Crony Capitalism on Steroids.
Did inside information by The Hutton Co. and/or Wells Fargo allow Bob Coker to make a killing on a speculative, taxpayer-backed investment?
We report, you decide.
The extent of Corker’s relationship with Wells Fargo is absolutely astonishing. We have already told you how Wells rode to the rescue of Corker’s business buddy Henry Luken (and likely Bob himself) with the refinancing of over $28 million in debt at a time when “refinancing” and “real estate debt” were mutually exclusive terms. Now comes an even more egregious example of how Wells Fargo appears to be financially joined at the hip to the junior senator from Tennessee.
“Who’s your Daddy?”
Greed has many fathers, but it has been Wells Fargo who has shown up repeatedly in Bob Corker’s financial life. The curious case of an Alabama development project is a classic example. A shopping center, called the McGowin project, was plopped down in a cow pasture near Mobile, AL with some curious taxpayer financing. It also had a major investor show up at the last minute: U.S. Senator Bob Corker.
Remember Hillary Clinton’s “cattle futures” investment that miraculously turned $1,000 into $100,000 in just a few short months? Well the Corker–Wells Fargo–McGowin deal was much, much bigger than a lousy $100,000. And Corker’s stake in the project was a heckuva lot more than Hillary’s measly $1,000 – try millions of dollars. In this instance, it appears Corker had two aces in the hole that likely guaranteed him a huge profit. And within a week of investing a large sum of money in the highly speculative project, Corker’s investment likely increased many times over, almost overnight, thanks to – who else? – Wells Fargo.
Follow us here for a minute: Bob Corker made a career in commercial real estate in Chattanooga. One of his close associates there was/is Karen Hutton, a former executive with CBL and a large campaign contributor to Corker. Yes, this is the same CBL who Corker used to work for and who is named in Senate ethics complaints filed against Corker (more on this in future posts). Oh, and we would be remiss if we failed to mention that the long-time banker for CBL is none other than — ta da! – Wells Fargo. In fact, CBL publicly credited Wells Fargo for enabling the company to stay afloat in the housing/real estate crisis of 2007-2013.
But back to Hutton. Karen Hutton is now the President of The Hutton Co. construction firm that is built the Mobile shopping center. The infamous Jones Lang LaSalle is also a partner. For you avid readers of Rocky Top, you remember Jones Lang LaSalle and their sweetheart state contract with their buddy, Bill Haslam? Man, they just keep turning up like a bad penny on smarmy deals, don’t they? Birds of a feather, and all that.
Now as any developer fresh out of the Haslam Business School at UT can tell you, when you invest in a commercial project that has less than rock-solid financing, your investment is highly speculative. Many developers can and have lost their shirts on such projects. It’s a high-risk proposition. That is, unless you are let in on some inside information that could – ka-ching! — turn your speculative investment into slam-bang profits. The minute a bank like Wells Fargo comes in to finance a big commercial real estate deal, the investments of the early speculators almost instantly move from a gamble to a valuable asset. Of course, many of the investors put in their money months if not years ahead of that time, sweating out their gamble.
But not Bob Coker. Oh no, he is a very important person with lots of important duties (like overseeing GSE reforms that could put hundreds of millions of dollars into the pockets of Wells Fargo – more on this later as well). Sen. Bob Corker doesn’t have time to wait like mere mortals for his investments to pay off.
On July 17, 2014, McGowin filed the forms revealing that Wells Fargo was the main and likely only major financier of the project. But the key date to remember here is not June 17th, but the date of July 11, 2014. For that is the day Corker dropped between $1 million and $5 million on the McGowin project. (Source: U.S. Senate 2015 financial disclosure statements).
So just six days — 6 days — before Wells Fargo turned the McGowin investments from speculation into spectacular, Bob Corker jumped in with a multi-million dollar bet. Did he know in advance of what was about to happen on the financing of the project? It strains credulity to believe he did not. And just as Wells Fargo bailed out Corker’s alleged $28 million debt from the sale of his property to Henry Luken, here they come again with yet another remarkably “coincidental” move that just so happened to help line the pockets of a man who sits on the Senate Banking Committee.
But the crony capitalism doesn’t end there. For what would a Corker deal be unless it involved skimming taxpayer dollars? And just as in the case of Corker voting to bail out AIG with taxpayer money (the same AIG whose continued solvency was critical to protect Corker’s investment when he shorted the housing market) the Alabama deal had a tax incentive component worth millions. Part of the deal was that investors would receive 1.7% of the 6% of city and county sales taxes predicted to be generated by the shopping center’s sales and would do so for 20 years. McGowin projected the shopping center would generate annual sales tax revenue of $200 million. That would put an additional estimated $3.4 million into the pockets of the investors every year for 20 years, for a total of $68 million over the life of the tax incentive. Not bad, eh?
Are we beginning to see a pattern here? Silly citizens – and you thought tax incentives and things such as sales taxes were to be used for the public good. But when it comes to Bob Corker, some of your tax money frequently seems to somehow find its way into his pocket. Using taxpayer money to guarantee returns – are these the “private gains, public losses” that Corker likes to talk about?
Is it just us, or is Bob Corker is beginning to resemble a wholly-owned subsidiary of Wells Fargo?
[Editors’ note: Despite the name of our humble little blog, we welcome our new readers from Alabama. And we encourage you to send any additional information about the McGowin project our way – anonymously, of course. Just drop a line with your scuttlebutt to the Rocky Top Tip Line (firstname.lastname@example.org) and if it checks out, we will try to use it in future posts.]
In the meantime, you can catch up on our previous postings at the links below:
- Special Report — The Corruption of Bob Corker (Part 1) – Coming up short in the ethics department.
- The Corruption of Bob Corker – Part 1.5 – The Big Short, Corker Style.
- Update: – Private Gains, Public Losses.
- The Corruption of Bob Corker – Part 2 – Wells Fargo bails out Corker and his Cronies
- Just think what the Russians could do if Corker is Secretary of State