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Big Donor Calls Favorable Treatment a 'Coincidence'

By Ruth Marcus and John Mintz
Washington Post Staff Writers
Monday, May 25, 1998; Page A1

In June 1994, Bernard L. Schwartz, the chairman of Loral Corp., wrote his first six-figure check to the Democratic Party, donating $100,000 to the Democratic National Committee.

Around the same time, Schwartz asked to be included on a trade mission being organized by then-Commerce Secretary Ronald H. Brown to China, where his company hoped to win a piece of the growing telecommunications market. On the trip, Brown arranged a meeting for Schwartz and a rival industry executive with the Chinese communications minister – a session that, as Schwartz recalled it yesterday, "helped open doors that were not open before."

The Clinton administration has been good to Bernard Schwartz, and he to it. Schwartz, a lifelong Democrat and longtime political donor, dramatically ratcheted up his giving after President Clinton took office, contributing a total of more than $1 million to Democratic party committees since then.

And as it has adopted policies favorable to U.S. companies seeking and doing business in China, the administration has taken steps favorable to Loral.

Last February, Clinton approved the company's request to launch a commercial telecommunications satellite aboard a Chinese rocket, choosing to side with the State Department's assessment of the launch as "in the national interest" rather than with Justice Department concerns that approval would interfere with an ongoing criminal investigation. Justice was – and still is – looking into whether Loral and another company provided unauthorized assistance to China's ballistic missile program after an unsuccessful previous launch.

Schwartz, a self-described "Democratic populist" who has spent his career in an industry dominated by Republicans, says the "confluence" of his own increased contributions and the Clinton administration's favorable treatment of his company was "just coincidence." He stepped up his political contributions at the same time that his own wealth increased, big-ticket giving to political parties soared and a Democratic president was elected whom Schwartz describes as "the most friendly to business of any in a long time."

But Republicans have seized on Schwartz and Loral to accuse the administration of essentially selling out U.S. national security for big bucks to the Democratic party. "You have major concessions made by the president on technology transfers which adversely affect national security," Sen. Arlen Specter (R-Pa.), said on Fox News Sunday yesterday. "These transfers are made at a time exactly when these enormous contributions were being made. ... It raises a very substantial question."

Rep. Christopher Cox (R-Calif.), who is to head a select House committee looking into the technology transfer, took a more detached view of the matter on NBC's "Meet the Press" yesterday, carefully separating the inquiry into a possible national security threat from questions about campaign finance. His committee's first step, Cox said, is to ask, "What really happened? Second, if it's as bad as it looks or possibly even worse, how did it happen? And once we figure that out, we can infer some possible solutions. But I think we're a long way away from trying to point the finger at any individual just now."

Saying he wants to ensure that the committee of five Republicans and three Democrats is "very collegial," Cox pledged, "It won't be political theater in the form of flashy congressional hearings."

Schwartz also took to the Sunday talk show circuit yesterday, making his case that he "never sought a favor nor got a favor" from the Clinton administration. He came from his maiden appearance on ABC's "This Week" to The Washington Post to explain his political generosity and argue that he got nothing for it besides good government.

"I don't see anything wrong with looking at the performance of the administration and saying this is worth supporting, but the implication that this is a quid pro quo is just outrageous," he said.

Loral, he said, "did not need, expect or receive any special treatment." Indeed, Schwartz noted, the company obtained one of its most lucrative governmental contracts, for weather satellites, from the Bush administration – and lost it at the Commerce Department under Brown's tenure.

And Schwartz pointed out that during the same period that he has made major political contributions he also has given more than $10 million to hospitals and schools and more than $18 million to Loral employees – half the $36 million bonus he received in the 1996 sale of Loral Corp. to Lockheed Martin. (Schwartz spun off Loral's commercial activities, and now oversees them as chairman of Loral Space and Communications.)

National Security Adviser Samuel R. "Sandy" Berger, speaking on CBS News's "Face the Nation," said, "The fact that Mr. Schwartz was a contributor to the Democratic party was not a factor that was known to me. That's not part of my job."

Asked whether Clinton was aware of Schwartz's giving, Berger changed the subject.

It seems unlikely that Clinton, always closely involved in his own campaign fund-raising, was not aware of Schwartz's loyalty. In a 1994 memorandum, then Deputy White House chief of staff Harold Ickes recommended that Clinton call Schwartz to solicit contributions for a $3 million party advertising blitz. "I have it on very good authority that Mr. Schwartz is prepared to do anything he can for the administration," Ickes wrote.

In an interview last week, Ickes recalled Schwartz as a man who has "never thrown his weight around. ... So many people who operate at this level, they're always basically acting in a tone of voice and a demeanor that they expect a meeting with the deputy chief of staff or they expect tickets to this or they expect special privilege on a receiving line, whatever the little dinky perks are. He never did that."

Recalled one former Democratic National Committee official, "He was really sort of your perfect donor – just wanted to attend events and never asked for anything."

Schwartz has always been a loner, shunned by his fellow CEOs in the defense and space industry – the only liberal Democrat, as well as the only non-engineer to lead a major aerospace company in recent years.

He traces his Democratic roots to his grandfather, a Tammany Hall functionary in New York who died after catching pneumonia while campaigning for the party around the turn of the century. For decades after, Schwartz's grandmother received a holiday turkey from the Democratic machine. "It left an impression that my family was connected to somebody who cares," Schwartz said in an interview last year.

In the late 1960s, he worked as an accountant for a Wall Street takeover artist. In 1971, at a rushed midtown Manhattan lunch, a friend persuaded him to buy Loral, then a floundering defense firm. He quickly turned it around, and over the next 25 years gobbled up 16 more defense companies, becoming the industry's paramount dealmaker and a pacesetter in the trend toward aerospace mergers.

Liberal politics were always a sideline to his empire-building, Schwartz said yesterday. During the Vietnam War, he would argue vociferously against U.S. intervention with generals and Pentagon officials, then sign more contracts to provide them with armaments.

Schwartz donated to Democrats along the way, along with a few key Republicans, but his political giving rose sharply after Clinton took office.

He first met Clinton at a Manhattan dinner party hosted by a friend in 1992, before the then-Arkansas governor had announced his presidential run. The defense executive was taken by Clinton's quick grasp of the industry issues the two men discussed. He became one of Clinton's earliest supporters in the business community.

"He's just smart and he's fun and he has a good sense of humor," Schwartz said. "He calls me his friend and I am proud that he does that. But we don't shoot golf together."

Still, as Schwartz has written check after check to Democratic party committees – from $25,000 in 1991-92 to $112,000 in 1993-94, $602,000 in 1995-96 and $421,000 so far this election cycle – the White House has been assiduous in courting him. Now the party's largest single individual donor, Schwartz was twice invited to stay in the Lincoln bedroom but couldn't make it. He attended state dinners for the emperor of Japan and British Prime Minister Tony Blair, and was toasted at a White House dinner two years ago on his 70th birthday.

He said he has never asked for a business favor. "It would have been imposing on a friendly relationship to advance my parochial interest with the president," he said. "It's awesome to go to the White House, an extraordinary privilege."

But the administration has helped out anyway – sometimes with steps specific to Loral, more often with policies designed to help U.S. businesses compete in a global market. In 1996, for example, the administration blessed Lockheed Martin Corp.'s acquisition of Loral's defense divisions.

That same year, after a bruising interagency battle, the Clinton administration tried to help ease the bureaucratic way for satellite makers – Loral and others – to gain government approval for their international ventures by transferring control of the process from the State Department to the Commerce Department.

Schwartz was enlisted by another industry executive to be one of the signers of a letter to Clinton asking the president to approve the transfer of satellite export licensing from the State Department to Commerce. "Your decision will greatly enhance the ability of U.S. manufacturers to retain our global competitiveness," the letter said.

Yesterday, Schwartz said the controversy over his donations would not cause him to close his checkbook. "I'm not going to be intimidated by this flap," he said. "The conspiracy thinkers who see a ghost behind every door can say what they want."

© Copyright 1998 The Washington Post Company

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