- The Washington Times - Monday, February 18, 2002

Democratic National Chairman Terrance M. McAuliffe, who has been trying to tie the Enron debacle to the Bush administration, has two Enrons in his closet.
Already under scrutiny for his $18 million profit from Global Crossing Ltd., Mr. McAuliffe was also on the board of directors of Telergy Inc., another telecommunications firm that went belly up last year. Mr. McAuliffe had been a major investor.
Telergy, headquartered in Mr. McAuliffe's hometown of Syracuse, N.Y., filed for Chapter 11 protection Oct. 26 in federal court in Utica, N.Y.
Telergy also dumped nearly 300 employees without severance pay.
In May 2000, Mr. McAuliffe owned or had warrants to acquire 12,728 shares of Telergy worth $2 million, company officials told the Associated Press at the time. Telergy also paid Mr. McAuliffe more than $1 million for helping to raise equity for the firm.
Telergy finally collapsed completely when it entered bankruptcy proceedings under Chapter 7 of the bankruptcy laws on Dec. 21 of last year. This was after unsuccessful efforts to get its financial house in order while it was under Chapter 11 protection from creditors.
Under Chapter 7 protection, companies liquidate; under Chapter 11, they reorganize but continue to operate.
In the case of Global Crossing, once the seventh largest corporation in America, the company filed for Chapter 11 protection last month but not before Mr. McAuliffe had turned a $100,000 investment in the fiber optics firm into an $18 million profit.
"Terry McAuliffe passes himself off as a great businessman but uses his political networking as a leverage for his business purposes," confided a fellow Democrat who has known Mr. McAuliffe for many years. "He's got two Enrons tucked away."
"He was a board member with responsibility to shareholders," the Democrat added. "He's the Ken Lay of this deal," a reference to former Enron CEO Kenneth Lay.
But McAuliffe spokeswoman Jennifer Palmieri called it "patently ludicrous to say he was the Ken Lay of this deal, because all Mr. McAuliffe did was serve on the Telergy board for two years."
Mr. McAuliffe was among the most prodigious fund-raisers for President Clinton. as well as the guarantor of the $1.35 million mortgage on Mr. Clinton's new house in Chappaqua, N.Y.
On Aug. 31 last year, Mr. Clinton, vacationing in Skaneateles, N.Y., played golf with Mr. McAuliffe and Telergy founder Kevin Kelly.
Mr. McAuliffe also arranged for Global's president, Gary Winnick, to play golf with President Clinton. Mr. Winnick also contributed $1 million to the Clinton presidential library.
Global then began negotiations with the Clinton administration for a $400 million Defense Department contract. Global won the contract last July, but the Bush administration rescinded the contract a month later after losing bidders raised a fuss over the bidding process.
While Mr. McAuliffe was on the board which was chock full of wealthy and influential Republican members Telergy got Global Crossing to invest $40 million in Telergy. Global Crossing went bankurpt last month.
"In Terry's world, business knows no politics. Now he plays the partisan party game when nobody's looking at the business game," confided the Democrat, a long-time acquaintance of Mr. Mcauliffe's. "He was working with big time Republicans in his home state."
Last year, Mr. McAuliffe resigned from Telergy's board, along with all its other directors and its top executives.
Some Republicans have said that Mr. McAuliffe's role in the Global Crossing debacle undermines the DNC chief's effort to tie the Enron collapse to the Bush administration. Others are saying the same thing about his relationship with Telergy.
"The point is not that McAuliffe did anything wrong necessarily in Global Crossing or Telergy, but that he tried to make a political issue out of Enron to use against Republicans and President Bush in particular and did it gleefully without compunctions," said David Norcross, a lawyer and former Republican National Committee general counsel.
Unlike his Global Crossing association, Mr. McAuliffe's Telergy experience led to no obvious financial bonanza.
"He was an investor in Telergy, and he lost money on his investment," said Miss Palmieri. "But whether he made or lost money is irrelevant. The last time I looked, investing venture capital in a company was a good thing, not a crime and for anyone to suggest otherwise is ludicrous."
Miss Palmieri said that Mr. McAuliffe was on Telergy's board of directors, but that the company never went public. In fact, the company made an unsuccessful effort to sell shares to the public but failed because of the lack of investor confidence, according to business news reports at the time.
Telergy was founded in 1995 and built a network of more than 250,000 miles of high-speed fiber optic lines stretching from Canada to New Jersey and Pennsylvania.
Key Telergy investors were J. Patrick Barrett, former chairman of the New York state Republican Party, and Mr. McAuliffe.
Mr. Barrett resigned as Telergy president on Aug. 8. He also resigned from Telergy's board of directors.
Other board members who resigned were Mr. McAuliffe and John O'Mara, former New York Public Service Commission chairman who had been a valuable asset to Telergy because he knew where or how to find where the public utility rights-of-way were situated, and therefore where Telergy could seek to lay its broadband fiber optic cables.
In May 2000, Global Crossing invested $40 million in Telergy and owned 14.2 percent of the company, according to Associated Press reports. At the time, Telergy listed assets of nearly $220 million.
As for any parallels with the Enron mess, Miss Palmieri said that her boss "did not meet the business associates from Telergy or Global Crossing through political connections. In the case of Global Crossing, he met Gary Winnick through an investment banker, and he and the Telergy CEO were childhood friends."
She also said that Mr. McAuliffe "never contacted the government on behalf of these companies. That's the difference between his relations with those companies and the Bush administration, which gave Enron unparalleled access to the White House on energy and tax policy."


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