggestion of Lester Crown, a billionaire who is a major shareholder in defense contractor General Dynamics. Crown said he developed a strong relationship with Emanuel through their mutual involvement in Chicago’s tight-knit civic establishment.
“When Rahm was going to come into town [after leaving the White House], I called John and said, `You should get to know him. This is someone you could use in business,'” Crown said.
“There were a lot of good investment banking firms that could handle this on a technical level,” Rowe said. But in a merger that combined regulatory, political and economic issues, he said, “Rahm seemed to give that extra bit to think about the pieces and how they fit strategically.”
Emanuel’s involvement also proved valuable because of the timing of the merger, announced shortly after Daley and other local officials savaged ComEd for its laggardly response to summer blackouts in 1999. Emanuel’s relationship with the mayor and his skill in massaging political issues proved crucial in overcoming the blackout backlash, said bankers and executives involved in the deal.
While the Unicom-Peco merger came together relatively quickly, GTCR’s purchase of SecurityLink was a troubled transaction that stretched on for a year and nearly collapsed when the venture capital company could not get a bank to finance the deal at the agreed price. Emanuel had brought the idea to GTCR, and his strong relationship with executives at SBC helped keep it alive, Rauner said.
Worked relentlessly
“Rahm was relentless. He, in his heart of hearts, knew this should work,” said David Donnini, the GTCR principal who worked most closely on the deal. “I remember getting a call from him almost every day, throwing out ideas to make it work, some crazy, some not.”
Under a regulatory deadline to divest itself of SecurityLink, SBC financed all but $100 million of GTCR’s $479 million purchase of the firm. Less than six months later, GTCR resold the company for $1 billion, earning a quick $500 million on its investment.
Emanuel left Wasserstein in the middle of 2001 to campaign for the Northwest Side congressional seat that Blagojevich was vacating to run for governor. With a well-financed campaign that included donations from some of the same businessmen who assisted his investment banking career, Emanuel handily won the primary and general election.
Shortly after taking his seat in Congress, in an effort to avoid any conflict of interest between the investment of his fortune and the performance of his legislative duties, Emanuel placed his assets in a series of blind trusts. Those trusts are designed to allow a lawmaker to vote and act on legislation ignorant of the impact on his own investments.
But relationships, once formed, cannot be stored away in a blind trust.
