TUESDAY, SEPTEMBER 27, 2005 CONTACT: MAYER AND AFRAN
FOR IMMEDIATE RELEASE 609-921-0253 (office)http://www.newjerseyuntouchables.blogspot.com
MASSIVE NEW CORZINE CONFLICTS REVEALED
CORZINE: INVESTED IN CROOKED GAMBLING DEAL
CORZINE: WELFARE KING BLEEDING NJ TAXPAYERS
CORZINE: LIED ABOUT BLIND TRUST HOLDINGS
Watchdog attorneys Bruce Afran and Carl Mayer today revealed two massive new conflicts of interest involving Jon Corzine.
First the pair revealed that Goldman Sachs is moving to acquire Gtech, the company that operates the lottery system for the State of New Jersey. Corzine served as head of Goldman Sachs and maintains a financial stake in the firm worth tens of millions of dollars. The pair also revealed that Gtech is partners with the gambling firms Ballys and Harrahs: owners of New Jersey casinos. This raises the possibility that Corzine could not legally hold Goldman stock as Governor if Goldman is running New Jersey gambling interests.
Second, Afran and Mayer disclosed that while Jon Corzine was chair of Goldman Sachs the firm did billions of dollars of bond work for the State of New Jersey. Most of this work was done on a non-competitive basis resulting in over $110 million of dollars in no-bid pay-to-play fees for Goldman and Corzine. Goldman Sachs continues to do hundreds of millions of dollars in bond business with the state of New Jersey and Afran and Mayer called on Corzine to immediately divest all of his Goldman Sachs holdings and to write a letter to Goldman Sachs demanding that the firm give back its no-bid fees.
The corruption-fighting duo also questioned Corzine’s assertion that that his assets are in a “blind trust”. The so-called “blind trust” is run by Corzine’s former business partners and its massive holdings in Goldman Sachs stock violate Corzine’s own pledge to unload those shares.
“For more than six years now, Jon Corzine has hidden his finances from the people of New Jersey. First it was a deal brokered with Bob Torricelli and convicted felon Charlie Kushner to spend hundreds of millions of dollars for a taxpayer funded arena in Newark. Then the loans and gifts he gave to the head of the union—which violated the law and resulted in his being investigated by the Senate Ethics Committee. Next we learned he invests with casino owner /corporate raider Carl Icahn, an investment that would be illegal if he were elected Governor. Now, we've learned that Goldman Sachs, from whom Mr. Corzine continues to derive substantial income, is trying to purchase Gtech, the company that has the contract to run New Jersey's lottery program. Conflict after conflict after conflict,” said Afran.
“In 2000, Mr. Corzine said he'd remedy conflicts by liquidating his holdings in Goldman. He didn't. He said he'd put his assets in a blind trust. He didn't. When he does chose to disclose information that would help shed light on the potential conflicts he has, he gives us the names of shell companies but tells us nothing about the business in which they are engaged. Mr. Corzine's financial arrangements make sense for a secretive businessman, but not for a man who wants to be Governor,” said Mayer
“The public has a right to know whether Jon Corzine is protecting their interest or protecting his own,” said Mayer. “Corzine turns out to be Senator Non-Disclosure, Senator Stonewall and Senator Conflicts all wrapped up in one. The Senator needs to sell his Goldman holdings and fully disclose, immediately.”
I. CORZINE PROFITS FROM GTECH: A CROOKED GAMBLING MONOPOLIST THAT RUNS NEW JERSEY’S LOTTERY
When Goldman Sachs announced on September 13, 2005 that it was moving to acquire Gtech, New Jersey citizens were probably not aware that Gtech runs the New Jersey lottery.
According to Corzine’s latest financial disclosure statements, the Senator has up to $50 million in Goldman Sachs stock and that would make him a major investor in the New Jersey lottery operator once the Goldman acquisition is consummated.
Even worse, from Corzine’s perspective, is the fact that Gtech is engaged in joint ventures with Bally’s and Harrahs, New Jersey casino operators. Gtech has a lottery video machine manufacturing deal with Bally Gaming. Gtech also entered into a joint venture with Harrah's Entertainment. Harrah's is the world's largest gaming company and operates New Jersey casinos.
Gtech has a particularly sordid history and the company has been investigated numerous times for bid-rigging and other violations, mostly stemming from its monopolistic practices and corrupt pay-to-play modus operandi. They include:
-- In 1998, Gtech founder Guy Snowden lost a libel battle over bribery allegations by British billionaire Richard Branson. Snowden's GTech and a Branson-led consortium were fighting to win England's national lottery business, the worlds largest. GTech won the bid. But after a London jury awarded Branson about $180,000 plus $1-million in legal costs, Snowden agreed to resign.” I’ve lobbied for 30 years, and I've never seen anything dirtier than lottery stuff," GTech lobbyist Barry Horenbein told the St. Petersburg Times in 1995.
-- The Securities and Exchange Commission launched a formal investigation of Gtech in 2004. Gtech is also being sued civilly by Brazil's Public Ministry over the company's contracts with Caixa Economica Federal, the state-owned bank that runs Brazil's lottery. Gtech has been plagued since 2003 by allegations of bribery involving the bank's awarding lottery contracts to the company
-- Snowden was called a "brutish executive" in a 1996 Fortune magazine article; Snowden built Gtech into the world's leading lottery vendor in fifteen years. According to Fortune, Gtech never lost a contract it went after. "Somebody was said to have the ear of a governor? He'd be retained by Gtech, often on the eve of bidding. A political contribution was needed to help a legislator see things from Gtech's point of view? Never a problem. Was a little wining and dining in order? Snowden would go all out," Fortune wrote.
--"We'd go to dinner with the lottery director and find out that Gtech had hired a yacht and taken out the whole goddamn legislature," said Hubert Plummer, the former president of Automated Wagering, Gtech's archrival. "It was like shooting your popgun, and they were firing a howitzer."
--Gtech's former national sales manager, J. David Smith, was convicted for fraud and bribery involving lotto lobbyists in New Jersey. In 1997 The Houston Chronicle reported that Smith boasted about bribing at least ten state legislators to ensure passage of the lottery bill in Texas and getting the contract for Gtech. The paper said a former Kentucky lottery official told investigators that in 1993 Smith named eight or ten Texas lawmakers he said he paid up to $10,000 apiece for "favorable consideration" of a lottery bill.
--The reported boast took place about six months after a major lottery push in a special Texas legislative session. Texas voters approved a state lottery in 1991, and Gtech began running its on-line games in 1992. Nora Linares, Texas Lottery Commission director, was fired in 1997 after confirming that a close friend -- an indicted state official who later went to prison -- worked as a Gtech consultant. In California, a Gtech lobbyist was captured on tape bragging that California's lottery director was "our gal."
-- With record $1 billion revenues Gtech operates lotteries in more than half the states, Gtech, as the nation's leading lottery contractor, is giving new meaning to lottos. Of 80 governments around the world relying on Gtech's lottery systems for smooth operation of their game
-- Gtech has paid its lobbyists a percentage of the lottery profits even after its former national sales manager was imprisoned on federal charges for kickbacks to lobbyists who helped land the New Jersey lotto contract
—Gtech is a monopolist. The company runs all five of the country's biggest state lottery systems - New York, Texas, Georgia, California and Florida. Altogether, GTech operates 26 of the 36 state lottery systems, plus the Washington, D.C., system and actually brags that it controls 70% of the world lottery market. serving 80 lotteries in 44 countries. This is not your “mamma's lottery, nor your father's grocery store,” as Gtech's annual report puts it. The corporation runs the lotteries in New Zealand, Turkey, Singapore, Estonia and Lithuania.-- The Atlanta Journal-Constitution quotes Russ Davidson, the former chief financial officer of the Kentucky lottery, saying, "You're dealing with the dirtiest industry I've ever seen in my 30 years of doing business ...."-- According to an Associated Press article, over a 16-year period, GTech was the subject of four federal grand jury investigations-- David Rainey of the Lawrence Journal-Weekly reported that a former lottery worker in Kansas filed a sexual harassment suit against GTech, claiming she was ordered to dig up dirt on the deputy director of the Kansas lottery in order to make him susceptible to blackmail during negotiations with the company.-- On April 12, 1998, a gambling industry analyst proclaimed Gtech's ethical troubles were a thing of the past. On September 18, 1998, the Dallas Morning News reported that Gtech settled a lawsuit brought by former Texas lottery director Nora Linares in which she alleged Gtech hired her boyfriend to gain leverage over her. Less than two years later, on July 7, 2000, the Austin American Statesman reported that Gtech executives were forced to resign over a number issues, including failure to disclose a computer glitch to their clients that caused erroneous payments in millions of lottery transactions in Texas and Great Britain.--Gtech’s mission is to addict Americans to gambling. Its GameScape subsidiary has developed a colorful lotto game machine to appeal to a new generation of gamblers in the South. Using tactical marketing polls and cultural studies, Gtech has come up with HotTrax, a new interactive 3-D game featuring racecars speeding around a track. "Designed to appeal to consumers who don't ordinarily play traditional lottery or casino-style games, HotTrax stimulates a high level of player involvement and friendly competition," says Gtech's annual report. Gtech's gaming machines could be at all the racetracks, coin laundries and service stations. The company's marketing strategy is to place the machines everywhere there's a checkout counter, including service stations, groceries and malls. They want to make it simple to play the lotto on Gtech's new EZ Express, a self-service kiosk designed to be "an easy, fun way to play in busy retail settings," according to Gtech. Slot machines are called the "crack cocaine" of gaming, and Gtech could be inventing a new drug
II. GOLDMAN AND CORZINE: NJ’S CORPORATE WELFARE KINGS.
It is fitting that Goldman is set to acquire Gtech as both companies thrive by fleecing taxpayers around the nation.
Of particular interest in the New Jersey gubernatorial race is the fact that Goldman Sachs was a major recipient of no-bid contracts in New Jersey.
Afran and Mayer reported that Goldman Sachs has done billions of dollars worth of business with the state of New Jersey and related entities. Goldman Sachs was the underwriter on 16 bond deals between 1997 and 1999 – when Corzine chaired Goldman -- worth over 2.4 billion dollars.
Of the sixteen deals done while Jon Corzine was chairman of Goldman Sachs, 10 were non-competitive. On these deals Goldman fleeced New Jersey taxpayers by charging up to 26 percent of the deal. In all, Goldman Sachs fleeced New Jersey taxpayers for $110 million dollars on these no-bid deals
On at least three of the deals, Goldman was co-underwriter with George Norcross’ bank, Commerce Bank, all on a non-competitive basis. The attached spreadsheet lists all of Goldman Sachs bond deals for the years Corzine was Goldman chairman.
Goldman Sachs continues to be a major bond underwriter for New Jersey, creating further conflicts between Corzine's personal interests and the State's, the attorneyssaid. "Such conflicts will be rife throughout New Jersey’s state government, if Corzine is elected Governor and still holds Goldman Sachs stock," Mayersaid. "This year alone , Goldman Sachs booked nearly one billion dollars in New Jersey government bond underwriting," Afran told reporters. (In 2005 Goldman wasawarded a $500 million underwriting bid for schools reconstruction and a $497million Port Authority bond.)
III. CORZINE’S “BLIND TRUST” IS A SHAM.
Afran and Mayer also criticized Corzine for failing to place all of his assets in a blind trust. Indeed, Corzine’s Goldman holdings are in what he calls a “blind trust” but the trust does not appear to be blind at all. It is managed by two former Goldman Sachs partners and by holding Goldman stock – and soon Gtech stock – Corzine is caught in exactly the conflicts many predicted.
“When multi-millionaire U.S. Sen. Jon S. Corzine ran for his seat six years ago, he promised voters he would place his assets in a blind trust. The move was to counter critics who charged that his portfolio, especially in a global investment banking and securities firm, could pose a conflict of interest.” (“Not All of Corzine’s Assets Are In Blind Trust As Promised,” The Asbury Park Press, August 5, 2005) Corzine in 2000 said: “We have pledged that we will put my assets in a blind trust if elected.” (“Campaign 2000: The New Jersey Senate Debate,” The New York Times, October 9, 2000)
Not only did Corzine not place his assets in a blind trust, he did not have the trust approved by the Senate Ethics Committee. “[A] review of his financial disclosure forms shows that Corzine, a Democrat seeking to become governor, has not put all of his assets in a blind trust. Moreover, the U.S. Senate ethics committee has not approved the trust that he has set up.” ( “Not All Of Corzine’s Assets Are In Blind Trust As Promised,” The Asbury Park Press, August 5, 2005)
Even worse, Corzine’s blind trust has the came mailing address as his Senate campaign committee. “And Corzine’s blind trust may not be that blind: The Newark mailing address for the trust is the same as his U.S. Senate campaign committee, according to his state financial disclosure form.” (“Not All Of Corzine’s Assets Are In Blind Trust As Promised,” The Asbury Park Press, August 5, 2005)
To get approved by the Senate Ethics Committee would require that the trust have an independent manager. “[G]etting approval [from the Senate ethics committee] means the agreement governing the trust would be a public record, and that Corzine would have to comply with strict Senate rules regulating such funds, including a requirement that the manager be independent, and not related to, the senator. ‘Once the ethics committee has approved it, it’s truly blind,’ said Pamela Gavin, the Senate’s superintendent of public records. ‘If it’s not a qualified blind trust, it has not been blessed by (the) ethics (committee).’”( “Not All Of Corzine’s Assets Are In Blind Trust As Promised,” The Asbury Park Press, August 5, 2005)
Mayer and Afran said that New Jersey voters should be outraged that Corzine’s “blind trust is managed by two former Goldman Sachs partners, one of whom is listed as an official with his Senate and Gubernatorial campaigns. “In 2001, Corzine told the Gannett News Service that two former Goldman Sachs partners, Jacob Goldfield and Chris Flowers, and a lawyer, Nancy Dunlap, would manage the blind trust. Dunlap is listed as an official with his U.S. Senate and gubernatorial political campaigns.” ( “Not All Of Corzine’s Assets Are In Blind Trust As Promised,” The Asbury Park Press, August 5, 2005) “This looks like an attempted Wall Street takeover of New Jersey government,” said Mayer
Even worse, Corzine’s blind trust share the same address as his actively managed funds. “JSC Investments LLC, The Corzine Blind Trust and another investment company called Wiley’s Corp. all share the same post office box with Corzine’s Senate campaign committee at One Riverfront Plaza in Newark, according to a state and federal filing. That post office box is paid for by the Corzine campaign.” (“Not All Of Corzine’s Assets Are In Blind Trust As Promised,” The Asbury Park Press, August 5, 2005)
According to Corzine’s 2004 Senate disclosure report, he owned between $86 million and $262 million in publicly held, and non-publicly held, assets. Between approximately 35 percent and 40 percent of that was in what Corzine calls The Corzine Blind Trust., “Not All Of Corzine’s Assets Are In Blind Trust As Promised,” The Asbury Park Press, August 5, 2005).
“Jon Corzine has a congenital inability to be honest with New Jersey voters about his own finances. Just by scratching the surface we learn that he and his Wall Street buddies at Goldman Sachs have been fleecing New Jersey taxpayers for years. We don’t believe that New Jersey voters want a wholesale takeover of New Jersey government by Wall Street that will enrich investment bankers and impoverish taxpayers” concluded Afran and Mayer.
IV. WATCHDOG ATTORNEYS DEMAND DIVESTMENT AND DISCLOSURE.
Afran and Mayer said that Corzine could only resolve his conflicts by doing the following:
Immediately divest all interests in Goldman Sachs, including stocks and options.
Immediately disclose how many hundreds of millions of dollars Goldman Sachs made on all New Jersey bond deals both while Corzine was Chairman of the firm and while he was Senator.
Disclose whether he or any of his staff discussed New Jersey bond deals with George Norcross.
Write a letter to Goldman Sachs CEO demanding that the firm return its no-bid fees and that it undertake only competitive deals in the future.
Place all his remaining assets in a qualified blind trust.
Promise to ban all no-bid bond contracts as Governor.
Release his severance agreement with Goldman Sachs and any other schedule of assets prepared during litigation so that the voters of New Jersey know what Corzine owns and therefore what are the possibilities for more conflicts.
Provide more information about Corzine’s secretive non-public assets and the specific holdings of the various shell companies, like Wiley's Corporation and JSC Investments.
“The time for disclosure is long over-due. Only with full disclosure can the people truly understand the nature and extent of Jon Corzine’s conflicts. People have a right to know more about the business of a man who wants to be their Governor,” said Mayer.