RICHMOND | In a governor’s race that’s all about jobs, Terry McAuliffe is facing questions about huge profits that he made from a company that collapsed two years later, leaving 10,000 people unemployed.
The multimillionaire businessman, former Democratic National Committee chairman and a close friend of Bill and Hillary Rodham Clinton is pledging to use his business savvy to land more jobs for his state than any of his fellow governors.
But since he entered the race in January, he’s been dogged by questions about his investments in telecommunications giant Global Crossing. He faces two opponents in a June 9 primary.
In 1997, Mr. McAuliffe sank $100,000 into the Beverly Hills, Calif.-based startup’s bold plan to link North America and Europe with a trans-Atlantic fiber-optic cable, a superfast conduit for voice, video and digital data.
“When I invested in Global Crossing, understand that it was a very risky deal,” Mr. McAuliffe said in an Associated Press interview about his finances.
His return was $8.1 million, mostly on the sale of 176,017 shares in 1999, the year Global Crossing stock peaked beyond $60 a share.
He could have made much more - closer to the $18 million in some published reports - had he sold all of his shares in 1999. Stock transaction records that he provided to the Associated Press show his last shares were sold in January 2002, after the company’s stock had plunged to 14 cents per share. And, as Mr. McAuliffe notes, he was never a board member or officer of the company.
When Global Crossing filed for bankruptcy protection that year, investors lost $54 billion and 10,000 employees lost jobs. Even after 2008’s spectacular Wall Street failures, Global Crossing’s bankruptcy still ranks among the largest in U.S. history.
Mr. McAuliffe’s most bitter primary rival is pounding him on it. Former state House Delegate Brian J. Moran’s only television ad, which debuted last week, accuses Mr. McAuliffe of “working insider deals for himself.”
Mr. Moran maintains the jobs lost at Global Crossing counter Mr. McAuliffe’s claims that he can generate jobs for Virginia.
“It undermines his reason for running for governor,” Mr. Moran said in an interview.
The other candidate, state Sen. R. Creigh Deeds, has stayed clear of the issue, declining to comment on Mr. McAuliffe’s business dealings.
Mr. McAuliffe won’t disclose his net worth, citing concern for his children, senior campaign adviser Delacey Skinner said. His portfolio, however, is long, diverse and lucrative, including Internet startups, real estate development, banks and even a well-connected Washington-area steakhouse. He said that business acumen will help with efforts to bring jobs to Virginia.
In 1990, two years before he moved to Virginia and raised the millions Mr. Clinton needed to win the White House, Mr. McAuliffe partnered with Jack Moore, a union pension fund trustee and Democratic donor, in a Florida real estate development venture. The pension fund invested $39 million; Mr. McAuliffe put up $100.
Mr. McAuliffe’s total profit, through what he called “sweat equity,” ultimately reached $16 million. The pension fund realized a modest profit, but the Labor Department sued the pension trustees, saying the deal was a bad one for union retirement money. Mr. McAuliffe was not a party to the suit.
In other ventures, his intimate ties to the Clinton White House were of obvious commercial appeal. Through Mr. McAuliffe, Global Crossing Chief Executive Officer Gary Winnick scored a tee time with the golf-loving president; from Mr. Winnick, Mr. Clinton got a $1 million pledge toward his presidential library in Arkansas.
Telergy, a promising information-technology firm in Mr. McAuliffe’s native Syracuse, N.Y., that failed after the Internet boom, put Mr. McAuliffe on its board of directors in 1999. Shortly afterward, Mr. Winnick invested $40 million. Telergy paid Mr. McAuliffe $1.2 million for his help.