RICHMOND — Virginia Gov. Terry McAuliffe had run out of options to pull off his marquee campaign promise to expand Medicaid under the Affordable Care Act. Even a risky plan to circumvent the legislature had fallen apart.
That’s when the governor, his top priority defeated, picked up the phone and called the man he blamed for the catastrophe.
“Hey, Phil? Terry McAuliffe,” the governor said in a seething voice message to Phillip P. Puckett, a Southwest Virginia Democrat who had quit the state Senate days earlier, throwing control of it to the GOP. “I want you to know we just lost the vote, 20 to 19, in the Senate. Medicaid is done. I hope you sleep easy tonight, buddy.”
Puckett had resigned after discussing jobs for himself and his daughter with Republicans — and after Democrats had tried to entice him to stay with talk of making his daughter a state agency head or federal judge. Now, it is clear that McAuliffe desperately needed Puckett in the Senate to take the daring step of expanding Medicaid on his own, using budget language the Democratic governor hoped to sneak past Republicans.
It’s also clear that the episode, which prompted a criminal investigation, has left lasting hard feelings between Democrats and Republicans. Republicans say all the blame and prosecutorial attention have been heaped on them. Democrats say they were cheated out of landmark Medicaid legislation, not to mention Senate control.
In the end, Puckett’s resignation exacerbated an increasingly partisan atmosphere in Richmond. Its reverberations are likely to make it more difficult for McAuliffe to work with a GOP-controlled legislature to get anything done during the remainder of his term.
The Washington Post interviewed more than a dozen people and reviewed scores of e-mails and text and voice messages to piece together new details about how Puckett’s resignation unfolded. The e-mails were obtained through Freedom of Information Act requests, and the texts and voice mails were each provided or read aloud by at least two individuals who directly saw or heard them.
What emerges is this new detail: Even as McAuliffe’s aides were spinning Puckett’s resignation as a sign of nasty Republican dealmaking, they were working desperately to strike a deal of their own to keep Puckett in the Senate — to protect a secret plan to pass Medicaid expansion without direct legislative approval.
Puckett, a senator since 1998, stepped down in early June while the House and Senate were deadlocked over Medicaid. The timing infuriated Democrats for that reason and for another: He left as Republicans were planning to give his daughter a judgeship and Puckett a top post at the GOP-controlled state tobacco commission. By mid-June, federal officials launched an investigation that, according to several individuals with knowledge of the probe, has focused on Puckett and the commission chairman, Del. Terry G. Kilgore (R-Scott), who had led the hiring effort.
Puckett and Kilgore said at the time that the senator was resigning primarily to clear the way for his daughter to become a judge. The House had twice confirmed Martha Puckett Ketron, an interim juvenile court judge, to a six-year term. But the Senate, citing an anti-nepotism policy, declined to act while her father was in office.
Only after deciding to quit did Puckett have any serious discussions with Kilgore, a fellow Southwest Virginian and friend, about working for the commission, according to a letter written to prosecutors by Thomas J. Bondurant and Thomas T. Cullen, attorneys for Puckett and Kilgore, respectively. Bondurant and Cullen declined to comment on behalf of their clients for this article.
Yet even the interim executive director of the Tobacco Indemnification and Community Revitalization Commission distanced himself from the plan, expressing in e-mails an understanding of how the deal might look once it became public.
The commission made an intense, highly accommodating push to hire Puckett in late May and early June. Puckett was invited to help create his own job description for a post likely to come with a six-figure salary that would increase his state pension and perhaps allow him to drive a state car, e-mails show.
“I’m not aware of the genesis of this idea, but Terry has asked us to speak to you,” Tim Pfohl, the interim chief, wrote in his first e-mail to Puckett about the job. Pfohl’s subject line on another e-mail on the topic: “Today’s directive from Terry K.” Pfohl declined to comment for this article.
Puckett had planned to announce on Friday, June 6, that he was quitting the Senate and taking the commission job. The night before, Pfohl urged him in an e-mail “to ‘decouple’ those announcements for the sake of the appearance of the Commission manipulating the Senate balance of power and starting WW3 w/ the Governor’s administration.”
Puckett opted to wait, but “WW3” was coming anyway. That Thursday night, Pfohl tipped off a member of McAuliffe’s Cabinet, setting off a flurry of e-mails, phone calls and texts.
“Tim P. called [Commerce] Secretary [Maurice] Jones today,” Puckett’s son, Joseph, wrote in a text later provided to investigators. Referring to the governor’s chief of staff, he also texted: “Paul Reagan just called dad,” and “Reagan has already taken it to the governor and convinced dad to wait on their callback in the morning.”
When news reports of Puckett’s resignation broke, Democrats jumped at the chance to lambaste the appearance of a quid pro quo with Republicans. But Virginia’s most powerful Democrats had also launched their own frenzied push to keep Puckett from quitting.
The Post reported this fall that Reagan and U.S. Sen. Mark R. Warner were also quietly discussing potential jobs as enticements for Puckett to stay. Reagan called Puckett that Thursday and left a follow-up voice message suggesting that Ketron might head a state agency if Puckett stayed put.
“We would be very eager to accommodate her, if, if that would be helpful in keeping you in the Senate,” Reagan said.
McAuliffe has said he did not know that Reagan had discussed potential jobs for Ketron until The Post revealed it in October. McAuliffe spokesman Brian Coy said the governor did not get word of Puckett’s resignation plans until that Friday in June — the day after Reagan first called Puckett. This recollection appears to conflict with the text from Puckett’s son, who wrote that Reagan told his father that he had already taken the matter to the governor. McAuliffe spokeswoman Jamie Radice said there must be some confusion, because the governor distinctly remembers where he was when he got word that Friday: at Dulles Airport, about to fly to the Caribbean for the wedding of Democratic fundraiser Mac Cummings.
Even with his top priority imperiled, McAuliffe could not have easily bowed out of the wedding that weekend: He was officiating. So between landing in Turks and Caicos and declaring, “I now pronounce you husband and wife,” McAuliffe worked the phones.
On Friday night, McAuliffe called the state Senate’s top Democrat, Richard L. Saslaw (Fairfax). The senator was running an errand at the Potomac Mills mall in Prince William County ahead of a trip to California to see his first grandchild. Until the phone rang, he’d had no inkling his majority-leader status was slipping away.
“Terry said, ‘Are you sitting down?’ ” Saslaw recalled.
Saslaw was sitting — in his car — in the mall parking lot. As he wound his way out of the lot, Saslaw called the state’s two U.S. senators. He left Warner a voice mail and reached an aide to Sen. Timothy M. Kaine (D). Saslaw said his plea to both was: “Call Puckett and see if you can fix this thing.”
Saslaw also phoned Puckett directly, leaving a message that asked him to call. He said he did not hear back from Puckett until that Monday, when it was all over. Kaine’s office said he, too, connected with Puckett only after the fact.
Warner reached out to Puckett’s son, Joseph, discussing the possibility of corporate work and a federal judgeship for Ketron, who has practiced law for less than a decade. That call complicated Warner’s bid for reelection, which he narrowly won over Republican Ed Gillespie this month. In one ad, Gillespie declared, “I’d never play politics with a lifetime appointment to the federal bench.” Warner said he “brainstormed” about potential jobs but never offered any.
So far, neither Warner nor Reagan has been contacted by prosecutors, their staffs say, leading some in the GOP to grumble that the Justice Department has pursued only potential Republican transgressions. A spokesman for Timothy J. Heaphy, U.S. attorney for the Western District of Virginia, declined to comment for this article.
McAuliffe, still in the Caribbean, also called Puckett. A self-described Irish storyteller, the governor has given a colorful account of their conversation in recent social settings, according to two people he separately regaled. The tale begins with McAuliffe begging the senator to stay and ends with him wishing aloud that Puckett “rot in hell.”
Coy, the governor’s spokesman, said McAuliffe never expressed the rot-in-hell sentiment directly to Puckett but conceded that he has voiced it to others.
“He’s understandably angry with Senator Puckett, whose resignation helped cost 400,000 Virginians access to health care,” Coy said.
But how? Even if Puckett had stayed, the GOP-dominated House was not budging.
The administration had been searching for a way to get around the legislature but hit a roadblock: The Virginia Constitution requires General Assembly approval for any expenditure, even pass-through funds from Washington.
Then McAuliffe’s camp found an obscure bit of language in the previous year’s budget that appropriated extra Medicaid funds if — and only if — a newly formed (and hopelessly deadlocked) state Medicaid commission agreed to expansion. If the language was ripped out of that context, the thinking went, McAuliffe could claim that it authorized him to spend an extra $2 billion a year in federal Medicaid funds.
There were serious obstacles to the plan even if Puckett had stayed. The strategy would have drawn an immediate legal challenge from Republicans, who had already contended that unilateral expansion would be unconstitutional. But McAuliffe and his team concluded that this was the governor’s best shot, according to four people familiar with the administration’s planning.
In his voice mail to Puckett, Reagan hinted at the plan: “We need you to help us get this Medicaid deal through, and I think we’ve got a way to do it.”
But he did not elaborate. And so to Puckett and most observers, his exit would seem to have no obvious effect on the Medicaid standoff. The Senate would still be in favor, given that three moderate Republicans supported it, and the House still opposed.
By Saturday, June 7, word of Puckett’s pending departure was swirling in the Roanoke convention hall where Republicans from across the state nominated Gillespie to take on Warner. Something was coming, the buzz was. Something big.
Late that Sunday afternoon, Puckett and his wife were in Richmond cleaning out his Capitol Square office, packing keepsakes and tossing the rest into trash cans they had collected from all over the building, said Senate Clerk Susan Clarke Schaar. He had asked Schaar to meet him there, and he handed her his letter of resignation, effective Monday.
Sunday evening, Puckett’s resignation became public. The governor’s spokesman, fielding inquiries, stressed the notion that Republicans had been dangling state jobs.
“Worth mentioning that this is state money theyre using in their backroom deal here,” Coy e-mailed one TV station.
Come Monday morning, McAuliffe’s press shop was analyzing how the story was playing for the governor.
“Overall not a bad clip — highlights ‘transactional’ agreement and ‘raises a lot of questions about how business operates in Virginia,” press aide Rachel Thomas wrote as she forwarded an MSNBC piece to Reagan and McAuliffe.
At the tobacco commission that morning, Pfohl let Kilgore know that he had put the finishing touches on Puckett’s job description. Puckett was due to be hired at an executive committee meeting two days later.
“Hold up,” Kilgore replied. Amid the uproar, Puckett had bowed out. Ketron’s judgeship stalled, although Republicans say it could come up for a vote in January.
Republicans moved ahead to capitalize on their coup, claiming control of the Senate that Monday and calling it back into session to approve a “clean,” Medicaid-free budget that Thursday.
Still, McAuliffe’s stealthy Medicaid strategy remained on track, with the budget language tucked inside the hefty bill. The plan was so tightly under wraps that some Democrats who had vowed not to back a budget without expansion were threatening to vote against it.
“Trust us, just do it,” Sen. John S. Edwards (D-Roanoke) said they were told. “I took several aside and said, ‘We’ve got it figured out.’ ”
So had conservative Bull Elephant blogger Steve Albertson, spotting the language and warning that it was a loophole McAuliffe might try to exploit.
“If conservatives in the Senate vote for the House budget without fixing this backdoor — for the governor — then they will be held responsible for allowing Terry McAuliffe to get away with expansion,” he wrote Tuesday, June 10, concluding with, “We’re watching.”
By Tuesday night, it was clear that the tea party could do more than watch. In a stunning upset, then-House Majority Leader Eric Cantor (R-Va.) lost a primary to an underfunded tea-party-backed rival, Dave Brat.
When they returned to Richmond two days later, rank-and-file Republicans refused to pass the spending plan with the worrisome language.
Had Puckett been there to vote, the budget would have passed the Senate. Whether McAuliffe’s scheme would have emerged from the House is less clear. Conservative delegates were alarmed by the language, but they risked saddling the GOP with all the blame for a possible government shutdown if they rejected the budget.
Shortly before midnight Thursday, a truly “clean” budget cleared the General Assembly and was on its way to the governor. And McAuliffe called Puckett to declare, “Medicaid is done.”