Profiting from Political Connections?

This is a partial transcript from The O'Reilly Factor, January 29, 2002. Click here to order the complete transcript.

O'REILLY: In the "Impact" segment tonight, profiting from power. A company named Global Crossing, which owns fiber cable lines all over the world, has gone under with its debt topping $12 billion. But as we told you in the Talking Points memo, its CEO, Gary Winnick, took out seven -- more than $700 million for himself, and DNC chief Terry McAuliffe made nearly $18 million trading the stock.

Meantime, the stockholders are hosed. Joining us now from Washington is Fox News analyst Jeff Birnbaum, Fortune magazine's Washington bureau chief. All right. What do you think of McAuliffe?

JEFF BIRNBAUM, FOX NEWS ANALYST: Well, I think he's doing exactly what a lot of people in power have done and probably will continue to do, which is to profit from their political connections.

O'REILLY: All right. Tell me how that's done.

BIRNBAUM: Well, in McAuliffe's case, what he did is meet a political contributor, Gary Winnick, who was the founder of Global Crossing, and before anyone even publicly was able to buy stock in Global Crossing, Winnick invited McAuliffe, urged McAuliffe, to invest privately $100,000 back in 1997, and that grew by 1999, just a couple years, to $18 million after that company went...

O'REILLY: All right. Now, when you say he...

BIRNBAUM: ... went public.

O'REILLY: ... invited him to invest privately, that's before the IPO?

BIRNBAUM: That's correct...

O'REILLY: All right. So he gets in...

BIRNBAUM: ... (UNINTELLIGIBLE).

O'REILLY: ... he gets a piece of the company, is what he gets, if he invests $100,000, he gets equity in the company, right?

BIRNBAUM: That's -- that's...

O'REILLY: And a certain amount of shares when it, when it becomes public. And it went to $60 a share. All right? So his $100,000 becomes $18 million.

Now, the trick is, when do you sell? Jack Kemp over here told me he lost money in Global Crossing. He didn't know when to sell, he held onto it, 60 down to nothing. Now, I say, to me it looks like Winnick said, Hey, you know, this might be a good time to get out.

BIRNBAUM: That could very well be, I wouldn't doubt it at all. I think what we'll hear from McAuliffe is that he wishes he held onto it just a little bit longer, because the stock continued to rise even after he sold most of it in 1999. But there's no question that he had the advantage of his political connections making money for him initially, and that he made out like a bandit...

O'REILLY: Is it naive...

BIRNBAUM: ... (UNINTELLIGIBLE)...

O'REILLY: ... is it naive to -- of me to think, when Gary Winnick, the CEO of Global Crossing, goes golfing with Terry McAuliffe and Bill Clinton, that Gary Winnick doesn't discuss his company?

BIRNBAUM: Gary Winnick clearly discusses his company, his political interests. He gave a million dollars to the Clinton Library, was a contributor. And getting that kind of access to the president of the United States is extremely rare and worth whatever...

O'REILLY: Right, and Bill Clinton couldn't...

BIRNBAUM: ... (UNINTELLIGIBLE) pay for it.

O'REILLY: ... buy stock because of the position he holds, just as none of the Bush administration people. They had to sell all their stock in Enron. Some of them had holdings in Enron, and they sold, luckily -- lucky for them.

Now, this is on both sides of the aisle, correct?

BIRNBAUM: That -- that...

O'REILLY: I mean, powerful people in Washington use access to big business people like CEOs to get tips.

BIRNBAUM: That's exactly right, and we've seen a history of it going back into the 1980s. Nineteen eighty-seven, you might remember, Tony Coelho, who was then a Democratic leader in the House of Representatives, he went on to chair the Gore campaign, you might also remember, he had to leave the House under a cloud because he was put into a special bond deal where he made tens of thousands of dollars and didn't disclose it all. That was clearly a special deal. He actually got a loan that he didn't

disclose to buy into that deal.

O'REILLY: Right.

BIRNBAUM: But Tom Foley, the speaker of the House, made about $100,000 over four years on IPOs, initial public offerings, as you mentioned before, that is when you get in at the ground floor with a

special deal just as a company is going public...

O'REILLY: And how about...

BIRNBAUM: ... he made a -- he...

O'REILLY: ... Senator Gramm and Enron?

BIRNBAUM: That's -- well, Senator Gramm -- the one I was going to talk about, and the more notorious case, was Senator Alfonse D'Amato back in the early 1990s. He made $37,000 in one day on an IPO. And so Torricelli, when he was the congress -- the senator from New Jersey when he was a congressman also did some insider -- not insider trading, IPO advantage trading. Senator Boxer of California, it was pretty widespread.

It doesn't happen as often now. There's no prohibition against it. But clearly because members of Congress have to disclose their securities trades, the, the, there is a taint when people see fast...

O'REILLY: But they still do it.

BIRNBAUM: ... profit being made.

O'REILLY: They still do it.

BIRNBAUM: I think -- they still do it, they don't do it as much, and they probably won't do it as much this year because it's a lot riskier venture...

O'REILLY: Right.

BIRNBAUM: ... than it was in the 1990s.

O'REILLY: But operatives like Terry McAuliffe are basically private citizens, and they can do whatever they want to do. There's no ethics binding them.

BIRNBAUM: That's exactly right. But it is also fair to say that what McAuliffe is doing is combining his political activities with his business activities...

O'REILLY: And he's always...

BIRNBAUM: ... in fact...

O'REILLY: ... admitted that he does that.

BIRNBAUM: In 1999, in "The New York Times" Jeff Gerth article, McAuliffe said that he made his business connections through his political connections...

O'REILLY: Yes. All right.

BIRNBAUM: ... he was very open about that.

O'REILLY: But I'll tell you what, the Democrats lost any momentum they might have built up on Enron with the Global Crossing thing. That's over, that's over.

BIRNBAUM: (UNINTELLIGIBLE) -- I think...

O'REILLY: Because people know they...

BIRNBAUM: ... I...

O'REILLY: ... both do it.

BIRNBAUM: I think...

O'REILLY: Jeff, we got to run.

BIRNBAUM: All right.

O'REILLY: And we appreciate you coming on very much.

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