Stealthy Wealthy: Franklin Haney built real estate empire with government helpBy Nancy Watzman Oct 18 2012 10:37 a.m.
Longtime Democratic donor Franklin L. Haney, who with his wife Emeline has poured $1.1 million into the effort to reelect President Barack Obama, has built his business around developing government-supported real estate projects and acting as a government landlord.
He survived investigations in the 1990s by the Justice Department on campaign finance violations and by Congress for using his monied influence to secure a lucrative government lease. During the latter, he was nearly found in contempt of Congress for failing to supply requested documents.
The onetime champion Bible seller and would-be governor of his home state of Tennessee has invested millions in lobbying and political contributions over the years and built an empire worth billions thanks in part to rents and tax exempt bonds.
The financial wizard operates his real estate empire through difficult-to-trace limited liability companies and real estate partnerships. It is virtually impossible to know how much Haney's government leases are worth because it's next-to impossible to determine how many he holds. The properties are developed under obscure names such as "Tower 49C LP," "Dulles Express LLC," and "Hill East Waterfront Development LLC."
Even when information is available, it raises more questions than it answers. Most recently, FLH Company, Haney's main business venture, hired former Rep. Bud Cramer, D-Ala., and former congressional aide Thomas Carpenter at Wexler & Walker Public Policy Associates to lobby Congress, the White House, and the Department of Energy on the agency's loan guarantee program, according to lobbying disclosure reports. However, via email, Cramer said that his firm's work for FLH consisted of "monitoring the DOE Loan Guarantee program along with several other energy issues," and that the lobbying firm never met with anyone from the federal agencies mentioned on the forms. A DOE spokesperson confirmed that FLH had not applied under the loan guarantee program. Haney did not reply to a request for an interview.
In a career that's lasted decades, Haney hasn’t always gotten everything he wanted. A pitch to buy an ownership stake in the Washington Nationals in the mid-2000s failed, as did a bid to operate the Dulles Toll Road, a major artery linking Virginia suburbs to the Washington beltway. So did an offer to the Tennessee Valley Authority (TVA) a decade ago to finance completion of a nuclear plant under a lease-back arrangement. He’s been on the wrong side of legal judgments: In the late 1990s, a Colorado jury forced Haney (subscription required) to pay $14.7 million to Smith Barney, which argued he’d unfairly substituted more risky bonds for Treasury securities in a real estate dealing.
But he’s also been wildly successful. His company operates a portfolio worth $10 billion, according to its website, which includes the lease of space to the Federal Communications Comission (FCC) and a “multi-billion” dollar investment in the Dulles Greenway Toll Road in Virginia. Those investments have paid off handsomely for Haney. In 2008 he spent $22 million to purchase “Villa Venetia,” a 52-room, 28,000 square foot Palm Beach mansion formerly owned by the Hearsts and before that the Vanderbuilts. (His wife, Emeline, told Washington Life magazine at the time that “As our family grew, we just kept needing more space.”) He bought a $50 million Italian-made yacht to go with it.
From running to riches
Haney's first major foray into politics was in 1966, when the George Washington law school graduate and congressional aide to Herbert S. Walters, D., Tenn. ran for a House seat and lost. The following year he founded the Franklin L. Haney Company, a privately held firm that quickly became a major developer in the southern states of Tennessee, Georgia, and Alabama. In 1974, Haney made a bid for the governorship, spending more than any of the other 13 candidates, according to a 2004 profile published by the Knoxville News-Sentinel.
The money largely came from his own pockets, because, as Haney explained at the time to the Associated Press, "The real question is not how much is spent, but where it comes from...I could have raised hundreds of thousands of dollars just by asking for it, but the people of Tennessee can't be fooled....They know that big campaign contributions from special interests come with strings attached." By the time the race was over, Haney had spent $1.2 million of his own money and came in fifth, the News-Sentinel reported.
After that drubbing, Haney concentrated on developing his business, building office buildings and hotels and working the strings of government to help make it happen. Many of his deals were financed with tax-exempt development bonds, which allow developers to raise funds for projects at lower interest rates because bondholders are exempted from taxes on earnings. While these deals generally don't put taxpayers on the hook directly, government loses tax revenue it would have gained if a deal were financed privately. Municipalities and local bond authorities regularly approve these types deals as a way to boost economic activity.
In the late 1990s, Haney became a focus of investigation by a congressional subcommittee for his role in securing a lucrative government lease to the FCC for the Portals, seen in the photo above. The development in southwest Washington was at the center of a long simmering battle between the FCC and the General Services Administration (GSA), with FCC officials protesting the move to what was seen as a location too far away from the center of things. The deal was particularily noteworthy because Haney negotiated a 20-year lease with a fixed start date that ended up earning his company $17 million before the agency moved in. Haney financed the deal through a complicated arrangement involving a series of transactions involving tax-exempt bonds in Colorado, which were later investigated by the Internal Revenue Service.
Haney was charged in news reports of paying a $1 million contingency fee to Peter Knight in 1996 to secure the Portals deal not long before Knight became head of the Clinton-Gore reelection campaign. Knight, a longtime Gore aide, had close ties to officials at GSA, which administers government leases, and the FCC. Contigency payments to secure a government contracts are illegal.
In the Republican-controlled subcommittee's 305-page report (available online only through certain university libraries), issued in December 1998, Haney was also accused of paying contingency fees of $1 million to former Tennessee Sen. Jim Sasser, a Democrat, in the Portals matter and $500,000 to John Wagster, who had worked for Sasser on a Senate subcommittee with oversight over the GSA. The report also charges that at the same time Knight was doing Portals business for Haney, he secured a $50,000 commitment from the businessman for the Clinton-Gore reelection campaign, and later, Haney "contributed $200,000 to various state Democratic parties and the Democration National Committee in May 1996, following the succesful closing of the Portals deal in March..."
Congressional Republicans called for an investigation by the Justice Department; meanwhile, the Democratic minority argued that the investigation "was and is nothing more than a partisan attack," and that the report was "riddled with strained factual and legal contentions." There was no denial that Haney had made the payments. Rather, Democrats argued, they were not contingency fees and therefore not illegal.
The following month, Attorney General Janet Reno declined to pursue further investigation of the Portals matter. However, in November 1998, the Justice Department, via its campaign finance task force, did indict the businessman on 42 counts involving making illegal contributions to the Clinton-Gore campaigns and two senatorial campaigns, including charges that Haney reimbursed donors for their contributions. In July 1999, a federal jury acquited Haney of all counts. In his defense, Haney's attorneys had not denied that he made the contributions, but that he misinterpreted complex laws on campaign finance disclosure.
Haney has secured other lucrative government leases and contracts over the years. Haney leased space in Chestnut Tower in Chattanooga, which he built in 1979, to the Tennessee Valley Authority (TVA). He also leased spaced to the TVA at 1101 Market Street, known as Monteagle Place. In 2009, TVA made a deal to buy the building at Monteagle Place in Chattanooga, agreeing to pay a total of $8 million, according to Securities and Exchange Commission (SEC) filings. Jim Berry, CEO of Republic Parking, which itself does a brisk business leasing space to the federal government, bought Chestnut Tower in 2010. Earlier Haney had sought even more business from TVA, but in 2002, the agency turned down Haney's offer to help finance completion of a nuclear plant.
Franklin Haney owns a building in downtown Birmingham, Ala., that was home to the local Social Security Administration (SSA) offices until the agency moved out in 2008. Contracting records show that $22.5 million was obligated to Haney's company in Alabama from 1999 to 2011 for contracts with the GSA and SSA.
Haney's company tried, but failed, to convince the Birmingham City Council to take on a 25-year lease of the building, for an annual rent costing between $2.67 million and $4.86 million, and would have included the building of a luxury hotel. He hired the former mayor of the city, Richard Arrington, to argue his case, but the Council rejected the proposal in 2009.
In March 2011, however, the Birmingham News reported, Haney's company signed a 30-year lease with to the Alabama Department of Human Resources for office space in the building. According to the paper, the city is now considering the building for another long term lease to house its police, fire, and municipal court headquarters; however, as of this posting, no formal proposal had been made, according to a Birmingham city spokesperson.
Dulles tolls not for Haney
Over the last decade, Haney's efforts have followed a common pattern: He aims very big, doesn't always get all the asks for, but remains tenacious. In 2005, Haney led a group of investors called Dulles Express LLC seeking a 50-year concession to operate the Dulles Toll Road, which the group claimed would bring $5.7 billion in benefits to the state.
Haney had been part of a consortium known as Toll Road Investors Partnership II, that invested in the Dulles Greenway, a privately owned toll road extending from the Washington Beltway to Leesburg, Virginia that was built with private loans. In 2005, the consortium was bought out by an Australian firm, the Macquarie Infrastructure Group.
The toll road would be a new project. From 2006 to 2008, the McGuire Woods law and lobbying firm reported collecting $300,000 from Haney to lobby Congress on the Dulles Toll Road project, according to federal lobbying records. The firm was also listed on the company's formal proposal to the state. The team included former Rep. L.F. Payne, D-Va. In 2006, however, the state of Virginia decided to give the Metropolitan Washington Airports Authority the authority to operate the toll road.
In 1982 Haney built a Holiday Inn in Knoxville near the site of the 1982 Worlds Fair, along with three other structures, in various partnerships, with some help from the city, according to a 2001 report in Metropulse. The Holiday Inn was financed with tax free bonds from the city's Industrial Development Board. A parking garage for the hotel used $4.7 million from the city's Urban Development Action Grant and a $1.5 million loan from the Knoxville Civic Revitalization Fund, a charitable trust. He also built a parking garage for an office building with the help of a $1 million loan in federal grant money that was to be paid back to the city. "It's hard to figure out exactly how much money Haney and his partners borrowed from the city on projects--one newspaper put the figure at $14.5 millin in UDAG funds," wrote reporter Joe Tarr.
The hotel became a center of controversy in the early 2000s, when the city, planning a new convention center and hotel to go with it, sought to condemn it. Haney fought off that attempt by promising to renovate the property.
However, he didn't succeed in convincing the city to finance the upgrade with extensive subsidies, which the City Finance Director, Chris Kinney, charged would amount to some $76.2 million in bonds, property contributions, and lost tax revenue to the city, as reported by the Knoxville News-Sentinel. He banded together with other downtown hotel owners and paid $14,000 to collect signatures for a ballot initiative forbidding the city to subsidize a new hotel. In August 2004, voters approved the ordinance 71 to 29 percent.
Haney did renovate the hotel, although not as extensively as had first proposed, a cause for complaint in the City Council. But he still got some backhanded help. In late 2009, Haney sold the hotel to another developer, a transaction greased by $15 million in tax-exempt development bonds approved by the city.
More recently, Haney's company has been in the running to develop Anacostia's waterfront in Washington, D.C., through Hill East Development LLC. On October 4, the city announced that it was starting over and issuing new requests for proposals in the controversial project, according to the Washington Business Journal.
(Photo credit: Federal Communications Commission)
Search the Blog
Real Time Ticker
Reporting we're watching
- OpenSecrets: Millionaire Freshmen Make Congress Even Wealthier
- Sunlight Foundation: Why does the IRS regulate political groups? A look at the complex world of campaign finance
- Sunlight Foundation: Update on FedBizOpps data
- OpenSecrets: Site Spotlight #3: Anomaly Tracker
- Sunlight Foundation: OpenGov Voices: Day of Action on Sunday: Know the influence behind your grocery purchase