Corzine in hot water again today
nj.com
Corzine has money in casino owner's firm
'If that is an issue,' he will sell, he says
Friday, August 05, 2005
BY JOSH MARGOLIN
Star-Ledger Staff
Five weeks before he announced his candidacy for governor, U.S. Sen. Jon Corzine invested $7 million in a firm owned and controlled by one of New Jersey's casino operators.
Corzine invested in Icahn Partners LP, a privately held hedge fund headed by Carl Icahn, whose casino holdings include the Sands Atlantic City. By the end of last year, the Democratic candidate had earned up to $100,000 from the Icahn investment, according to his Senate financial disclosure statement.
New Jersey's Conflicts of Interest Law bans governors from holding financial interests that pose a "reasonable risk of the public perception of a conflict of interest" with gambling companies.
When asked about the investment yesterday, the state's senior senator acknowledged it could present a conflict of interest if he were elected governor, and he vowed to rid himself of his interest if he won his November race against Republican Doug Forrester.
"This one is a no-brainer. There's no reason to have that conflict," Corzine said. "If that is an issue -- and I guess it would be -- then it will be liquidated. ... It would be no hesitation whatsoever to divest."
Corzine's donations and investments have come under scrutiny since he announced his candidacy for governor. Republicans have criticized his $9 million in donations to Democratic causes, charging he has financed "political bosses." He also donated $32 million to charitable organizations, including vast sums to groups tied to political figures.
Yesterday he defended a $470,000 gift he gave to his former girlfriend, Carla Katz, the president of the largest state-employees union local. The money was first presented to her as a loan in 2002; he forgave the debt a week after he kicked off his campaign.
Corzine said he made the Icahn investment Oct. 27, after being approached by Icahn at a cocktail party in New York last year. Corzine kicked off his campaign on Dec. 2.
The senator said that when he was approached by Icahn, "I didn't read the prospectus. I don't know the details on it. But I asked that question" about a possible conflict. He said he was told Icahn Partners does not hold stakes in gambling concerns.
Icahn confirmed that yesterday, saying the fund "has nothing at all to do with the casinos."
Icahn said he understood why Corzine might pull out of the fund if elected and that the loss would be negligible. "It's a very, very small fraction of the fund," he said.
Hedge funds are often described as private investment clubs for those who want to buy everything from stocks and bonds to real estate. The funds also fish in the choppy waters of stock options, short sales and leverage plays. For the most part, they are not regulated by the government.
Icahn Partners has about $2 billion and requires $25 million for an entry-level investment. Corzine pooled his $7 million investment with a handful of friends who are not involved in politics, his campaign spokesman Tom Shea said. Shea declined to name Corzine's partners.
Corzine said he has known Icahn through New York business circles "for years. I've got respect for him. I guess he's got respect for me."
In 1999, Icahn donated $1,000 to Corzine's Senate campaign. Last year, Icahn made a $15,000 contribution to the Democratic Senatorial Campaign Committee, which Corzine headed at the time. State law, however, prohibits casino operators from donating to gubernatorial and legislative elections.
Corzine said his friendship with Icahn and his investment would not hamper his ability to run a government that regulates Atlantic City's multibillion-dollar casino industry.
"Absolutely not," he said. "Carl's a guy I know, but that's part of being an investment banker -- you're going to know a whole host of folks."
New Jersey's casino laws bar a long list of state officials from having financial interests that could lead to entanglements with the gaming industry. Mickey Brown, a former state gaming enforcement chief who helped write New Jersey's casino regulations, said the law was made tough "so the government of the state of New Jersey deals at arm's length with the industry."
"The governor's obligation and oath is to carry out the business of the state of New Jersey without any possible undue influence or personal involvement and to ensure the government is not overly influenced or compromised in any way by the gaming industry," said Brown.
Republican state Chairman Tom Wilson said Corzine's investment should worry New Jersey voters.
"The troubling piece is that this again goes to the conflicts and judgment of Jon Corzine," Wilson said. "Since the advent of legalized gaming in Atlantic City in the 1970s, the state has worked to scrupulously avoid any intermingling whatsoever of casino interests and public officials."
Corzine, who is financing his own campaign, is former chief executive of the investment banking firm Goldman Sachs. His personal wealth is valued between $85.5 million and $261.5 million.
Icahn, the best-known of the "corporate raiders," owns four casinos, including the Stratosphere in Las Vegas. The Sands Atlantic City has continued to struggle since Icahn bought it out of bankruptcy five years ago. The casino has been hurt by new competition from the likes of the $1.1 billion Borgata, which opened two years ago.
For the first quarter of this year, net revenues fell by $1 million for the first quarter of 2005, and the casino's net loss widened to $4.14 million from $3.14 million a year ago. The company's accountants have warned that another bankruptcy could be in its future, according to Securities and Exchange Commission filings. |
