Playing Power Politics

By MICHAEL WEISSKOPF

When Al Gore floated a bold proposal last week to reform campaign financing--calling for an end to "soft money" contributions and the creation of a $7.1 billion endowment--he admitted that he is an "imperfect messenger for this cause." In his new modesty offensive, Gore was alluding to such well-known blemishes on his record as the 1996 fund raiser he held at a Buddhist temple. But Gore's imperfections may also extend to the more traditional realm of political patronage, particularly through his influence with a powerful institution back home: the Tennessee Valley Authority.

A New Deal project created to tame the Tennessee River and pull its impoverished valley out of the Depression, the TVA has far exceeded the dreams of its founders. The $6.7 billion-a-year enterprise is the nation's largest electric utility and continues to fuel economic growth in Tennessee and surrounding states. But it also has doled out millions of dollars in consulting fees, salaries, rent for office space, and investment capital, much of it directed to supporters and advisers of the home-state politician who reached the vice presidency, Al Gore.

Patronage, of course, is nothing new to politics or to the TVA. "There's always been favoritism and cronyism, just not as extreme as now," says Stephen Smith, who heads a TVA watchdog group in Knoxville, Tenn. And no one has accused the Vice President of handing out political favors directly--simply of putting in place people who could do it for him. Yet the enrichment of his friends raises questions about the reformist image that Gore is trying to project as he grabs for the political high ground in his nascent campaign for the presidency against George W. Bush.

With a Vice President from the TVA's home state of Tennessee, it was natural that President Clinton turned to Gore to help fill two vacancies on its three-person governing board not long after the Inauguration in 1993. And it was natural that Gore would propose people who were well known to him. Clinton named as director Johnny Hayes, who has worked as a principal fund raiser of every Gore campaign since he entered politics--including the current one. The President named as chairman Craven Crowell, an old pal of Gore's from his newspaper days and a top aide to Gore's ally Jim Sasser, a former Democratic Senator from Tennessee. (The third board member, a Kentucky Republican, was in mid-term.)

With these two men in key positions, the TVA soon became a fount of largesse for other Gore supporters and advisers. Within weeks of Crowell's and Hayes' swearing in, the TVA hired Washington lobbyist Peter Knight, who had run Gore's House and Senate offices for years and helped direct his 1988 presidential bid. It is questionable how badly Knight was needed. The TVA already had four in-house lobbyists, as well as plenty of Congressmen from its seven-state service region, fighting for its interests. It also had a Vice President who hardly needed coaxing to support the TVA; like his father, Gore has been a champion of the federal utility, even as many have argued that the TVA long ago fulfilled its mission and should be privatized.

The TVA paid Knight's firm $680,000 over six years for his "strategic" counsel, according to a TVA spokesman. The relationship ended last year when Knight went to work raising money for Gore's presidential campaign. Another Gore pal, however, continues on the TVA's lobbying payroll: Jack Quinn, Gore's first chief of staff in the Clinton White House, who was hired by the TVA in 1997. Quinn's firm was paid $707,000 over 2 1/2 years. Then, when Quinn left at the beginning of this year to set up his own shop, the TVA followed him; it pays him $25,000 a month to lobby, even as he serves as an informal Gore adviser and media surrogate.

In addition to finding jobs for Gore's Washington friends, the TVA has doled out contracts to supporters back home. Among them is Mark McNeely, who has participated in several of Gore's campaigns and who landed a $100,000 TVA deal for public relations work in November 1997. Just three months later, the TVA began to require competition for such awards. McNeely's pact was torn up when the rules changed--but not before his Nashville firm had received $22,000. Another Gore campaign activist and fund raiser, James Lawson, collected $462,000 over four years for reviewing TVA's minority-business programs, the Los Angeles Times has reported.

A spokesman for Gore says the Vice President had "no role" in awarding these jobs. And TVA spokesman John Moulton defends the hiring of these consultants and lobbyists as necessary in the era of electric-utility restructuring. "We needed the best help we could get," says Moulton, pointing out that the agency hired Republican lobbyists as well to combat the threat posed by private utilities.

But there have been other questionable expenses. Though the TVA has been downsizing since the 1980s, it renewed a $1.6 million-a-year lease on a Chattanooga office building in 1996. The building's owner is longtime Gore supporter Franklin Haney, who gave the Democratic Party more than $200,000 during the Clinton-Gore re-election drive that year. The TVA signed a new 10-year lease, even though more than half the 17-floor structure was being sublet by a health insurer whose lease was expiring in three years. When the insurer moved out last year, the TVA was left with a partly filled building and seven years remaining to pay Haney. The TVA's Moulton says the lease made sense at the time because the tenant, whose rent more than covered the TVA's costs, had shown no sign of intending to leave.

The Gore connection may also have figured in the TVA's plunge into the world of venture capital. In 1996 the agency invested $2 million to help get a new firm called Commerce Capital off the ground. Two other companies with ties to Gore were also investors in the Nashville-based outfit--and thus stood to benefit from the TVA's infusion of money. One was Insouth Bank, which was represented by Charles Bone, Hayes' personal lawyer, who has raised at least $100,000 for Gore's current campaign. Another investor was hospital-management giant Columbia/HCA, whose chairman at the time was Clayton McWhorter, an old Gore friend and supporter. The company gave $50,000 to the Democratic Party in 1996.

TVA insiders tell TIME the hirings and expenditures under Crowell and Hayes were apparently designed to win favor with the Vice President. A spokesman for Crowell disputes this, saying the only motivation was to "add value" to the TVA. Hayes, who left the agency last year to work on Gore's campaign, told TIME, "I never looked at anything as patronage for Al Gore."

Crowell is given credit for getting the TVA ready for the era of deregulation. And Hayes, who was head of Tennessee's economic development agency before becoming champion of the TVA's low-interest-loan program, did much to boost local companies. But Hayes, watchdog Smith contends, was put in the agency by Gore mainly "as a placeholder until he popped up the other side, once Gore needed some real fund raising." An earthy, onetime insurance man from Sideview, Tenn., Hayes mounted his 1962 pickup and drove Gore from fish fry to cattle show during his first congressional race, 24 years ago. Many years later, the business people who received TVA loans on his watch became natural sources of campaign cash. "I never called one of them," says Hayes. But he didn't have to solicit people like Scott Applegate, whose East Tennessee aluminum-casting plant landed a $2 million TVA loan in 1998. A year later, when Applegate heard that Hayes had left the TVA to raise money for Gore's campaign, he donated $1,000. "TVA stepped up with the loan," he said. "I thought it would be nice to help."

At the TVA, Hayes had a motto: "Just Do What's Right." One thing is certain: a lot of what he and Crowell did there also turned out to be right for Al Gore.