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Executive Compensation an Issue for Edwards

By Alec MacGillis
CONCORD, N.H. -- As his populist stump speech has grown even more forceful in the final weeks before primary voting begins, John Edwards has a new applause line about the outrage of high CEO compensation. "You've got the head CEO of one of the biggest health insurance companies in America, last year he didn't make a million dollars, he didn't make tens of millions of dollars, he made hundreds of millions of dollars. Hundreds of millions of dollars," Edwards told voters in Laconia, N.H. last week, about an unnamed executive.

Edwards also did not name another chief executive who did quite well last year: Wesley Edens, the president of Fortress Investment Group, the New York hedge fund and private equity firm that paid Edwards nearly $500,000 for his work as a part-time adviser in 2006, where Edwards has about $16 million invested, and whose employees earlier this year raised $167,000 for Edwards's campaign, his largest single source of contributions.

Edens earned $109.2 million in 2006, according to documents Fortress filed with the Securities and Exchange Commission as part of its initial public offering earlier this year, and the total value of Edens' shares in the firm following the public offering is estimated at about $1.8 billion. Fortress' top five executives, including Edens, earned an average of about $90 million each in 2006. In addition, the five principles earned a combined $409 million in the first two months of the year when the Nomura Group purchased an $888 million stake in the firm.

The Fortress executives earnings are on a slightly lower scale than that of the unnamed health care executive described by Edwards. But the gap is smaller than it looks, given that the earnings of hedge fund and private equity managers are taxed at a lower rate than other salaries -- under tax law, they are considered capital gains, instead of salary, and so are taxed at 15 percent instead of the more than 30 percent they would be taxed at if considered regular salary.

The Edwards campaign notes that he was the first of the Democratic presidential candidates to call earlier this year for raising the tax rate on private equity and hedge fund earnings, a move that Hillary Clinton and Barack Obama quickly followed. That proposal is not a part of his regular stump speech.

Asked about how Edwards' latest declarations against CEO pay jibe with his work for Fortress, campaign spokesman Eric Schultz said, "There is no shortage of examples of how the rich are getting richer and the middle class is getting left behind, and until John Edwards is president corporate greed will continue to overshadow the needs of working families. Just like Franklin Delano Roosevelt, an Edwards Administration will be hated by corporate interests on Wall Street and in Washington ."

Edwards' populist message has been undermined in other ways by his work at Fortress, which he said in an interview earlier this year that he chose as a place of employment because he wanted to learn more about capital markets and their relationship with poverty. Edwards has railed against companies that use offshore tax shelters; many of Fortress' hedge funds are incorporated in the Cayman Islands, which allows foreign investors and large institutional investors to avoid U.S. taxes on their gains with Fortress.

Edwards has also sharply criticized the predatory practices of some subprime mortage lenders, which have contributed to the surge in bankruptcies. When he went to work at Fortress in late 2005, it held a large stake in a major subprime lender, GreenTree Servicing, that has been accused of using predatory lending practices in, among other places, New Orleans, whose plight Edwards has made a focus of his campaign. While Edwards was at Fortress, the company bought large stakes in several other subprime lenders. Edwards has said that he could not recall whether he was told about the GreenTree stake at the time of his hiring and that he was not involved in the later investments. His role at Fortress was strictly advisory, he said, and he went to its New York office at most a few days a month. He has since started raising money, with some contributions of his own, to help the several dozen homeowners in New Orleans who have been forced into bankruptcies since Hurricane Katrina by mortgages held with lenders linked to Fortress.

By Web Politics Editor  |  December 31, 2007; 4:11 PM ET
Categories:  A_Blog , John Edwards  
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The notion that Edwards has to be poor in order to represent the working class is IDIOTIC and obvioulsy originates from a blind JEd hater. I'll let Jay Z have the last word on the subject:
"And I can't help the poor if I'm one of them
So I got rich and gave back
To me that's the win, win
The next time you see the homie and his rims spin
Just know my mind is workin just like them
(The rims that is)"

Posted by: sm4269a | January 2, 2008 1:32 PM | Report abuse

So Edwards is criticizing high CEO pay and he may or may not be hypocritical about it. But what does he propose to do about it?

Basically all he is saying is, other people are making lots of money and that is not fair. He does this without offering anything specific. Does he want to raise capital gains taxes which would have a negative effect on the economy just to get at these CEOs?

Candidacies that are based on hate and class envy only go so far and eventually crash and burn. Edwards finished second in Iowa because Dean and Gephardt were slashing at each other and voters turned to the then sunny and positive Edwards.

Now he is doing the slashing so I wonder if he will really be everyone's second choice as is the convention wisdom. We will see.

Posted by: danielhancock | January 2, 2008 8:53 AM | Report abuse

Edwards was the only candidate talking about corporate greed in America, about the working poor and changing America until the other candidates saw that it was polling well. It is not about what kinds of jobs he's had, its about the policies he is and will be pushing for.

Posted by: shearbutter | January 1, 2008 4:34 AM | Report abuse

I am supporting John Edwards for president because I heard him give a speech one day,and he sounded like Franklin Roosevelt. In fact, I think he is the only candidate who understands and speaks to all of us in America. He is the only one who truly knows the problems facing the middle income and lower income people. He has made the effort to find out what the people need, and he is willing to represent us. I would love to see an outsider like him have the chance to represent the common man in Washington Circles.

Posted by: bjross1 | December 31, 2007 11:22 PM | Report abuse

Alec's piece doesn't work. It relies on an oversimplified logic that Edwards has criticised one CEO's compensation, and therefore he should have a problem with all executive packages and that if he doesn't, then there's inconsistency and/or hypocrisy.

The issue with the health insurance executive compensation is that folks are paying several hundred dollar premiums each month (in addition to employer contributions) and are told this is just the cost of health care. While struggling to make those payments, the executive compensation at those health insurance companies is very high. Health care is not an elective from a basic needs perspective, so the issue of what folks have to pay for insurance and why - where those dollars go - and governments part in failing to regulate an area that touches on essential services is the issue there.

A private equity firm on the other hand, is not remotely related to the same subject (although Alec has latched the two together through executive compensation). No struggling family needs to invest in a private equity firm as they need to buy health insurance. The health insurance compensation is that these premiums go to the large pay package. At the private equity firm, compensation is the result of investors making a choice with their cash regarding how to make that money grow - and how well the firms make that money grow for their clients.

Alec's piece relies on bad logic to try and find inconsistencies and hypocrisy, but in the end seems to string unrelated items together and leaves the reader with the upshot that Alec's editor probably needs to review these blog posts a little more closely before these are posted on the usually very good Washington Post site.

Posted by: tparadise1 | December 31, 2007 6:47 PM | Report abuse

Unless I am mistaken, the Roosevelt family was among the wealthiest at his time. But for Roosevelt, America never, never, never would have had a vast middle-class that many mistakingly believe is some sort of natural organic outcome of capitalism. You would be dead wrong. While monied interest, corporate and familial throw the unwashed masses the red meat of stop the blacks!! stop the gaysj!! stop the immigrants!! (while they hire them) stop the secular humanist!! etc, etc etc. The one thing that they are consistent on is robbing the national treasury through government contracts and pretending to pay taxes. Get this through your skull, there are people in this country that do not believe in America, they do not believe in a middle class, they do not believe in workers rights or minimum wages or anything that they believe will get in the way capital accumulation. They have so little respect for the masses because they know the masses have a Jerry Springer-American Idol mentality that can be easily distracted from the issues that actually make a difference in peoples lives. Doh, Edwards house big then Edwards bad. I guess he should be a Buddihst monk in order to speak for the middle class. Perhaps he should have taken a vow of poverty. Of course if he lived in a modest house the headlines would be "EDWARDS PRETENDS TO BE MIDDLE CLASS BY LIVING IN A SMALL HOUSE." With so many non-critically thinking emotional handicapped people within the Ameican body politic, this country is doomed.

Posted by: Dessalines | December 31, 2007 6:31 PM | Report abuse


As Jesus would say: "Don't Worry" : )

Posted by: JakeD | December 31, 2007 5:44 PM | Report abuse

How terribly sad for America that the only Democrat who has a chance against the mean spirited, hateful neocons this election is Edwards. Edwards, like Hillary Clinton, is an establishment Democrat who is more interested in corporate support and votes than the American people. His phoniness is extremely transparent.

Because the majority of white voters are racist and/or misogynist, they will elect neither Obama nor Hillary. Looks like we're on the road to four and possibly eight more years of Bush-warmed-over because the Democrats are so weak they can't come up with a dynamic, electable candidate.

I truly weep for America and for Jesus. Both have been hijacked for a theocratic, fascist political agenda. There is little hope now that the Democrats can stop this as proven by the ineffectiveness of weak-sister Nancy Pelosi and the bland or un-electable candidates the Democrats have
put forward. It will come down again to not voting for who one likes but voting against who one doesn't like the most.

Posted by: coloradodog | December 31, 2007 5:17 PM | Report abuse


How much do you think Mike Huckabee's net worth is? I'm looking at his SF 278 form, filed May 13, 2007.

Posted by: JakeD | December 31, 2007 5:15 PM | Report abuse

"They even recycle stories and present them as new just in case you missed them the first time."
The stories have to be recycled because not enough people know how much of a hypocrite Edwards is.

Posted by: fox_qajgev | December 31, 2007 5:06 PM | Report abuse

A small disclaimer-
Edwards is just one of many, of the "rich a**holes" i mentioned.

Edwards isn't as bad as some of the others, So next to Obama, Edwards is actually my second choice of the top 3.

Posted by: julieds | December 31, 2007 4:58 PM | Report abuse

This article is an example of why Edwards has no credibility. I am sick of rich a**holes trying to pass themselves off as blue collar, middle class regular dudes. It will be a great day when elections are publicly funded and regular Americans can run for office.

Obama is downright poor compared to all the other candidates (Obama's worth about 1.3 mil) and up until he wrote his book a few years ago, the Obama's were living in a condo, trying to pay a mortgage like the rest of us.

Obama is also the most electable dem in the general, has held office for 11 years, taught constitutional law, has authored or co-authored over 1000 bills since he entered the senate, and has the best judgement regarding foreign relations.

Posted by: julieds | December 31, 2007 4:54 PM | Report abuse

Boy, the hits from the corporate controlled media just keep on coming, don't they? They even recycle stories and present them as new just in case you missed them the first time.

Posted by: pmorlan1 | December 31, 2007 4:50 PM | Report abuse

Yeah, and how's that big "house" coming along?

Posted by: DLC1220 | December 31, 2007 4:31 PM | Report abuse

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