Schumer and Paetec
Senator Schumer has issued a press release with a copy of a letter to the Secretary of Housing and Urban Development, Shaun Donovan, urging Mr. Donovan to approve a $16.5 million government loan ("Typically Section 108 loan interest rates are 50% less than commercial market rate loans," the press release helpfully explains) to a company called Paetec for the purpose of building a new headquarters in Rochester, New York.
The press release goes on to explain that the government loan isn't the only government backing Paetec would get for its new headquarters. "Additional tax credit investment is being sought in partnership with the City of Rochester," the release says, and "Last year Schumer secured $1.4 million in federal funding for the Midtown Plaza Revitalization Project that will be used to build new infrastructure and access roads to make the 9-acre site shovel-ready for new private development."
The release promises that the project "will create approximately 2,000 new jobs for downtown Rochester, including 1,000 Paetec workers." But 900 of them are workers who already work at Paetec's existing headquarters, in the Rochester suburb of Fairport, New York. So the new jobs for Rochester come at the expense of not only the taxpayers but also Fairport.
With Mr. Schumer, there's almost always a campaign finance angle, and sure enough, Paetec chairman and CEO Arunas Chesonis gave Mr. Schumer's campaign $3,000 in 2003 and $2,400 in 2010, Federal Election Commission records show. The Paetec Political Action Committee gave Mr. Schumer's campaign $5,000 in 2010, according to FEC records. On December 5, 2003 — the same day Mr. Schumer's campaign booked the $3,000 from Mr. Chesonis — Mr. Schumer's campaign collected $1,500 from Paetec's Timothy Bancroft, $3,000 from Paetec's John Baron, $3,000 from Paetec's Jeffrey Burke, $3,000 from Paetec's Richard Ottalagana, $3,000 from Paetec's Richard Padulo, $250 from Paetec's Douglas Spref. That's $16,750 in campaign contributions from Paetec employees in a single day.
Some of the employees aren't in the habit of making such large political contributions. FEC records, for example, show Mr. Ottalagana and Mr. Padulo never gave any other politician more than $500 at a time.
Paetec shares, which traded as high as $45 apiece back in 2000, are now trading at about $3.58, and Yahoo! Finance says the company has nearly $1 billion in debt and negative earnings per share. In the absence of government incentives, the company might not be making it a priority to borrow more money to move from Fairport to downtown Rochester.
It's certainly possible that even if Mr. Schumer hadn't received campaign contributions from the Paetec people he'd be an enthusiastic advocate of their government loan application. In the context of the tens of millions Mr. Schumer has raised for his own and other Democratic campaigns over the years, $16,750, even on a single day, may not amount to all that much.
But it's also funny that if Mr. Schumer had secretly called HUD to get a government-backed loan for a campaign contributor's company, it might well be a scandal. By issuing a press release about it, he portrays it as championing economic development and jobs in Rochester rather than as doing a favor for a campaign contributor by using political influence to get the contributor's company a government loan at half of the market interest rate.
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