For Jesse, It's Still All About the Money

Posted Jan. 23, 2003

By Kenneth R. Timmerman

(Feb. 4-17, 2003 issue)


By Kenneth R. Timmerman  

It's one thing for the Rev. Jesse Jackson to shake down Wall Street when he finds corporate officers weak or foolish enough to give in to his race-baiting tactics. It's quite another for the Bush administration to aid and abet Jackson's self-serving schemes. That's what happened a few weeks ago when Federal Communications Commission (FCC) Chairman Michael Powell, a Bush appointee and son of Secretary of State Colin Powell, flew to New York City to embrace Jackson during his sixth annual Wall Street Project conference.

[Read the sidebar that accompanies this article,
"Thou Shalt Not Speak Ill of the Rev. Jackson."]

Michael Powell and Securities and Exchange Commission (SEC) Commissioner Roel Campos spoke at an awards luncheon on Jan. 16, introducing New York Stock Exchange Chairman Richard Grasso. The two Bush appointees offered markedly different versions of why they appeared at a fund-raising event for Jackson.

In a telephone interview shortly before his New York speech, Campos told Insight that he viewed his participation as a "duty, not an endorsement" of Jackson's organization and his methods. "I make no judgment as to whether it's a shakedown," Campos said. "The SEC is an independent agency that represents the interests of all investors. I don't ask if they are Democrat or Republican or how they voted. I ask: 'Are you interested in the SEC?' It's our duty to get the message out that we are intent on guaranteeing the integrity of the marketplace so people can have faith in the market."

Powell spokesman David Fiske also denied that his boss' appearance at Jackson's premier fund-raising event constituted an endorsement. "He's going to promote minority participation and the health of the telecommunications industry, which has become a major concern since the WorldCom meltdown. Whether this 'legitimizes' Jesse Jackson was never an issue."

On the contrary, says Harold Doley, who in 1973 became the first black businessman to purchase a seat on the New York Stock Exchange. "By trotting Michael Powell around in front of photographers, Jackson is giving the perception that he consistently can deliver the FCC. That's been a real moneymaker for his cronies."

Jackson has raked in millions of dollars by "brokering" deals for the telecommunications industry. His method, described in detail in this reporter's book Shakedown: Exposing the Real Jesse Jackson, was simple: When telecom or media organizations went to the FCC at merger or acquisition time for licenses, Jackson was waiting. Using the 1996 Telecommunications Act, which mandated minority set-asides, Jackson's lawyers would file objections to the deals with the FCC. Jackson then would contact corporate chief executives and offer to "mediate," often winding up with huge checks for his efforts. Whether the "problem" he sought to "mediate" existed before his lawyers created it at the FCC is open to question, say critics.

In 1997, for instance, he opposed the sale by Viacom of its radio network to Chancellor Media Corp., arguing that the sale violated a Viacom pledge made in 1994 to sell to minority owners two stations serving the black community in the Washington area. That objection effectively blocked the deal.

Viacom Chairman Sumner Redstone, a major donor to the Democratic National Committee, hadn't foreseen any difficulty in getting by the FCC. Eventually he met with Jackson to discuss his price for withdrawing the objections. It was a mere $2 million, a small commission when cast against a $1 billion deal. The FCC trumpeted the arrangement as a "settlement," leaving aside the thorny question raised by Doley and other critics of what right Jackson had to insert himself in a commercial transaction between outside parties.

Viacom and Chancellor Media paid the money into a special account dedicated to "public education and advocacy" and special conferences "to educate the public about the value of minority media entrepreneurship" managed by longtime Jackson allies Warner Session and former New York City mayor David Dinkins. Session then funneled $680,000 into Jackson's Citizenship Education Fund (CEF). Redstone paid Jackson a $40,000 cash fee to cover legal costs and had Viacom contribute an additional $422,500 to CEF, tax records show. Not bad for a few days' work.

This is not Michael Powell's first effort to "reach out" to Jackson. As FCC chairman, he serves on the board of directors of the Telecommunications Development Fund (TDF), a private fund set up by the FCC. For years the fund has been capitalized under a bizarre arrangement, crafted by the Congressional Black Caucus as an amendment to the Telecommunications Act of 1996, that allows the fund to spend the interest on deposits paid to the FCC by companies seeking to buy spectrum at federal auction. TDF then "invests" in start-up ventures. "Most of this money has gone to Jesse Jackson cronies," former FCC commissioner Harold Furchtgott-Roth tells Insight.

Serious money is involved. In January 2001, Verizon, AT&T and others laid out a $1.5 billion down payment to buy spectrum belonging to Nextway after that company went bankrupt. Interest on the deposit amounted to $2 million per week, Furchtgott-Roth says, and was "distributed" by TDF with Michael Powell's approval.

When the Nextway auction was declared illegal, a D.C. circuit court ordered the FCC to repay the deposit money. But as much as $100 million in interest was lost. "The interest stays with the fund. That's the scam," says Furchtgott-Roth.

Run by former Commerce Department official Ginger Lew, infamous for her role in the Clinton Chinagate fund-raising scandals, TDF counts Jackson crony Thomas A. Hart on its board. Hart was one of the main Washington lawyers used by Jackson in the numerous FCC complaints his groups filed. Some of the projects TDF has funded are legitimate and have become profitable; others took the money and disappeared.

Several sources believe that Michael Powell is seeking Jackson's support for an eventual bid for the U.S. Senate in Virginia, and had been planning to run in 2002 until Sen. John Warner announced his bid for re-election.

Doley believes that by courting Jackson the Republican Party is wasting its time. "We shouldn't be reaching out to our enemies; we're not reaching out to Saddam Hussein. My father used to say, 'You don't feed frogs to snakes because the snake is still going to bite you.' It's the same with Jesse Jackson. He's never going to be our friend."

In the wake of the embarrassment resulting from Sen. Trent Lott's (R-Miss.) remarks about Dixiecrat values, Republican strategists are casting about for ways of reaching out to the black community, a traditional Republican constituency for nearly 100 years after the War Between the States. A group of conservative black Republicans, led by commentator Armstrong Williams, met with top Republican National Committee officials in Washington on Jan. 13 to explore ways of wooing black voters.

One tactic under discussion is to emphasize the accomplishments of the Bush administration. "Half of the federal budget is now being managed by African-Americans," says Doley. He pointed out that the Bush White House has appointed blacks to the No. 2 slots at the departments of Housing and Urban Development, Veterans' Affairs and Health and Human Services, where they manage hundred-billion-dollar budgets. Bush also has appointed African-Americans to run the General Services Administration, which manages all federal property; the Office of Personnel Management, which manages the entire federal workforce; the National Security Council and the departments of State and Education.

Another option is to appeal to black churches that are filled with social conservatives who share much of the Republican agenda. "It's a natural fit," Doley says. "Don't forget that the Voting Rights Act was needed because Southern Democrats were keeping blacks from registering to vote. Blacks never had problems with the Republican Party."

But why try to court African-Americans through Jackson, who not only has organized black churchmen for Democrats but publicly has snubbed the Bush appointees. Last October, after entertainer Harry Belafonte called Secretary of State Colin Powell a "house slave," Jackson defended the calypso singer and said that the secretary was "not on our team," by which critics presumed he meant "not a Democrat."

In previous years, Jackson's Wall Street Project conference brought in close to $2 million. This year, with the help of Michael Powell, he's been telling reporters he hopes the take will reach $4 million, also thanks in part to help from presidential hopeful Rep. Richard Gephardt (D-Mo). "Dick Gephardt needs Jesse Jackson to fend off a challenge from Al Sharpton," one Democratic Party insider tells Insight. "Jesse Jackson is on the payroll of the DNC [Democratic National Committee]," says Doley. By pumping up Jackson's coffers now, two years before the 2004 election, the money becomes harder to trace. During the final months of the 2000 presidential race, Jackson gave 150 speeches around the country on behalf of the Al Gore-Joe Lieberman ticket, prompting the American Conservative Union to file a complaint (still pending) with the Federal Election Commission.

One of Jackson's sessions at this year's conference was sponsored by the insurance industry, eager to curry favor with him. Speakers included senior executives from North Carolina Mutual, Atlanta Life General and the chief executive officer of New York Life. Jackson announced last year that he intended to go after the successors of Civil War-era insurance companies and back lawsuits seeking reparations from companies that issued policies to slave owners on their slaves.

But Jackson himself now is facing lawsuits that have been filed against him by black entrepreneurs and associations in California and Arizona. He also is in the midst of an IRS audit, several sources tell Insight, generated by complaints filed after the 2000 election by the American Conservative Union and the National Legal and Policy Center.

Kenneth R. Timmerman is a senior writer for Insight magazine.
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Sidebar: Thou Shalt Not Speak Ill of the Rev. Jackson

By Kenneth R. Timmerman

MGM executives thought they were doing everything right. They had a black producer, a black director, a black screenwriter and an all-black cast for their latest "ethnic" film, Barbershop.

[Read Kenneth R. Timmerman's full-length article on the Rev. Jesse Jackson, "For Jesse, It's Still All About the Money," in the current issue.]

In the film, Cedric the Entertainer plays an acid-tongued barber who takes everyone to pieces. He mocks Martin Luther King Jr. for his extramarital affairs and says that Rosa Parks, the civil-rights activist who refused to move to the back of the bus, only did so because she was tired. Says Cedric, "All she did was sit on her a**." He also takes a swipe at the Rev. Jesse Jackson. That, apparently, is where he went over the line. Jackson is known for many things, but a self-deprecating sense of humor is not one of them.

"Yes, comedies should illicit [sic] laughs," he wrote in his weekly Jacksfax in September 2001, "but not at the expense of those whose legacy is sacred."

Sacrilege having been committed, Jackson and Al Sharpton then called MGM executives Alex Yemenidjan and Chris McGurk, to complain -- not in their own name, to be sure, but in the name of the National Association of Cosmetologists (NAC) and other groups, saying they were offended and planned to organize a nationwide consumer boycott of the movie if the offending comments weren't stricken. Despite Jackson's threats, the movie was the No. 1 box-office hit for its first two weeks.

MGM called NAC President James Stern and invited him for a private screening of the movie. "I brought 100 of my members," he tells Insight. "We cracked up from beginning to end. It was hilarious. If we as blacks want equal rights, we have equal rights to comedy, too. You can't just pick and choose." The NAC declined Jackson's attempts to convince them to boycott the movie.

Stern sent out a printed poll to 14,000 of his members and says he received replies from more than 11,000, who agreed that they should ask for an apology from Jackson and Sharpton for misrepresenting them in their talks with MGM. Jackson refused. That's when things got serious.

In late October, Stern and his association filed a class-action lawsuit against Jackson for $61 million. "Jackson claimed falsely to represent our members," Stern says. In California, many black hairstylists cater to a white clientele, and Stern said that some of his members had seen a 15 to 20 percent drop in their business since Jackson's campaign against MGM.

According to the complaint, Jackson phoned Stern the day after the screening and Stern requested that Jackson stop claiming to represent the black barbers. Stern also spoke with Sharpton. When Stern refused Sharpton's demand that his association support the boycott, "Sharpton then yelled that he would continue to claim that [the association] supported his efforts because he had the power to do so. He cursed at Stern and hung up."

Greg Gorman of the Los Angeles law firm Baute & Tidus joined the lawsuit recently, scaling it back to $10 million. "This is a lawsuit with a legitimate basis," he tells Insight. "MGM has confirmed the story."

Jackson's spokesman dismissed the flap as "a nuisance suit" and has tried to paint Stern as a gadfly with a criminal record. "James Stern does have a criminal record," Gorman says. "He wrote one bad check and went to jail. But he is known and respected as a community activist." In the late 1980s Stern, who also is a pastor, helped broker the first gangland "truce" in Los Angeles between the Crips and the Bloods. So much for the smear.

In Arizona, Jackson faces another challenge from John W. Stone, a businessman involved in a class-action lawsuit against Albertson's, the food-store chain. When Albertson's attorneys fought back, Stone turned to Jackson, who asked Stone to send all his documents so Jackson's attorneys could study the case. Then, "Jackson turned to Albertson's and got a $50,000 grant," says Ken Boehm, chairman of the National Legal and Policy Center. "After that, he said Albertson's was great."

And that's not all. Insight has learned that Jackson has been putting pressure on DaimlerChrylser to hire ad agencies from a short-list of his friends, and in so doing has aroused the ire of other black executives who feel they have been cheated out of their business. "Jesse Jackson is trying to shake down Detroit through threats of national boycotts against automotive manufacturers," said Ernest Walker, President and CEO of VisionMediaTV. At the same time, Walker said, he has learned from other black advertising executives that Jackson and Sharpton are "demanding hundreds of thousands of dollars from black-owned ad agencies. In other words, after they shake down major corporations they broker the advertising/marketing component to the highest bidder among black firms. If the firm refuses to pay them, they don't have a chance to compete and are blocked access."

Walker tells Insight he has written to Attorney General John Ashcroft requesting he open a criminal investigation under RICO (Title 18, U.S. Code §§1961-64). These are the tough racketeering statutes used by federal prosecutors in Chicago to bust the El Rukn mob in the 1980s, which landed gang member Noah Robinson -- Jackson's half-brother -- in jail with a life sentence.


-- KRT