Louisiana Treasurer John Kennedy is a prolific fundraiser. But some of his most generous donors are those who broker multimillion-dollar financing deals before the Louisiana Bond Commission he chairs.
(Photography by Don Kadair: Louisiana Treasurer John Kennedy)
In the campaign commercial released this summer, a high-school-age John Neely Kennedy rambles down a tree-lined dirt road in a sea green vintage Ford pickup truck. Over scenes of a young man unloading lumber and artful shots of the state capitol, the longtime state treasurer waxes poetically about his Zachary roots, his good-government approach and his often-brash style.
“I don’t try to be rude, but I speak my mind,” Kennedy says in an earnest tone. “I like to see your money spent right. I’m not a part of the club and I’m not invited when they divide up the pork, but that’s OK. My job is to protect and represent taxpayers and I just do the job the best I can.”
It’s a typical biographical campaign ad—slickly produced and cloyingly sentimental—but the message is not completely removed from reality. Kennedy has been one of Louisiana’s most visible and vocal fiscal hawks over the past decade, pushing back against what he sees as wasteful spending in all corners of state government, from construction projects to little-known nonprofits that are able to secure tens of thousands of dollars in state funding through allies in the state Legislature.
Despite mixed success pushing through his proposed policy reforms, voters seem to have taken notice. Kennedy has been elected treasurer four times either without opposition or by wide margins—most recently in 2011—and with only one underfunded opponent on the November ballot, will likely coast to a fifth term this fall. Kennedy, however, has long eyed a higher office and the Republican is positioning himself for a possible run for the U.S. Senate in 2016 if David Vitter departs for the governor’s mansion.
Says University of Louisiana-Monroe political science professor Joshua Stockley: “He’s obviously done something right in that he hasn’t drawn anything close to a credible challenger in that position.”
The treasurer, who switched from a Democrat to Republican in 2007, is stepping back into the political limelight as the fall campaign season approaches. Kennedy was in his element again at a recent meeting of the Baton Rouge Press Club, criticizing the Legislature for rolling back tax credits without a two-thirds vote and dropping TV-ready sound bites throughout his talk.
“We all know that the governor used the state as a stepping stone, and boy did we get stepped on,” Kennedy said.
It’s the sort of media-friendly quip voters are used to getting from Kennedy. However, behind the biting quotes and good-government rhetoric is an aggressive fundraising operation that has outpaced all but a few Louisiana candidates this election cycle. Kennedy, whom political insiders describe as an aggressive and disciplined raiser of campaign cash, brought in more than $715,401 in 2014 and has collected an additional $641,919 through the first three quarters of this year—all for a campaign that is not expected to be competitive. As of September he had $2.7 million in his campaign account, trailing only U.S. Sen. David Vitter among Louisiana politicians.
A closer review of campaign finance reports, though, shows that a number of those contributions have come from attorneys who help broker multimillion-dollar financing deals for local governments, nonprofits and businesses before the Louisiana Bond Commission, the influential state board chaired by Kennedy and filled by key lawmakers and state officials. The donations include more than $82,000 in campaign contributions from attorneys from a single law firm that is a leading player in Louisiana’s public finance world. A handful of others are from out-of-state firms that have landed lucrative contracts to represent the state or state entities.
The practice is perfectly legal—there is no state law prohibiting such donations —and Kennedy and his allies insist the donations have no connection with his Bond Commission work and represent a small fraction of his overall financial support. But the scope of the donations raises questions about where the office of treasurer ends and the campaign begins.
Of all the major instruments of state government, the Louisiana Bond Commission is one of the least followed closely by the general public. The commission meets monthly on the third Thursday of the month at the State Capitol, but those gatherings rarely feature lengthy debate and consequently are not closely reported by the news media. The vast majority of the deal making and vetting happens behind closed doors among local municipalities, attorneys, banks and financial advisers.
Still, the 14-member commission—composed primarily of elected officials, including the lieutenant governor, the secretary of state and the chairs of the key legislative money committees—is a key cog in Louisiana government, facilitating the financing for a wide range of local and state projects.
The Louisiana constitution does not allow municipalities or the state to borrow money directly from a bank like a small business. Instead, they must issue debt and raise money on the municipal bond market, and they must seek approval from the Bond Commission to do so. The bonds are usually secured by some sort of local revenue stream—often proceeds from a sales or property tax. It’s the Bond Commission’s job to ensure the local government has the financial ability to pay the money back. In August alone, the commission approved $215 million worth of financing for local projects statewide.
Bond Commission work can be a lucrative business for attorneys who are able to build relationships with local governments, which generally select their own bond counsel for deals. Attorneys, as well as financial advisers and banks, earn a small percentage of the overall bond sale. Maximum fees an attorney can charge are set by state law—usually less than 4% of the bond sale—and are paid as closing costs from the bond proceeds by the municipality or business taking on the debt.
A typical Bond Commission deal took place last February, when the board approved a $42.5 million bond issue for the Union Parish School Board to help finance new facilities in the parish. Coordinating the deal was the firm of Foley & Judell, L.L.P. With offices in Baton Rouge and New Orleans, Foley & Judell is, as one attorney puts it, the “gorilla in the room” when it comes to public finance work in Louisiana. On its website, the firm claims to have represented some “160 municipalities, 53 parishes, 59 school boards, 30 industrial development boards, 18 local public trusts, 14 state board and special commissions, 15 port commissions, 11 levee boards and 7 universities and colleges.”
The firm is also one of the most prolific donors to Kennedy’s campaign funds. Eight attorneys at the firm have donated a combined $82,500 to Kennedy’s campaigns over the years, including a total of $27,500 from a single lawyer: special counsel Wayne Neveu, according to campaign finance reports from the State Ethics Board. The firm did not respond to a request for comment.
Foley is not alone. Numerous other firms and attorneys who regularly appear before the Bond Commission have contributed financially to Kennedy’s political aspirations. In fact, Bond Commission work is largely dominated by some of Kennedy’s most generous donors. A review of major Bond Commission items over the past two years turned up numerous examples:
|| The Mississippi-based firm Butler Snow and its PAC donated a combined $10,000 to Kennedy’s last campaign. It also contributed to Bond Commission member State Sen. Neil Riser. The firm has served as bond counsel or underwriters counsel for multiple large deals over the past three years, including a $75 million bond issue for the St. James Place Retirement Community that was facilitated by the Louisiana Community Development Authority.
|| The Louisiana super firm Jones Walker has given $24,000 to Kennedy’s state campaign funds. The firm has handled several large deals approved by the Bond Commission in recent years, including a $100 million bond issue for the Port of Lake Charles in 2013 and several tax-free bond sales for storm repairs for the Louisiana Utilities Restoration Corporation totaling more than $100 million. The firm is a prolific contributor to other Louisiana candidates, but Kennedy ranks among the company’s biggest recipients of campaign cash.
|| The law firm of Breazeale, Sachse & Wilson, which has served as either bond or underwriters counsel for multiple Louisiana projects that have gone before the Bond Commission, has donated $23,500 to Kennedy campaigns. And two of the firm’s three attorneys that specialize in public finance, Richard Leibowitz and C. Stokes McConnell Jr., have donated an additional $12,250 to the treasurer’s campaigns under their own names.
|| Adams and Reese, an influential law firm with interests throughout the southeast and in Washington, D.C., has given $21,250 to Kennedy’s campaigns through its firm and election PAC. The firm often serves as underwriters counsel for large deals from The Louisiana Public Facilities Authority, the state entity that helps ventures like hospitals and economic development projects access tax-free bonds. The bond issues must be approved by the bond commission.
|| The New Orleans firm of McGlinchey Stafford has written checks totaling $20,500 to Kennedy’s campaigns, and attorney J. Patrick Beauchamp, who specializes in public finance work at the firm, donated another $5,500 on his own.
|| Joseph Delafield, a Lake Charles attorney who has handled bond issues for the city of Bossier, has donated $6,500 to Kennedy’s campaigns.
The list goes on. Numerous other firms, attorneys and banks who handle public finance work are also contributors. In a recent interview, Kennedy insisted that the donations have nothing to do with any work the attorneys bring before the Bond Commission.
“People give to me for one reason: They support my candidacy,” Kennedy says. “And I raise money the same way from everybody. I call folks up and I say I’m running for re-election to state treasurer. I’d be honored to have your support if you think I’ve done a good job. I’d like you to contribute to my campaign. If you can’t do it, I understand, but if you can, I’d be grateful. And some do and some don’t.”
Adds Kennedy, “I think if you run the numbers you’ll find that a very, very small percentage of my contributors have ever appeared before the bond commission, both by number and by amount of money raised.”
Kennedy has a point. His campaign finance records are full of traditional players in the Louisiana political ecosystem, including numerous companies and individuals connected to the oil and gas industry, and plenty of attorneys that do not handle public finance work that goes before the Bond Commission. Still, Some of Kennedy’s financial backers have associations to other areas of state government over which the treasurer has oversight or a role, including governing boards for state pension funds that by law the treasurer serves on by law as an ex-officio member.
For example, last year when the Louisiana State Police Retirement System board was embroiled in a controversy over a secretive legislative boost to LSP Superintendent Col. Mike Edmonson’s retirement, Kennedy, who sits on the board, publicly urged the panel to hire outside counsel to investigate the matter.
The firm chosen was Klausner, Kaufman, Jensen & Levinson, a Florida outfit that has represented state retirement systems in several legal matters. It has also donated more than $10,000 to Kennedy’s campaigns.
However, a source with knowledge of the selection process said the fund had worked before with Klausner, which specializes in retirement and benefit systems, and that Kennedy played no role in hiring the firm. Kennedy also had trouble securing the firm’s eventual report, even threatening to sue the board before it finally turned over the findings.
In a telephone interview, Robert Klausner, the firm’s senior partner and also a personal donor to Kennedy’s campaign, was quick to note that he owns a home in New Orleans and that two of his children went to school in Louisiana.
“So I have a great stake in the economic future of Louisiana,” Klausner says. “I’ve had an opportunity to see the treasurer’s interest and leadership up close in terms of insuring adequate funding and pursuing wrongdoers when we come across them, so that’s why I support him.”
OUT OF STATE
Klausner is hardly the only out-of-state donor to back Kennedy financially over the years, and nearly all of them have conducted business with the state.
Great Southern LLC, a south-Georgia developer that in 2012 handled a multimillion-dollar apartment renovation called Cypress Place in Marrerro, donated $2,500 to Kennedy’s campaign last year. It was the only contribution the company made to any Louisiana candidate.
The Cypress Place apartment project was funded in part through the Low-Income Housing Tax Credit Program, a federal tax credit managed on the state level by the Louisiana Housing Corporation and designed to increase the availability of low income rental housing. Kennedy sits on the LHC’s board as an ex-officio member.
The Delaware-based law firm of Grant & Eisenhofer donated $15,000 to Kennedy’s campaign between 2005 and 2010, either in the firm’s name or through the firm’s co-founder and managing director, Jay Eisenhofer, records show. Neither the firm nor Eisenhofer have donated to any other Louisiana candidates.
The firm, which specializes in large class-action cases, represented the Louisiana State Employees’ Retirement System, or LASERS, in two large cases during that period, including a class-action lawsuit pushed by shareholders of Tyco International Ltd. over a multibillion-dollar accounting fraud. A LASERS spokesman said the system is not currently working with Grant & Eisenhofer.
Kennedy by law serves as an ex-officio member of the LASERS board of trustees and regularly attends board meetings or sends a representative in his place, according to official minutes.
‘NOT PAY TO PLAY’
Connections between donors and state business abound, but there is no evidence supporters have received anything but a thank you from Kennedy. Louisiana attorneys said Kennedy, along with Attorney General Buddy Caldwell, is among the most aggressive solicitors from campaign cash from lawyers, but none said those calls for campaign contributions were ever tied to Bond Commission business or work with other state entities.
“He has his campaign people call around, but they all do,” says an attorney who has not donated to Kennedy’s campaign. “It’s something that everybody kind of gossips about, but I personally do not think it’s pay to play.”
Kennedy says his campaign is careful to “report every penny in, every penny out, and I am very meticulous in following the law.” He also says his fundraising success stems from his willingness to talk directly with potential donors rather than simply soliciting donations by letter or email.
“Now, that means you suffer a lot of rejections—that many people either don’t call you back or tell you no,” Kennedy says. “The vast majority don’t, but some do and you have to be willing to suffer rejection. But I think it’s good for any politician to do that because number one, you learn a lot, and number two, it humbles you. It really, really humbles you to say, ‘Look I need your help and here’s why I think I’ve done a good job and would you help me?’ And it humbles you to hear the answers sometimes. Sometimes the answers are really positive, sometimes they aren’t. But that’s what I’ve always done and it works for me.”
Kennedy also argues that he is not alone in his fundraising practices, saying that other members of the Bond Commission—including Gov. Bobby Jindal and Lt. Gov. Jay Dardenne—are highly successful fundraisers in their own right and have also raised money from donors who work with the commission.
“I think everybody on the Bond Commission is entitled under the law to solicit contributions to anybody,” Kennedy says. “There’s nothing wrong with that and it’s perfectly legal as long as you report it.”
A NEW LAW?
The issue of campaign contributions to the state treasurer has not traditionally been a hot topic in the halls of the Capitol, although it did come up briefly during the closing days of the 2015 legislative session that wrapped up in June.
State Sen. J.P. Morrell, D-New Orleans, unsuccessfully tried to limit contributions to the Bond Commission chair with an amendment tacked on to an unrelated bill that came up on the Senate floor during a rare Saturday session. The proposed amendment would have barred campaign contributions to the Bond Commission chair 90 days before and after the agenda was set.
Morrell likened his proposal to an existing state law barring campaign contributions to lawmakers while they are in a legislative session. He also conceded such a law would effectively ban all contributions from attorneys and firms who frequently appear before the Bond Commission.
“If you have someone who only has one item on the bond agenda ever then yeah, that person would be out of the window,” Morrell said on the Senate floor. “But if you’re someone who is perpetually in front of the Bond Commission then, yeah, it would probably be forever.”
The ban was derailed after a Senator challenged it and Senate President John Alario ruled that it was not germane to the bill.
It’s unclear whether Morrell will push a similar measure in the 2016 legislative session. Morrell did not respond to multiple requests for comment. Kennedy also declined to comment on the proposal, saying he wasn’t familiar with it.
Kennedy, who ran unsuccessfully for the U.S. Senate in 2004 and 2008, has signaled recently that his sights are still set beyond the treasurer’s office. He has endorsed David Vitter’s gubernatorial campaign and become a key surrogate for the senior senator in recent months.
Kennedy’s campaign went into overdrive this summer, putting some of the $3.7 million it had on hand as of July to work. The campaign spent $1.12 million from July 17 to Sept. 14, most of it on television and radio advertising. That’s second only to Vitter and nearly as much as John Bel Edwards, Scott Angelle and Jay Dardenne spent combined over the same period.
Kennedy’s “Best I Can” television ad has already hit the airwaves around Louisiana, and it’s a good bet that he will further dip into his campaign account in the coming months in an effort to raise his profile ahead of the 2016 election cycle. His campaign cash gives him a head start over two other likely candidates for the Senate seat: Republican Congressmen Charles Boustany and John Fleming.
Should he launch a Senate run, Kennedy could have additional financial help in the form of an allied super PAC, the independent expenditure committee that could raise unlimited amounts of cash and use it to support or attack candidates. Kennedy’s former deputy treasurer, Jason Redmond, stepped down from his position and registered the Make Louisiana Proud super PAC with the Federal Election Commission. The super PAC, which by law cannot coordinate with the Kennedy campaign, says on its website that it was formed to “support the candidacy of State Treasurer John Neely Kennedy should he run for the United States Senate in the 2016 election.”
“Financially he’s in great shape,” Stockley, the political science professor, says of Kennedy. “He … running advertisements and fundraising … meaning he gets to already run for the [Senate] office.”
Stockley surmises Kennedy could likely carve out an ideological spot in the middle of the field, hoping to appeal to moderate Republicans and conservative Democrats as Boustany and Fleming fight for the state’s most conservative voters. One thing is for certain: He has plenty of cash to help make his case to voters.
“His dollars and name recognition right now I think give him a fighting chance,” Stockley says.
Not surprisingly, Kennedy, at least in public, is taking the political process one step at a time. Such caution is prudent, given that recent polls have indicated that Sen. David Vitter’s coronation as governor may not be as sure of a thing as it was a few months ago. If Vitter is does not depart for the governor’s mansion, all bets are off for the 2016 Senate race.
Which is likely why Kennedy, when asked recently if he would run for Senate next year, declined to answer directly.
“I’ve got one thing on my mind,” he says. “Running for re-election for state treasurer.”
Donors doing business with Louisiana
Numerous donors to John Kennedy’s campaigns have connections to the Bond Commission and other state entities on which the treasurer serves as an ex-officio member. Here are few examples.
Bond Commission: Creekstone Juban I LLC
The Houston-based company headed by developer Stephen Keller that is behind the Juban Crossing mixed-use development in Livingston Parish donated a total of $6,000 to Kennedy’s campaigns in 2014 and 2015—most recently a $2,500 contribution in July. The State Bond Commission in 2013 approved $30 million in sales tax revenue bonds for the Juban Crossing and a second round of funding last year for an expansion. The contributions were made under the names Creekstone Juban I LLC or Creekstone Management LLC. The only other contributions the company made over the same period were $1,600 in donations to Livingston Parish President Layton Ricks.
Retirement boards: Klausner, Kaufman, Jensen & Levinson
This Florida-based law firm has represented several retirement systems in the state—including the Louisiana State Police Retirement System—in a variety of high-stakes legal battles. The firm has donated more than $10,000 to Kennedy’s campaigns. Kennedy sits on the Louisiana State Police Retirement System’s governing board as an ex-officio member.
Louisiana Housing Corporation: Great Southern LLC
Great Southern LLC, a Georgia developer that in 2012 handled a multimillion-dollar apartment renovation called Cypress Place in Marrerro, donated $2,500 to Kennedy’s campaign last year. It was the only contribution the company made to any Louisiana candidate. The Cypress Place apartment project was funded in part through the Low-Income Housing Tax Credit Program, a federal tax credit managed on the state level by the Louisiana Housing Corporation and designed to increase the availability of low-income rental housing. Kennedy sits on the LHC’s board as an ex-officio member.
LASERS: Grant & Eisenhofer
The Delaware-based law firm of Grant & Eisenhofer donated $15,000 to Kennedy’s campaign between 2005 and 2010, either in the firm’s name or through the firm’s co-founder and managing director, Jay Eisenhofer. Neither the firm nor Eisenhofer have donated to any other Louisiana candidates. The firm, which specializes in large class-action cases, represented the Louisiana State Employees’ Retirement System, or LASERS, in two significant cases during that period. Kennedy by law serves as an ex-officio member of the LASERS board of trustees and regularly attends board meetings or sends a representative in his place, according to official minutes.