Tag Archives: McDonnell trial

Spotlight in McDonnell Trial Shifts to Judge Spencer

Judge James Spencer

Judge James Spencer

Hmmm…. It turns out that Judge James Spencer, the judge who presided over the trial of former Governor Bob McDonnell, is married to Judge Margaret P. Spencer — whom McDonnell voted against in 1997 when she was nominated in an unsuccessful bid for appointment to the Virginia Supreme Court. Republican/ conservative bloggers are wondering if Mr. Spencer’s overwhelmingly consistent rulings against McDonnell on points of law and his framing of jury instructions reflect personal animus on his part. At the very least, they are asking, did the judge have a conflict of interest?

I don’t know enough to say one way or another. I’d like to know more about that 1997 vote. If McDonnell had been prominently involved in defeating Ms. Spencer’s Supreme Court judgeship, the conflict-of-interest idea might have merit. If he was but one of fifty or so members of the House of Delegates who voted against her in a party-line vote, it’s more difficult to imagine that Mr. Spencer bore a grudge.

What’s also interesting is that in the wall-to-wall coverage of the trial — including the judge’s rejection of the McDonnell defense team’s numerous legal gambits — none of the media took note of this potential conflict. The issue came to light only when raised yesterday by Will Houp at WAVY TV. (His story here contains some details of the 1997 nominating controversy.)

It’s also worth asking why the story surfaced now, just a month before McDonnell’s sentencing. Did Houp just pick up scuttlebutt in the legal community? Or did McDonnell’s defense team leak this information to apply pressure on Spencer to stop leaning so hard against McDonnell?

— JAB

Was Bob McDonnell Convicted with Tainted Testimony?

Baron von Munchausen, famous spinner of tall tales

Baron von Munchausen, famous spinner of tall tales

Jonnie Williams’ trial testimony about a critical meeting with the former governor was contradictory, implausible and sometimes incoherent. But the jury bought it anyway.

Peter G.’s skeptical response to the op-ed I co-authored with Paul Goldman and Mark Rozell is exactly what I would have expected, given the fact that we had to boil a complex argument with abundant support documentation down to 750 words. Accordingly, what follows is an expanded version of that column. However, I take the argument further than Goldman and Rozell may be comfortable taking it, so I assume sole responsibility for this piece. — JAB

In closing statements of former Governor Bob McDonnell’s August trial, lead prosecutor Michael Dry made a remarkable statement. McDonnell had flat-out denied key testimony of star witness Jonnie R. Williams, a suspected con man under federal investigation who had agreed to testify in exchange for a generous immunity agreement. Dry acknowledged that jurors might suspect that Williams had lied. But then he argued, “Who cares?” The jury could “discount everything, every single word uttered by Mr. Williams,” he said, and it wouldn’t matter. There still remained a mountain of evidence to prove the government’s case that McDonnell and his wife had used their status to obtain $138,804 in gifts and loans from Williams.

“Who cares” if Mr. Williams lied? The jurors apparently did not; they found the governor guilty on all counts, his wife on nine. But Virginians should care. When Mr. and Mrs. McDonnell are sentenced for their convictions early next year, they may well be sentenced to jail time, and the amount of time will be determined in part by the number of counts for which they were convicted. If some of those convictions were obtained from tainted testimony, they will be punished excessively and unjustly.

Virginians also should care about the lengths to which a Democratic Attorney General’s office was willing to go to win a conviction against a popular Republican governor. Prosecutors put forth as a witness a man whose narrative evolved over some ten meetings with the FBI and federal prosecutors, whose story about a key encounter with McDonnell changed within the trial itself. Indeed, law enforcement officials had every reason to question his story themselves. If they won their convictions through tainted testimony, is that really the way Virginians want the rule of law to work?

Government’s key witness

Serial entrepreneur and Star Scientific Inc. founder Jonnie Williams had been fined in the 1980s by the Securities and Exchange Commission, and he remained on the federal government’s scam radar. At Star Scientific, he peddled the promise of developing a “safer cigarette.” When that futile quest collapsed, he claimed to have discovered a miracle compound, anatabine – as big as penicillin — that potentially could fight Alzheimer’s and other diseases linked to inflammation. But he faced a steep climb to gain acceptance. Virginia’s secretary of health and human services, among others, dismissed the product as “worthless.”

Unbeknownst to the public, the First Couple was struggling financially with crushing credit card debt and underwater real estate investments in Virginia Beach. Prosecutors argued that the McDonnells engaged in a conspiracy to trade the prestige and support of the Governor’s office for Williams’ gifts and loans. The McDonnells hosted a luncheon praising Anatabloc in August of 2011 at the Governor’s Mansion. The First Lady spoke at Star investor conferences across the country.  The Governor popped Anatabloc at official meetings and helped set up meetings with state government officials.

For all the documentation the feds had gathered, however, they lacked “smoking gun” proof of a quid pro quo.  McDonnell argued that he did no more for Star Scientific than he would for any promising Virginia company. Prosecutors needed Williams to provide evidence of a tacit conspiracy to trade favors for gifts.

The first time investigators interviewed him, Williams described the McDonnells as friends. He denied trying to buy influence with his loans. He praised the Governor’s integrity. But the government ratcheted up the pressure, probing into potential insider trading transaction involving Star Scientific stock. The second time he met with investigators, they granted him “use” immunity, which prevented his testimony from being used against him. Williams then said there was a “wink and a nod” agreement to exchange gifts and favors. In a meeting shortly before the trial, the government offered “transactional” immunity that protected him from other offenses, including the insider-trading probe. His story changed yet again. This time, he said, he was never friends with Maureen and Bob McDonnell. Their dealings were business transactions, and they knew they were exchanging gifts for favors.

Accordingly, prosecutors made the following keystone charge, upon which much of the rest of the case would hinge, in its indictment:

Before agreeing to provide the requested financial assistance to the defendants, JW [Jonnie Williams] spoke directly with ROBERT MCDONNELL about the $50,000 loan. In that conversation, ROBERT MCDONNELL explained the defendant’s financial difficulties. ROBERT MCDONNELL informed JW that the rental income from the defendants’ rental property in Virginia Beach was not covering the bills for those properties. JW agreed to provide the $50,000 loan with a two-year term at 5% interest. JW also informed ROBERT MCDONNELL that loan paperwork was not necessary.

Williams later admitted in court that the deal freed him “from worrying about going to jail.” Legal experts were hard pressed to remember other instances of prosecutors granting such broad immunities in a corruption case.

Shifting story

May 2, 2011, was a key date in the prosecution’s conspiracy timeline. The prosecution alleged and the defense did not dispute that Williams and Mrs. McDonnell met at the Governor’s Mansion. Mrs. McDonnell revealed the family’s credit-card and rental-property issues to Williams, and Williams agreed to give her a $50,000 personal loan and to cover $15,000 in catering costs for daughter Cailin’s upcoming nuptials.

The other key date was May 23, 2011, the day that Williams delivered the two checks. It happened to be his wedding anniversary, and he and his wife Celeste were planning to have lunch at the Jefferson Hotel. Williams dropped by the Governor’s Mansion on the way to deliver one check for the catering company and another made out to Mrs. McDonnell. Williams and his wife stayed about an hour and fifteen minutes, he testified at one point. “We went upstairs and had a salad.”

Why, the defense asked, did he make out the $50,000 check to Maureen McDonnell? Because, he testified, that’s to whom she said to make it out to.

Federal anti-corruption law applies to elected or appointed public officials. As First Lady, Mrs. McDonnell was neither elected nor appointed. She was a private citizen. While it was wildly inappropriate in the eyes of the public for her to offer Williams her services in exchange for the $65,000, it was not illegal. To demonstrate a conspiracy that involved McDonnell, prosecutors had to show that the Governor knew about the arrangement at the time. Continue reading

Did McDonnell Prosecutors Knowingly Use Tainted Testimony?

mcdonnellPublished this morning in the Roanoke Times:

By Paul Goldman, James Bacon and Mark J. Rozell

Did Democratic U.S. Attorney General Eric Holder sanction using tainted trial testimony against Republican Gov. Bob McDonnell? In closing argument, the prosecution said jurors could “discount everything, every single word uttered by” Star Scientific founder Jonnie R. Williams and still find the McDonnells guilty of public corruption. Yet Williams had been the government’s chief witness and sole accuser. He spent nearly a week on the witness stand. Determining “who is most believable about the interactions between the governor and Williams” had been called the key to the case.

The Virginia native had appeared on Uncle Sam’s scam radar since the 1980s, after the Securities and Exchange Commission investigated false claims by an earlier Williams company. When Williams met Gov. McDonnell, he hawked “Anatabloc,” a nutritional supplement based on a curative “discovery” touted as more important than penicillin. The indictment charged Williams had given $138,804 in gifts and loans in exchange for the governor’s agreement to help Star promote the product.

Williams initially defended the First Couple but testified against them pursuant to a rare immunity deal shielding him from prosecution for crimes not related to the McDonnell case. Prosecutors promised jurors he would be completely truthful.

Indictment paragraph 28 remained key to the government’s corruption conspiracy timeline:

“Before agreeing to provide the requested financial assistance to the defendants, JW [Jonnie Williams] spoke directly with ROBERT MCDONNELL about the $50,000 loan . . . ROBERT MCDONNELL informed JW that the rental income from the defendants’ rental property in Virginia Beach was not covering the bills for those properties. JW agreed to provide the $50,000 loan . . . .”

Prosecutors conceded Maureen McDonnell had personally asked Williams for the loan on May 2, 2011. She promised to reciprocate by helping Star. Williams testified understanding she spoke solely for herself, not her husband. Virginia’s first lady is not a public official under federal anti-corruption laws. While disgraceful, this two-way deal did not break the law.

The Star pitchman personally delivered a $50,000 check payable to her on May 23 when they met at the Executive Mansion. Gov. McDonnell swore he didn’t learn about the check until two weeks afterwards. The prosecution self-evidentially believed it crucial to show his knowledge prior to her accepting the money.

During testimony, Williams said he couldn’t remember when he spoke to the governor, or even whether he had spoken by telephone or in person. But he remained adamant, saying, “I am not writing his wife any checks without him knowing about it.”

The prosecution trumpeted this “evidence,” declaring, “What does this tell you about who the loan was really to?”

But his testimony crumbled. During cross-examination, defense counsel asked Williams:

Question: “Before those checks were cut, between the 2nd of May and the 23rd of May, you never talked to Bob McDonnell about those checks, did you?”

Answer: “No.”

He then insisted the conversation occurred while delivering the checks on May 23.

Prosecutors proffered no corroborating phone record or eyewitness account. Furthermore, while Williams claimed the governor said he needed the money to keep his Virginia Beach rental properties afloat, Maureen McDonnell put the $50,000 in her account and used most of the sum to purchase Star Scientific stock, not to cover beach property expenses.

In closing argument, the prosecution told jurors, “Who cares?” whether Williams might have lied since the government had “more evidence than necessary” to convict. Read more.

Goldman is a Richmond lawyer and Democratic Party activist. Bacon publishes the Bacons Rebellion blog covering public policy issues in Virginia. Rozell is Acting Dean of the School of Policy, Government, and International Affairs at George Mason University.

Guilty!

So, the jury has convicted Bob McDonnell of 11 of 13 counts and Maureen of nine.

I’m stunned. The prosecution presented no evidence of quid pro quo, and evidence of a conspiracy struck me as weak and circumstantial. But I didn’t attend the trial, I didn’t hear the full testimony, and I didn’t get to appraise the veracity of the witnesses. I can’t help but wonder how much the judge’s instructions to the jury influenced the outcome but I’ll accept the fact that the jury reached the proper verdict.

While I did not regard the McDonnells’ behavior as illegal, I did view it as deplorable. Perhaps jurors were making a statement that they’re sick and tired of the way the political system works, and they’re not going to take it any more. Regardless, it can’t hurt to send a harsh message to the political class.

To borrow a phrase from Henry Howell, a populist Virginia politician of yore, “Keep the big boys honest.” Let’s follow up by fighting for greater transparency and tighter conflict-of-interest rules.

— JAB

Bringing out the Knives

An Afghan pesh-kabz

An Afghan pesh-kabz

by James A. Bacon

There is a rising tide in the op-ed pages, TV commentary and blog commentary that former Governor Bob McDonnell is a brutish, swinish cad for portraying his wife Maureen as the heavy in the corruption trial. You’ve got to love liberals. They’re so very compassionate…  until they’re talking about their wounded enemies. Then, like the Afghan women in the Rudyard Kipling poem, “The Young British Soldier,” they scour the battlefield to “cut up what remains.”

If Maureen and Bob McDonnell had been Democrats instead of Republicans, we would be treated to a litany of perspectives on the heavy toll of political life upon the marriages of elected officials, the unambiguous signs that Maureen was suffering from depression, and speculation from mental health experts to provide subtlety, nuance and context to the story.

No such compassion is accorded McDonnell, who now is being depicted as a man who “betrayed” his wife and was willing to “flay” her character in order to save himself, just to cite the observations of Petula Dvorak and her headline writer in the Washington Post. (Bacon’s Rebellion‘s very own Peter Galuszka is no kinder.)

Here’s the question I would pose to them. If you were in McDonnell’s shoes, and if the marriage were the shambles he says it was, and if Maureen was indeed the one who solicited the gifts and loans from former Star Scientific CEO Jonnie Williams, Sr., and if you truly believed yourself to be innocent of any illegality, what would you have done? Would you have, in Dvorak’s words, “manned up” and taken the plea agreement offered by prosecutors before the trial? How many people would admit to a crime they believed they did not commit?

Who really bears the moral onus here? McDonnell, for defending himself, or the prosecutors, who (a) proceeded with a case that’s looking flimsier by the day, and (b) called the witnesses whose testimony trashed Maureen’s reputation before McDonnell breathed a word?

McDonnell bears his share of blame for the failing marriage, as he seemed willing to concede on the witness stand yesterday. Maureen was happy living in Virginia Beach before he rose to statewide political prominence. He asked her to sacrifice a lot for his political career, giving up her cozy network of friends and her part-time job selling vitamin supplements. When he first moved to Richmond, the family lived apart while the kids finished high school. As attorney general and especially as governor, he traveled constantly and spent half his nights away from his wife and family. He insisted she use a small inheritance to pay down credit card bills. When Maureen expressed her increasing unhappiness by nagging and throwing tantrums, he withdrew from her, often spending extra time at the office. Emotionally exhausted from the confrontations, he did not question some of Maureen’s activities that he should have questioned — it was easier just to look the other way.

But McDonnells’ critics don’t mention any of these all-to-human failings that probably could describe thousands, even millions, of American men at some point in their marriages. Liberals bring out the long knives. They move in for the kill, portraying their weakened foes as morally reprehensible, as less than human.

In his poem, Kipling advised the wounded English soldier, “Jest roll to your rifle and blow out your brains.” McDonnell did not roll over. Perhaps that was his worst affront of all.

McDonnell on the Stand

mcdonnellFormer Governor Bob McDonnell took the stand yesterday, defending his conduct in connection with Jonnie Williams Sr. and Star Scientific in precisely the way one would expect: Other than providing access to government, something that every governor does, he said, he did Williams no favors. As the Times-Dispatch summarized his testimony, “He never used discretionary funds at his disposal to give Star Scientific a grant, never paid a site visit to the company, and never held a news conference or issued a news release for the company.”

The fact that people are disgusted with the influence of money in politics is not an argument for convicting McDonnell. If McDonnell can be sent to jail for arranging meetings between Williams and state officials, then every living governor in Virginia had better start taking measurements for their orange prison jump suits. As for failing to disclose the real estate loans from Williams in loan applications to a bank and a credit union, the defense has made the case that he wasn’t required to — and the prosecution hasn’t presented a shred of evidence to suggest otherwise.

The only thing that can change the course of this trial is an aggressive cross-examination by the prosecution. If McDonnell comes across as contradictory or evasive, he could raise doubts that don’t exist now. But at this point, it does not appear that federal prosecutors have a case.

— JAB

Mo Maureen and Po’ Maureen

Mo McDonnell

Mo McDonnell

by James A. Bacon

More interesting testimony from the McDonnell trial yesterday. In the balance, the defense bolstered its case. But it was not entirely convincing.

The other Maureen. Mo McDonnell, Bob McDonnell’s little sister, was a successful business executive who had worked for IBM, Regent University and Amerigroup, culminating with a salary of $540,000 in 2012 and accumulating savings of more than $1 million. Mo testified that she had more than enough money to cover the cost of maintaining the troubled MoBo Real Estate Partnership, undercutting the prosecution’s argument that Bob borrowed money from Star Scientific CEO Jonnie Williams out of desperation to keep the real estate partnership afloat. Indeed, when her bother decided to repay the loans to Williams, she was the one who fronted him the money to do so.

Although she could have covered any shortfall herself with a $150,000 payment she received when she left Amerigroup, she explained, she and Bob decided that interest rates were so low that it made more sense to borrow the money so she could invest her own funds at a higher rate of return.

Really? I’m not sure that passes the smell test. She is asking jurors to believe that it made more sense to borrow money from Jonnie Williams, even though Bob knew how it would look if the loan were made public and even though he had discussed with Williams (if we are to believe Williams) ways to avoid disclosure. Any reasonable person would conclude the exact opposite, that it made far more sense for Bob to borrow the money from his sister in a transaction that would have created no questions — as he ultimately did when he repaid Williams. If I were the prosecution, I would hammer that hard. It is not a convincing explanation. My hunch: There is more to the story, and we haven’t heard it yet.

Poor Maureen. Mo McDonnell and Kathleen Scott, a special assistant to the governor’s wife, provide new details on the first lady’s state of mind. The story of Po’ Maureen’s out-of-control behavior has been so consistent throughout the trail that there is little point in enumerating all the anecdotes here. But one round of testimony advances us to a new level of understanding.

Although McDonnell defended his wife to others, he acknowledged that she had a problem.  As Mo testified (as reported by the Virginian-Pilot):

The first lady once reduced her to tears with a biting comment during a weekend family gathering in 2012, McDonnell’s sister testified. She told her husband she wanted to leave.

“Bob came up and apologized and begged me to stay,” she said. “He said he was working on it. He was trying to get her help.”

As I have observed in previous posts, it is obvious that Po’ Maureen was suffering from depression, mood swings, hysterical outbursts and other signs of mental illness. This testimony confirms that while Bob coped by withdrawing and tuning her out, he also recognized she had a problem. I would not be surprised if testimony reveals that she sought psychiatric treatment and at some point took medication.  The McDonnells may not choose to release this information because they consider it private and shameful. They should not. Millions of Americans suffer from depression and related disorders. Suffering from depression is not a moral failing. (The behavior resulting from depression can be but the depression itself is not.)

Acknowledging Maureen’s mental illness would not excuse illegal or unethical conduct, especially on Bob’s part, but it would would put the McDonnells in a different light than the prosecution’s explanation, that Bob joined in a calculatingly immoral conspiracy with his wife to commit fraud. Also, the Maureen-the-depressed-wife seems less harsh and demeaning than the Maureen-the-bitch defense.

Throwing Maureen under the Bus

maureen_mcdonnellby James A. Bacon

The full dimensions of the McDonnell family tragedy came into clearer focus yesterday as attorneys representing Maureen and Bob McDonnell launched the defense phase of the corruption trial… by throwing Maureen under the bus. Defense witness Janet Kelly, Secretary of the Commonwealth in the McDonnell administration, described as “diva-ish” and so difficult with work under that her staff threatened to quit en mass.

Maureen’s behavior was so out of control that those in the governor’s inner circle wonder if she suffered from a mental illness. The picture painted by Kelly was of a woman who was isolated, miserable and unable to grow into the job. Kelly’s relationship with Maureen had deteriorated to the point she could not work with her even before Bob took office, but she did evince some sympathy for the first lady. Breaking down in tears at one point, she said she did not want to “pile on.” As the Washington Post summarized her testimony:

Maureen McDonnell repeatedly told her that being first lady was not something she had wanted. She was uncomfortable with public speaking and, in her first year in the mansion, lost both her parents and sent her youngest children to college — all while essentially losing her husband to his job.

“She would say, ‘I didn’t sign up for this. This isn’t what I wanted,’ ” Kelly testified. “It was a lot for her.”

Perhaps most germane to our understanding of the relationship between the former governor and his wife — defense attorneys said the marriage was in such bad shape that the two could not have conspired to swap gifts for favors with Star Scientific CEO Jonnie Wiliams Sr. — Kelly testified that the displays of affection in public between Bob and Maureen hid a deeper alienation. In private settings, she would rage at him.

Bacon’s bottom line: More pieces are falling into place. Bob McDonnell was an ambitious man. What he wanted out of life — political fame and success — wasn’t what Maureen wanted. Family finances were a mess before the family entered the governor’s mansion, made worse by extensive borrowing during the gubernatorial campaign. Maureen was ill equipped to fill the role of first lady; she didn’t ask for the job but she was stuck with it. Unable to handle the stress of the position on top of the deteriorating family finances, she flew into rages, alienated many of the people around her, including her husband, which made her situation even worse. She gravitated to Williams, who plied her with attention, gifts and what seemed to be friendship. (Kelly’s testimony supports my observation in a previous post that her behavior seemed indicative of clinical depression, a phenomenon that takes on a life of its own.) It’s a sad story, even a tragic one.

None of this excuses breaking the law (if laws are shown to be broken). None of it exonerates the McDonnells for showing terrible judgment by accepting gifts from Williams. Wrong is wrong, whatever the psychological explanation. But it does provide a context for understanding and interpreting what happened. And the picture we’re getting is of a vulnerable woman preyed upon by Williams to extract political favors from the administration.

The Prosecution Closes on a Weak Note

Bob McDonnell: Now it's time to hear his side of the story.

McDonnell: Ready to give his side of the story.

by James A. Bacon

The U.S. Justice Department closed its case in the McDonnell trial on a weak note Thursday as cross examination of FBI Agent David Hulser confounded the narrative prosecutors were trying to establish of a financially desperate first family.

Previous testimony had revealed the seemingly damning fact that Maureen and Bob McDonnell had accumulated $90,000 in credit card debt before entering the governor’s mansion. I blogged my personal shock and dismay at the revelation that the McDonnells had run up such a massive credit card debt. I had viewed that fact in the context of Maureen McDonnell’s oft-cited complaint that her credit cards were maxed out and her grabbiness in soliciting gifts and loans from Star Scientific CEO Jonnie Williams. I drew precisely the conclusion that the prosecution hoped I would: that the McDonnells had run up the tab imprudently, perhaps recklessly.

But it turns out there was more to the story. One reason for the big credit card bill was Bob’s run for governor. He had resigned from his position as Attorney General in February 2009 so someone else could take the helm. He was not exactly left penniless — he made $129,000 during the campaign by going on the payroll of his former law firm, Huff, Poole & Mahoney. Still, as McDonnell told reporters after the trial proceedings, running for governor is expensive.

Yesterday, new dots were added to the page, allowing the jurors (and bloggers) to connect them differently. Under questioning by Henry Asbill, one of Bob McDonnell’s attorneys, Agent Hulser conceded that McDonnell’s credit scores were excellent and that the prosecution had presented no evidence to suggest that he had failed to pay his credit card bills on time. Hulser also conceded that the McDonnells’ credit cards had untapped credit on them, although he could not confirm Asbill’s assertion that the amount approached $175,000 to $200,000. All that came atop previous testimony that the first family had paid down its credit card debt to $31,000 in April 2011 after Maureen received an inheritance and Hulse’s concession that the McDonnells had repaid three loans to Williams totaling $120,000, as had been the intention all along.

Furthermore, here are questions that any reasonably intelligent juror would ask that the prosecutors did not answer:

  • What were the monthly minimum payments on the credit cards?
  • What was the gap between PITI (principal, interest, tax and insurance) on the McDonnells’ former residence in Henrico County and rental income ?
  • What was the gap on their Wintergreen property?
  • What was the gap on the two Virginia Beach houses held in partnership with Bob’s sister?
  • What was the gap on the McDonnells’ Alexandria rental property?
  • What was the income or loss on all those properties? How much of a financial hardship did that pose to a governor earning $175,000 a year and living rent-free in the governor’s mansion?
  • Did the McDonnells subsequently succeed in restructuring their debt? Did a bank and/or credit union deem them credit-worthy?

There’s a lot we don’t know about the McDonnell family finances. This lacunae in the data hardly lets the McDonnells off the hook for soliciting gifts and loans from Williams, a man who was seeking favors from the governor. No matter how you cut it, Bob and Maureen showed colossally bad judgment. The “optics” were terrible. But bad optics are not, in themselves, illegal. And the burdenof proof rests with the prosecution.

While the prosecution did successfully portray the McDonnells as under financial pressure, it hardly made the case that they were desperate. During the time in question, McDonnell was trying to restructure his family finances through loans from the Pentagon Federal Credit Union and Towne Financial Services Group. If he could roll over his debt until his term expired, he could repay it once he started making $500,000 a year or more as a rainmaker for a big Virginia law firm or occupied a well-paid sinecure as a university president somewhere.

That still leaves the seemingly incriminating omission of the Jonnie Williams loans in Bob McDonnell’s loan applications to the Pentagon Federal and Towne Financial, which in previous posts I had regarded as potentially the most damaging charges against the former governor. Why would McDonnell seek to cover up those loans — a potential felony — if not for nefarious purposes?

That question assumes that McDonnell was covering up anything. Defense attorneys revealed their line of logic during cross-examination Wednesday. True, McDonnell submitted a loan application that omitted reference to the Jonnie Williams loans. And, true, after police began asking questions, McDonnell submitted a revised loan document that included the Williams loan information. John Brownlee, McDonnell’s attorney, argued that the governor’s revisions to the loan document were part of an ongoing process before the application was finalized — a process that was extended due to McDonnell’s preoccupation with the legislative session. It turns out he had omitted other data as well, not just the Williams loan. The revised document included a car not mentioned previously. Finally, the Pentagon Federal loan manager testified that she was not surprised to see the revisions. Apparently, such revisions are common.

As for the loan application submitted to Towne Financial, President William Sessoms (who also is Virginia Beach’s mayor) testified that a personal financial statement such as the one McDonnell filled out need not have included mention of debt owed by his wife ($50,000) or by a limited liability company such as MoBo Real Estate Partners.

Bacon’s bottom line: The prosecution case is looking surprisingly weak — and that’s before McDonnell testifies on his own behalf. The prosecution has managed to air a lot of the McDonnell family’s dirty laundry. And it has exposed activities that, if not illegal, perhaps should be illegal. However, if I were a juror rendering a verdict based on what I know at this moment in time, I would vote to acquit. But I have flip-flopped a couple of times already on this trial, and I may well do so again.

Another Day Older and Deeper in Debt

Bob McDonnell. Photo credit: Washington Times

Bob McDonnell. Photo credit: Washington Times

OMG! Maureen and Bob McDonnell owed $75,000 on seven credit cards when Bob took office as governor in 2010. Their credit card debt peaked at $90,000 later that year. The first family managed to pay down its debt to around $31,000 the next year, apparently after Maureen inherited some money, according to the Times-Dispatch.

Think about it: They owned a McMansion in Richmond’s West End, a resort property in Wintergreen, and (co-owned) two beach properties in Virginia Beach. And had $90,000 in credit card debt. And racked up another $220,000 in debt from private individuals, including Jonnie Williams, Sr., president of Star Scientific, to keep their Virginia Beach properties afloat.

I’m wondering if this sheds light on McDonnell’s approach to government. The hallmark of his transportation policy was a willingness to borrow billions of dollars, and then to leverage that state debt through added toll-backed public-private partnership debt. Was there a connection between his views on personal debt and his views on state debt? Perhaps.

The common denominator, one could argue, was a proclivity to engage in best-case-scenario thinking and an inability or unwillingness to consider that things might go wrong. A more prudent man would not have allowed the state to get in the jam it did by rushing the U.S. 460 upgrade — a fiasco that could expose taxpayers to $300 million or more in losses.

As always, I’ll reserve final judgment until after I hear McDonnell’s defense. But I’m not feeling very charitably inclined toward the man at the moment.

— JAB

Sands Shift under McDonnell Defense

eroding_beachfront

Eroding defense…

by James A. Bacon

The McDonnell trial resumed yesterday as the prosecution brought in more witnesses to dot i’s and cross t’s on its case that Maureen and Bob McDonnell conspired to grant official favors to Star Scientific President Jonnie Williams Sr. in exchange for more than $150,000 in loans and gifts. There were no big surprises in the day’s testimony, but details emerged that put the spotlight, long focused on Maureen’s outrageous behavior, back on Bob.

We now have a clearer idea of what a drain the real estate investments caused for the first family, which relied primarily upon Bob’s $175,000-a-year governor’s salary to pay its bills. We also have a better idea why Bob was so eager to obtain those $70,000 in real estate loans from Williams.

Last week, I laid out some numbers suggesting that the cost of maintaining McDonnells’ house in the West End of Richmond was costing the family roughly $1,000 more than it could generate in rent.

Yesterday’s testimony alluded to the fact that the McDonnells also owned a propertycalled Blue Ridge Heaven in the Wintergreen mountain resort  — providing more evidence of the family’s financial over-reach. While Wintergreen does rent out privately owned properties, generating some income for absentee owners, it is entirely possible that Blue Ridge Heaven also represented another drain on family finances.

The most interesting testimony came from Michael Uncapher, recently divorced from McDonnells’ sister Maureen. He testified that Bob and sister Maureen had purchased two houses across the street from one another in Virginia Beach as a gathering place for the McDonnell clan. Although they planned to rent the houses, the 2005 purchase was never seen as a money-making investment; the property was primarily for the family’s enjoyment.

Bob’s sister, it transpires, is a successful business executive. According to Uncapher, she earned more than $500,000 in 2012 — a fact the defense elicited to counter the prosecution’s claim that Bob and (wife) Maureen were financially desperate. Her ability to meet her share of the obligations was never in question. Only a few days after Bob accepted loans from Williams, she earned a $70,000 bonus.

The defense seems weak. MoBo Real Estate Partners was experiencing difficulties. Between 2008 and 2012, the business was losing between $50,000 to $60,000 a year. Under cross-examination, Uncapher, who had managed the two properties, conceded that his financial mismanagement contributed to the partnership’s money problems. The partnership borrowed $100,000 from McDonnell’s father John in 2007 and another $50,000 from Dr. Paul Davis, a radiologist in 2009 before borrowing $70,000 more from Williams in 2012. If piling up $220,000 in extra debt over seven years is not a sign of financial desperation, what is?

While many of the first couple’s financial problems can be laid at the doorstep of the free-spending first lady, MoBo was a partnership between Bob McDonnell and his sister, the stated purpose of which was to create a place where the families of brother and sister could enjoy vacation time together. There is nothing in the testimony that wife Maureen had anything to do with that investment. While the circumstances are still unclear, my working hypothesis is that the Virginia Beach real estate investment was Bob’s doing.

I’m surprised the prosecution hasn’t done a better job of piecing together the McDonnell family finances. Maybe we’ll see more testimony as the trial continues. As a juror, I would want to know exactly how much money the McDonnells owned on their Wintergreen, Henrico and Virginia Beach properties, how large their Principal/Interesting/Taxes/Insurance payments were, how much they were spending on maintenance, how much they were generating in rentals, and how big the negative cash flow was. The drain could have been immense, and it could explain a lot of the McDonnells’ behavior.

Update: Subsequent testimony revealed that late fees were imposed 18 times for late payment on the smaller of the two beach house mortgages and 29 times for the larger loan.

Bob Takes a Hit

A rare smile from Maureen McDonnell at the federal courthouse in Richmond. Photo credit: Times-Dispatch

A rare smile from Maureen McDonnell at the federal courthouse in Richmond. Photo credit: Times-Dispatch

by James A. Bacon

Bob McDonnell took a big hit yesterday in the corruption trial against him and his wife Maureen. He has a lot more explaining to do about his knowledge of his wife’s ownership of Star Scientific stock.

Before yesterday, the testimony of prosecutor witnesses had focused overwhelmingly on the out-of-control behavior of Maureen McDonnell in soliciting gifts from Star Scientific CEO Jonnie Williams Sr. and using her influence as first lady to promote the interests of his company. The governor himself had remained in the background, seemingly a passive or reluctant participant in his wife’s dealings.

But testimony of John Piscitelli, a Virginia Beach stock broker and godfather to the McDonnells’ youngest daughter Rachel, portrayed Bob as a willing and active collaborator in the handling of the Star Scientific stock, even as Maureen went to great lengths to conceal public disclosure of her ownership of the stock. As summarized by the Times-Dispatch:

In June 2011 Jonnie Williams wrote Maureen a $50,000 check in advance of her trip to Florida to promote Star’s Anatabloc supplement at an investors meeting. She used $30,000 of the loan to purchase shares of Star Scientific stock. State disclosure law required the governor to list securities held at the end of the year if the value exceeded $10,000. Maureen asked Piscitelli how she might maintain ownership of the stock without keeping it in her name. That proved impractical, so she sold the shares in December 2011 and bought back the stock in January 2012, thus dodging the reporting requirement.

There had been no evidence presented that Bob knew about any of this activity, and given Maureen’s proclivity for doing things behind his back, it seemed plausible to suggest that he remained ignorant of it. However, Piscitelli testified of a February conference call with both Bob and Maureen in which they discussed opening a second brokerage account, also in Maureen’s name, into which they would deposit Star Scientific stock. The plan was to borrow against the value of the securities.

Here’s the killer (quoting from the T-D account): “Piscitelli acknowledged that during the conversation,  the governor thanked him for helping his wife in other transactions.”

This opens up the possibility that the governor was more deeply involved in Maureen’s stock-trading activities than has been revealed so far. If he doesn’t have a plausible explanation for this testimony from a close family friend, jurors will be asking themselves what else he knew.

The Beat Goes On…

Bill Hazel, secretary of health an human resources. Photo credit: Virginian-Pilot.

Bill Hazel, secretary of health an human resources. Photo credit: Virginian-Pilot.

Testimony continued yesterday in the Maureen and Bob McDonnell corruption trial as the prosecution brought more witnesses to the stand. There were no major revelations but trial junkies were treated to a number of small but telling details.

Snake oil. We’ve known from the beginning that Bill Hazel, former governor McDonnell’s secretary of health and human resources, was skeptical of Star Scientific CEO Jonnie Williams, Sr.’s claims regarding the company’s Anatabloc supplements. We just didn’t know how skeptical. It turns out that Hazel regarded Williams as one step removed from a snake oil salesman. He found Williams’ claims “unbelievable,” adding, “I won’t even put the stuff in my mouth.” What’s not clear is how forcefully he conveyed that skepticism to the McDonnells.

A couple in love. The McDonnells struck Sarah Scarbrough, then-director of the Executive Mansion, as a “happy, in-love couple.” The governor made time for his family and “worshiped the ground” that Maureen walked on, frequently kissing her on the cheek. Scarbrough’s testimony buttressed that of Mary-Shea Sutherland, the first lady’s chief of staff, that the McDonnells had regular family dinners together and made romantic gestures to one another. Sutherland had described previously how Maureen had sought to purchase a yellow dress because the governor had “fallen in love with her in yellow,” and how Bob had composed her a “lovely” poem. Then, of course, there was the infamous $6,000 Rolex watch that Maureen gave Bob for Christmas.

These recollections seemingly conflict with the defense’s claim that the couple’s relationship was so rocky that they barely spoke to one another, making it implausible that they would conspire on how to trade favors for gifts with Williams. However, Scarbrough did say she did not believe that the couple communicated well with each other.

Scarbrough also confirmed Sutherland’s testimony that Maureen was often sad and upset and that her management style was “her way or no way.” The first lady also could be sneaky. On more than one occasion she would invoke her husband’s name to get things done, such as the time she ordered Anatabloc placed in gift bags handed out at a function when, in fact, the governor had asked for no such thing.

Maureen’s friend. One of the few concrete actions Bob McDonnell took on behalf of Jonnie Williams was setting up an interview with health secretary Hazel. As Hazel recounted the event, the governor told him that Williams was a “very good friend” of his wife’s and “he wanted me to meet with him.” That quote supports my narrative that Maureen was the driving force behind granting favors to, and soliciting gifts from, Williams (again, with the possible exception of the real estate loans), and that (most of the time) McDonnell went along to avoid conflict with his wife. By asking Hazel to meet with a good friend of his wife, as opposed to a good friend of his, he was distancing himself from the request.

More meddling. Hazel’s testimony highlighted another favor Maureen did for Williams: meddling in a “Healthcare Leaders” luncheon at the governor’s mansion organized in February 2012. Maureen insisted upon adding multiple guests affiliated with Star Scientific to the guest list. Hazel refused to use his department’s budget to pay for the added guests. ““I was not excited to see these outsiders, who were not considered leaders, involved,” Hazel said.

I’m still sticking with my narrative that the McDonnell marriage was a mess. Even bad marriages have ups as well as downs, depending upon the mood swings of the more erratic partner. I find it entirely plausible that Bob would try to sooth an unhappy spouse, who felt lonely and neglected, through occasional displays of affection. I also find it plausible that the first couple would try to put on a brave front for the benefit of outsiders. Still, there’s no denying that the testimony is ambiguous. Any objective person would have to remain open-minded on the issue.

A reminder to my blog critics: An interpretation of the testimony that says Maureen was the motive force behind the exchange of gifts and favors with Williams while Bob went along reluctantly to avoid conflict (with my usual caveat regarding McDonnell’s submission of incomplete information on loan documents)  does not justify any illegal or unethical actions either one of them might have taken. People do things they shouldn’t do for all sorts of reasons — greed, lust, revenge, whatever. A reluctant lawbreaker is a lawbreaker nonetheless. By exploring the personal dynamics in the McDonnell family, I am not “defending” anyone. I am not trying to exonerate anyone. I’m simply trying to understand what went so wrong and reach a conclusion, as the jury will have to do, of whether the McDonnells are guilty or innocent of the charges with which they are being tried.

Out of Control

Mary-Shea Sutherland. Photo credit: Times-Dispatch

Mary-Shea Sutherland. Photo credit: Times-Dispatch

by James A. Bacon

With each new day of testimony, the trial of Maureen and Bob McDonnell is becoming more a trial of Maureen and less a trial of Bob. There was abundant evidence in previous testimony that the former first lady was out of control, sending members of the former governor’s staff scrambling to rein in inappropriate behavior. But yesterday’s testimony revealed that life was even worse inside the governor’s mansion, where there was no buffer between Maureen and those who worked under her. It is increasingly clear that the first lady was the motive source of the outrageous behavior that prompted the charges against her husband and her.

As Mary-Shea Sutherland, former chief of staff to the first lady, described her in testimony yesterday, Maureen was the boss from hell. Sutherland depicted Maureen as “a screamer” and a “nutbag” who frequently tongue-lashed the staff. The incidents were so frequent and so bad that Sutherland conferred with Bob’s chief of staff, Martin Kent, about incidents involving Maureen, including “a lot of yelling and screaming” about reimbursements the first family would have to make to the state.

“It was almost two years of emotional stress,” Sutherland testified. “I couldn’t protect the staff. It was a state of constant stress; going to work in the morning with your stomach in a knot.”

Finally, Sutherland couldn’t take it anymore and started looking for another job. She approached Jonnie Williams Sr., president of Star Scientific, who has testified that he lavished gifts upon the McDonnells in the hope of gaining their assistance in promoting his Anatabloc vitamin supplement. Williams promised her a job, backed down and then told Maureen about it. That disclosure, reports the Times-Dispatch, sent the first lady on a tear through Sutherland’s office. Maureen demanded Sutherland’s computer password and rifled through her desk.

Sutherland’s testimony is of more than voyeuristic interest. It further illuminates the dysfunction within the governor’s household during a period in which Maureen and Bob McDonnell accepted gifts and loans from Williams exceeding $150,000 in value and acted in various capacities to promote his product and solicit state research funds for his company. So far, the evidence suggests that Maureen initiated all, or nearly all, of the incidents under investigation.

That is not to condone Bob’s behavior in going along — it is simply to explain it. I have conjectured that Bob engaged in conflict-avoidance behavior, torn between doing what he knew to be ethical and a desire to escape his wife’s harangues. I believe that Bob labored long, workaholic hours on state business, in part to avoid a conflict-ridden home life, and left his wife to rule the roost. Previous testimony, by son Bobby McDonnell, describes how McDonnell had objected to Bobby accepting a gift of new golf clubs from Williams but how Bobby and Maureen overrode him.

By facilitating meetings between Williams and state officials, a routine favor dispensed by governors, and by appearing at promotional events, Bob sought to do enough to assuage Maureen but not too much, he hoped, to cross into illegality. He may have crossed the line, however, when accepting loans from Williams to bail out his bad real estate investments and, allegedly, conspiring to hide the transaction. (We’ll have to hear his testimony before drawing firm conclusions.)

Sutherland’s testimony provides other clues about the McDonnell-family dysfunction. Maureen’s out-of-control behavior may well have been the cause of the family’s terrible finances in the first place. As she told Sutherland while shopping for her inaugural wear in New York, her credit cards were “maxed out.” In other words, Maureen had been trying to live a champagne lifestyle on a beer budget long before she reached the governor’s mansion and met Jonnie Williams.

Maureen told Sutherland that her family was “buried in debt” due to expenses and sagging real estate investments. Notably, though, she did not want to sell the family’s $835,000 home in Wyndham, in the affluent West End of Henrico County. That remark was highly revealing.

Let’s do a little math. Let’s assume the McDonnells paid a 20% down payment when they purchased the house in late 2005/early 2006 when Bob took the job of attorney general. That would have left them with a mortgage of about $670,000. Let’s assume they paid a 7% interest rate, which was prevalent at that time. That would imply annual payments of principal, interest, taxes and insurance of more than $50,000 a year, or a third of the AG’s salary and more than is financially prudent. It’s possible that they refinanced at lower rates in later years, bringing down the payments somewhat but the overall burden would not have changed significantly. If they paid a smaller down payment, the burden would have been commensurately higher. Continue reading

The Damage-Control Patrol

Jason Eige (left) with Bob McDonnell on Legislative Day, 2013. Photo credit: Times-Dispatch.

Jason Eige (left) with Bob McDonnell on Legislative Day, 2013. Photo credit: Times-Dispatch.

by James A. Bacon

In New Jersey’s Bridge-gate scandal, Governor Chris Christie was cursed (if you believe his story) by underlings who made bad decisions that landed him in political hot water. In Virginia’s Gift-gate scandal, former Governor Bob McDonnell was blessed by underlings whose advice and actions kept him out of trouble — at least in those matters in which they were consulted.

But Jasen Eige, Phil Cox and Molly Huffstetler — all three of whom testified at the McDonnell trial yesterday — were powerless to protect the governor and his wife Maureen from bad judgment in matters they kept entirely to themselves.

As Jim Noland and Frank Green sum up the day’s testimony for the Times-Dispatch, “It is clear that a number of the governor’s aides and political advisers either were wary of [Star Scientific CEO and favor-seeker Jonnie] Williams, did not take him seriously or warned the first couple about the appearance caused his by his ostentatious gifts.” But they were unaware of the extent to which Williams was bankrolling the family because the McDonnells never told them.

McDonnell’s aides frequently engaged in damage control.

  • The dress. When Williams offered to buy Maureen McDonnell an Oscar de la Renta dress for the inaugural ball, Jason Eige, senior policy adviser to McDonnell, nixed the offer. With the company coming out of a recession, it would not look good for her to wear such expensive apparel. Phil Cox, the governor’s former campaign manager, also acted to dissuade the First Family from accepting the gift.
  • The clinical trials. When the governor e-mailed him about meeting to discuss Virginia Commonwealth University and University of Virginia research support for Williams’ Anatabloc dietary supplement, Eige warned, “We need to be careful with this issue.” It is not clear from newspaper accounts whether that meeting ever transpired, but it appears that the governor did not pursue the matter.
  • The clinical trials (redux). Huffstetler, a top aide to Health and Human Resources Secretary Bill Hazel, met at the governor’s request with Williams and the First Lady in her office for an hour. She listened to Williams’ pitch for state support then responded with “a blowoff email.” In private, she referred to Williams as “the Tic Tac man.” The governor did not pursue the matter.
  • The board appointment. When Maureen inquired about an appointment to the Star Scientific board, Eige expressed his concern that such an appointment would have “bad public optics.” That ended that.
  • Tobacco money. When Maureen complained that VCU and UVa were not applying for grant money from the Tobacco Indemnification and Community Revitalization Commission to research Anatabloc, and asked to set up a meeting, Eige stalled. Even though the first lady had stated the governor shared her concern, Eige never heard from him. The stall worked and the meeting was never scheduled.
  • The launch luncheon. Maureen arranged the use of the governor’s mansion to host the product launch of Anatabloc. Eige and other top aides warned that was not an appropriate use of state property. Eige managed to downgrade the event from a product launch to a luncheon in which Williams would distribute research grants to medical school researchers. He and Communications Director Tucker Martin also edited a Star Scientific press release to remove mention of the Governor and First Lady to avoid the appearance that they were endorsing a particular product.
  • Pitching Ann Romney. On a campaign bus with Republican candidate Mitt Romney and his wife, Maureen pitched Ann Romney on the benefits of Anatabloc. “I was horrified,” testified Cox. “I thought it was a train wreck. I thought it was improper that Maureen would try to push this product on Ann Romney.” He interrupted the sales pitch at a break in the conversation and helped change the subject.

Here’s my hypothesis of what was going on. Bob McDonnell didn’t like saying, “No,” to his wife. (Perhaps we’ll get testimony of what domestic life was like in the governor’s mansion but testimony so far suggests that she had a very bad temper.) He knew that some of the things she wanted to do were either potentially illegal or had “bad optics” but didn’t have the emotional stamina to stand up to her nagging and harangues. It was easier to kick things over to staff and let them take the heat.

And take the heat they did. As Eige testified in connection to block the purchase of the Oscar de la Renta dress, the first lady “wasn’t happy with us [regarding] the dress situation.” Likewise, Cox described her response as “an insane rant of an e-mail.” In a different incident, according to Willliams, Maureen’s chief of staff Mary-Shea Sutherland asked him for a job, confiding that “she was tired of the way she was treated.”

It is notable that McDonnell never applied pressure on his staff to do anything other than meet with Williams. He could plausibly say to Maureen and Williams (my quotes) that he “did something” by setting up a meeting, which was a routine gubernatorial practice, but “there was only so much he could do.” As a former Attorney General, McDonnell assuredly knew where the line of legality was, and he knew not to cross it…. in most instances.

As some have observed, it is “ungallant” to heap the blame on Maureen. But it’s hard to avoid doing so. Every scintilla of evidence presented so far suggests that the first lady was out of control. When frustrated, she flew into fits of anger. Her husband couldn’t handle her. His aides were continually running damage control.

As far as McDonnell himself, the most troubling evidence to surface to date is that which suggests he conspired with Williams to take two real estate loans totaling $70,000 to bail out his bad real estate investments and discuss how to cover up the transaction. I withhold judgment until McDonnell gives his side of the story. But he’s got some serious explaining to do.