As former White House Chief of Staff Erskine B. Bowles makes his second run for a North Carolina Senate seat, he faces a $120 million lawsuit from the state of Connecticut for bad investments made while a top official at the Forstmann Little investment firm.
Mr. Bowles, who had been general partner at the New York firm making $4 million per year, is among nine top officials at Forstmann Little who are named in the Connecticut court case, which begins with jury selection this week.
“We’ll probably be watching this case just as closely as Erskine Bowles will be,” said Paul Shumaker, consultant to Mr. Bowles’ likely Republican rival, Rep. Richard M. Burr.
Mr. Bowles’ spokeswoman, Susan Lagana, dismissed any concerns.
“These charges were raised and answered two years ago,” she said. “As we learned then, they are politically motivated, unfounded and without merit.”
Ever since the suit was filed in March 2002, politics has dominated the case.
When it was first filed by Connecticut’s Democratic state treasurer and attorney general, one name from Forstmann Little’s masthead was conspicuously absent: Mr. Bowles, who was busy down in North Carolina running for the Senate seat being vacated by former Sen. Jesse Helms. It was a crucial race in which the control of the Senate was at stake.
Only after complaints were raised in the media was Mr. Bowles’ name added to the suit. Connecticut state officials said “other evidence” arose, requiring the inclusion of Mr. Bowles and another company official in the lawsuit.
All told, the company lost nearly $2 billion of investors’ money, mainly on investments made while Mr. Bowles, a veteran of the Clinton White House, worked there.
Among the more concrete charges in the lawsuit is that Forstmann Little officials concentrated too much of Connecticut pensioners’ investments in too few holdings.
As a result, the company lost $95 million investing in XO Communications, based in Virginia. They lost $31 million investing in the Iowa-based telecommunications company McLeodUSA, on whose board Mr. Bowles and another Forstmann Little official served.
Adding to the political fire is that senior partner Thomas J. Forstmann is a major Republican donor and supporter of President Bush.
During Mr. Bowles’ last campaign for Senate, which he lost to Elizabeth Dole in 2002, Republicans and Democrats tried making hay out of the case.
Republicans said Mr. Forstmann was out of the loop doing charity work while Mr. Bowles was left primarily in charge of the firm’s operations.
During the Dole-Bowles race, the National Republican Senatorial Committee aired an ad blaming Mr. Bowles for the Connecticut pensioners losing their investments. After fierce complaints from the Bowles campaign, four North Carolina TV stations pulled the ad.
Meanwhile, Mr. Bowles tried downplaying his involvement in the failed investments.
During the 2002 campaign, Mr. Forstmann issued a statement, saying: “Erskine was a good and productive partner during his time at Forstmann Little. He is being wrongly blamed in recent press coverage for certain difficult investments that the firm as a whole decided to make. This is inaccurate and unfair.”
Mr. Forstmann’s statement did not say who should be blamed.
