Friendly Dealings

Edward T. Pound has a piece out tomorrow in National Journal that asks:

"Will Norm Coleman's relationship with a well-connected GOP operative hurt him in his tough battle for re-election?"

The full story is available after the jump. Enjoy ...

Friendly Dealings
Will Norm Coleman's relationship with a well-connected GOP operative hurt him in his tough battle for re-election?

by Edward T. Pound

Sat. Jun 28, 2008

Norm Coleman is a man of many faces--politically, that is. As a student activist at Hofstra University on Long Island nearly four decades ago, the long-haired Coleman ardently protested against the Vietnam War. Before long, however, the student who also partied at Woodstock quickly learned the ways of the establishment. Coleman became a lawyer and served as the chief prosecutor and solicitor general in the attorney general's office in Minnesota, his adopted home state. He went on to become a two-term mayor of St. Paul where many, including Coleman himself, credit his administration with revitalizing the city. In 1996, the longtime Democrat abruptly became a Republican, and six years later he was elected to the U.S. Senate.

Along the road to the top of the political heap in Minnesota, Coleman had plenty of help. But in the last dozen years, few if any supporters have played a more important role than a little-known Republican operative named Jeff Larson. Larson works in St. Paul but has gold-plated GOP connections in Washington and across the country. Or, as Coleman puts it: "He's the most connected person in D.C. that nobody in Minnesota knows."

Their relationship--the ambitious, energetic, can-do lawmaker and the low-key, behind-the-scenes strategist--has proved to be mutually beneficial. Larson's political telemarketing business appears to have profited handsomely from the relationship, and Coleman has turned to his close friend in times of need, including in his tough battle to win a second Senate term in November.

Most curiously, Larson provides Coleman with a place to live in Washington. In July 2007, Coleman began paying Larson $600 a month in rent for a portion of a one-bedroom basement apartment in a Capitol Hill town house that Larson owns. The way Coleman explained the arrangement, the apartment serves as a crash pad. The 58-year-old senator sleeps in a bed shoehorned into a 10-by-10 bedroom, and he said he spends perhaps only "three waking hours a night" in the place.

Earlier this month, after National Journal questioned Coleman and Larson about the living arrangement, the senator said he discovered that his rent for last November and January had not been paid. In mid-June, Coleman covered the back rent with a personal check for $1,200 made out to Larson and signed by the senator's wife. Last year, Coleman sold furniture to Larson to cover one month's rent, according to Larson. And Larson held on to yet another month's rent check for three months, cashing it a few days after NJ's inquiries.

Larson's St. Paul-based company, FLS Connect, is a critical component of Coleman's political operation. The firm, which has raised money and hustled up voters for Coleman, has been paid about $1.6 million since mid-2001 by Coleman's Northstar Leadership political action committee and two Senate campaigns, according to reports filed with the Federal Election Commission. Larson serves as the PAC's treasurer and provides it with office space in St. Paul; Coleman's Senate campaign stopped renting space from Larson last year.

Coleman has yet another Larson connection. He has employed Larson's wife, Dorene, for more than two years as a "casework supervisor" in the senator's St. Paul office. She is listed on his Senate payroll under her maiden name. After NJ questioned Coleman about the arrangement, his staff said that she would be leaving her constituent-services job on July 10.

Coleman and Larson are also widely credited with persuading senior Republican leaders to select Minneapolis-St. Paul as the host for the GOP's national convention in September. Larson holds a prominent role as the unpaid CEO and chief fundraiser for the local host committee, a position that Coleman helped arrange. Additionally, Coleman took the lead in arranging a $50 million congressional appropriation for security at the Republican convention. Without that earmark, Larson and the host committee would have been required to raise the security funds privately. (Democrats also got $50 million for their Denver convention in August.)

In separate interviews, Coleman and Larson said that their dealings were aboveboard. The senator said that the apartment deal he struck with Larson was appropriate, that Larson's wife was one of his best employees, and that Larson's telemarketing business provided "great services" to his campaign and PAC. "Where's the benefit for me? ... What do I get out of this?" Coleman asked.

Later, in a prepared statement, Coleman said he moved into Larson's town house in a belt-tightening move to cut his living expenses; his previous apartment in Washington cost him $1,780 a month. Coleman's Senate salary is $169,300.

Meanwhile, Larson said that the town house arrangement was not a favor to Coleman. "I am not trying to peddle influence or get more business out of him, curry favor with him," Larson said. He said he was "merely trying to meet my mortgage.... I was thrilled that it worked out for him." Larson also described Coleman's living arrangements: "He has one bedroom in the back. I was actually surprised [the bed] fits into it. Somehow, he jumps into it at night and has just a bathroom, sink, and small refrigerator." He said that the apartment does not even have a stove.

Coleman isn't the only tenant. Larson said he rents the top two floors of the town house to a business partner who is now on an unpaid leave of absence from FLS Connect while serving as the political director of the Republican National Committee.

Well Connected

Larson, 49, is a maestro of political telemarketing. FLS Connect's website illustrates the company's firepower and connections: "FLS Connect has raised money for hundreds of candidates, state and national party committees, and conservative organizations.... FLS Connect has the capacity to make over 40,000 fundraising calls from our own call centers in Phoenix, AZ; Mankato, MN; and Saint Cloud, MN."

Connections, it has. Larson and his longtime partner, Tony Feather, are close to the Bush White House. Republican operatives said that Feather is especially close to Karl Rove, the former senior White House adviser who masterminded both of George W. Bush's presidential campaigns. In the 2003-04 presidential election cycle, the Bush-Cheney campaign paid FLS Connect, then known by other names, nearly $7.6 million, FEC records show.

But that's virtually chump change compared with what the Republican National Committee has doled out to FLS Connect since 2003--some $29.5 million, according to an analysis of federal campaign reports by the Center for Responsive Politics. And those numbers don't include money funneled to FLS Connect by at least 20 state GOP parties and House and Senate candidates.

In the end, Coleman's ties to Larson could prove politically damaging. Democrats, trying to unseat Coleman in his bid for a second term, have already publicly attacked him for his association with Larson's FLS Connect and another firm, DCI Group, a powerhouse Washington lobbying outfit. Although there's no indication that the attacks have gained traction, Democrats in Minnesota and Washington argue that Coleman's dealings with such "special interests" will help their candidate, Al Franken, the satirist and former Saturday Night Live writer and performer, overtake Coleman in the November election. One recent poll indicated that the two men are in a neck-and-neck race; another put Coleman 12 points ahead.

Minnesota's Senate race is being closely watched. Republicans hold 49 seats in the Senate and can ill afford to lose Minnesota. Democrats have sharply criticized Coleman for "shifting positions" on big issues such as the Iraq war. They pointedly note that Coleman served as President Clinton's state co-chairman in 1996, switched parties, and became Bush's state chairman in 2000. Democrats also contend that Barack Obama's coattails will carry Franken to victory, despite recent controversies over his ribald humor and failure to pay out-of-state taxes.

In the NJ interview, Coleman expressed confidence that Minnesotans will return him to the Senate. "I think the contrast on three levels is so enormous," he said, "in terms of experience, accomplishment, temperament, demonstrated ability to get things done at a time when people are really--they're scared, they're anxious. The cost of energy, the price of food, keeping a roof over their head, the security issue out there."

Asked why he switched parties, Coleman described himself as a lifelong "reformer" and said: "I switched parties but didn't switch a position. You know, there were ... a lot of people switching parities who had to switch their position. I didn't change a single position. I simply switched the label but continued with the same programs, same agenda, and got re-elected as a Republican" to a second term as St. Paul's mayor.

Calling his current race "very, very tough," Coleman acknowledged that Obama's candidacy is worrisome. "I think the Obama factor is something that I have to be concerned about," he said. "Is that an edge? Is the other side energized over Obama? Absolutely." But he said he takes heart in knowing that presumptive Republican presidential nominee John McCain is "a candidate with an independent streak that appeals to a state that has an independent streak."

Help From His Friend

In his private life, the Brooklyn, N.Y.-born Coleman is married to a former runway model and actress; he and Laurie Coleman have two children, Jake, 22, and Sarah, 18. Coleman is not wealthy--"I am not a millionaire," he said. Excluding his house in St. Paul, Coleman's largest asset is an individual retirement account valued at $615,000, according to his latest financial disclosure report, released in mid-June. Separately, Coleman lists his wife as drawing a salary from Hays Cos., a Minneapolis insurance broker. The amount was not revealed, and Coleman is not required by law to disclose that information.

Apart from the insurance work, Laurie Coleman has been out touting her new invention--"Blo & Go," a blow-dryer holster that attaches to flat surfaces and frees up both hands for hair styling. The senator's financial report shows no income from the device, but, Coleman says, he's hopeful that his wife's product will become a success. On the day National Journal interviewed him, Coleman said that his wife would be promoting Blo & Go that afternoon on the Home Shopping Network.

Laurie Coleman once used her husband's role as a senator to sell her device on Blo & Go's website but removed the language after a reviewer criticized his politics, the senator said. Coleman said he saw no problem with the website's reference to him. "She's my wife; it's not a secret," he said, but "I don't think she wanted to get involved in political wars--that's not her battle."

Even some Democratic critics agree with Coleman's assessment that he has been bipartisan in working to accomplish his goals. "He is a true optimist, and he generally wants to get things done," said a senior Democratic official in Minnesota who has worked with Coleman but asked not to be quoted by name.

Coleman cites his work on Homeland Security's Permanent Subcommittee on Investigations as among his chief accomplishments. He chaired the subcommittee for four years and now sits as its ranking Republican. Working in a bipartisan fashion, Coleman said, the panel has rooted out more than $12 billion in "waste, fraud, and abuse." He was particularly dogged in his pursuit of corruption in the United Nations' oil-for-food program.

With the help of his good friend Jeff Larson and others, Coleman can point to another big accomplishment: landing the Republican National Convention for the Twin Cities.

In Larson, Coleman relied on the right man. Well connected with RNC officials and party leaders throughout the country because of his telemarketing business, Larson was seen as a crucial player in the process by those who worked with him to bring the convention to Minnesota. Erin Dady, the director of convention planning for the city of St. Paul, describes Larson as "a behind-the-scenes, get-it-done kind of guy" who used his "personal relationships in the Republican Party" to help win over GOP officials. "This was personal to him," she added. "He wanted to bring the convention here."

As the CEO of the nonprofit Minneapolis-St. Paul 2008 Host Committee, Larson has the job of raising private money to pay for the big party, which will be held at St. Paul's Xcel Energy Center. Earlier this month, the host committee announced that it had raised $31 million, still a long way from its stated goal of $58 million. Much of the money has come from corporate supporters, including Fortune 500 companies based in Minnesota.

Without the help of Congress--and, specifically, Coleman--the host committee would be facing an even bigger fundraising challenge. In December, Coleman spearheaded the successful effort to give St. Paul $50 million in federal funds for convention security. Under its agreement with the city, Larson's host committee would have been required to raise the security money if Congress had not acted.

Sen. Tom Coburn, R-Okla., a staunch opponent of earmarks, objected last year to the appropriations for both parties' conventions. In a recent interview with National Journal, he said that the money would indirectly subsidize "lavish" parties for politicians and amounted to an "economic development grant" to the host cities. "We just charged $100 million to our grandchildren," he declared. But St. Paul officials said they will use the money to hire additional police and noted that the Justice Department will closely monitor expenditures. Coleman added that after the tragedy of 9/11, security is paramount. "This is not about parties," he told NJ. "This is about security."

Out of the Spotlight

Larson is no stranger to Republican politics, having been involved in GOP campaigns for a quarter-century. He got his start in the early 1980s as a driver for a U.S. Senate candidate, Bud Westman, in his native North Dakota. He worked on President George H.W. Bush's re-election campaign in 1992 and was heavily involved, from a telemarketing standpoint, in the 2000 and 2004 campaigns of the current president. In his free time, Larson likes to dabble in thoroughbred racing--he is part-owner of five horses, including Devil Not Me--and owns a 36-foot cabin cruiser.

Larson, it became clear, does not enjoy the spotlight. He said he agreed to talk to National Journal only because Coleman had asked him to. The two men go back at least a dozen years. Larson said he started working for Coleman after Coleman became a Republican in 1996 and decided to run for a second mayoral term. "I was doing telemarketing and polling type stuff for the mayoral campaign," he explained. In 1999, Larson and his partners created Feather, Larson & Synhorst, the telemarketing company now known as FLS Connect. The firm was a fixture in Coleman's 2002 Senate campaign and is raising money and contacting voters for the current race. In the first quarter of this year, Coleman's campaign reported paying FLS Connect at least $157,482, mostly in telemarketing and consulting fees. The way he sees things, Larson said, Coleman is a "dynamic leader, somebody who really gets things done."

Larson will get no argument on that score from his wife, Dorene Kainz, who went to work for the senator in September 2005 handling requests from Coleman's constituents in his St. Paul office. Senate records show that she has been paid $101,218 through March 31.

Coleman and his staff emphasized how valuable an employee Kainz has been. The senator described her variously as "extraordinary," "the best employee I had," "one of the best employees I've ever had," "legendary," and "a saving angel."

Coleman said he did not know why she was on his payroll under her maiden name, but insisted that there was no attempt to hide her employment. "She was really extraordinary," the senator said. "I want you to know this--there's no hanky-panky, goodness gracious.... Listen, everything in our business is public. There are no secrets." Asked how he happened to hire Kainz, Coleman said, "I make my reputation on [serving constituents], and I was looking for somebody really good, and I had known Dorene, a talented woman, and she was available."

Larson, too, said there was no attempt to hide his wife's employment. He said that she retained Kainz as her legal name when they were married 23 years ago in Bismarck, N.D. Larson explained that she "goes back and forth"--sometimes using Larson, sometimes Kainz.

In explaining why his wife was leaving Coleman's staff next month, Larson said they both work 60 to 70 hours a week, and "she made the decision a couple months ago to step aside" so she could spend more time with their two sons.

Although they don't stay in Washington often, Larson and his wife bought the town house on Capitol Hill in March 2007 for $989,900--a decision that turned out to be a fortunate one for Coleman and a senior official at the Republican National Committee. Property records show that Larson and Kainz took out a $692,000 mortgage from Wells Fargo Bank.

Larson said he intended to use the town house as a place for him and other FLS officials and employees to stay when they were in Washington. In the past, he said, he had found it difficult to book a hotel room when he visited Washington to consult with his Republican clients, including the RNC. "After I looked at what our company paid for hotel rooms, how hard it is to get a room in D.C.," Larson said, " I said, 'I ought to just buy a place--people who work for us will have a place to stay.' "

As it turned out, he said, he decided to rent a portion of the basement apartment to Coleman and the top two floors to Rich Beeson, an FLS Connect partner who is on an unpaid leave of absence while serving as the RNC's political director. Both Larson and Beeson declined to say how much rent Beeson and his family are paying, except to say that it was "fair market value."

Beeson also said in an interview that since joining the RNC in February 2007, he has played no role in contract awards to FLS Connect. He said he has complied with RNC ethics and conflict-of-interest standards, and had no "deferred compensation arrangement" with FLS Connect.

Assuring Voters

Meanwhile, Coleman and Larson have had a rather loose arrangement when it comes to the senator's monthly $600 rent payments. Copies of the checks they provided to National Journal showed that the checks were often written nine or more days after the first of the month. Larson didn't cash a check written on March 10 until June 17--after NJ questioned Coleman and Larson about their arrangement.

To cover one month's rent, Coleman sold Larson a couch, a table and chairs, and a desk from his old apartment. How did they determine that the furniture was worth $600? Larson: "We just looked at it, estimated it was $600 and one month's rent. We were always conflicted--if it was too high, somebody would say it's not worth that much. We erred on the side of taking one month's rent, valued at $600."

In addition, neither man could find checks from Coleman for two months' rent. In a statement issued to NJ, Coleman said that, in reviewing his records, "it's clear that two months of rent were not paid." He said he took "full responsibility for that, and the situation has been remedied with a personal check" to Larson for $1,200. "This will not happen again."

Before moving last July to the basement of Larson's town house, which sits on a tree-lined street four blocks from the Capitol, Coleman said he was paying $1,780 a month for a larger apartment at the Lansburgh in downtown Washington. In the NJ interview, the senator said he didn't need the space and went looking for new accommodations after his lease expired. "And just in conversation, Jeff mentioned that he had a building, and, you know, he had a room in there, was I interested?" the senator explained. "I said, 'Yeah.' "

Coleman has a bedroom and a bathroom in Larson's town house and shares the remaining living space, which includes his old couch, table, and chairs, with FLS Connect. A company employee uses a portion of the apartment to work and take calls on some days, according to Larson. "There's no kitchen. There's a sink," Coleman said, in describing the apartment. "And there's a little refrigerator that I keep water in. There's no cooking, no nothing."

He insisted that Larson hadn't given him a special deal. Coleman said that before taking the place, he had consulted colleagues in Congress who rent rooms, and they, too, paid "600 bucks" a month in rent. "I went from having a place with a swimming pool and 24-hour service to literally a bedroom," Coleman told National Journal. "But that's all I need. Some of my colleagues live in their office."

In his prepared statement, Coleman said he moved into Larson's apartment "to dramatically reduce my living expenses in Washington. While my Senate salary is generous, the demands of maintaining two households, putting two kids through college and simply covering living expenses in both Minnesota and Washington are substantial."

But ever the perceptive politician, Coleman predicted rough sledding ahead in this year's Senate campaign: "I can assure Minnesotans that while partisans will attempt to raise questions about the perception of my paying rent to live in a bedroom of a house of a friend, there is no extraordinary reason for my staying there other than it fit my family's budget."