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When Jackson Presses, Funds Tend to Follow

TIMES STAFF WRITERS

When news broke in January that one of his charities had paid $36,000 to help move his then-pregnant mistress to Los Angeles, the Rev. Jesse Jackson vowed to take some time off for spiritual and family healing.

Four days later, though, he was back on the job, welcoming his most generous corporate benefactors to a four-day conference and black-tie gala in New York. The event raised $2.1 million for Jackson’s Citizenship Education Fund--the same fund that had cut the check for his friend, Karin Stanford.

For the record:

12:00 a.m. April 6, 2001 For the Record
Los Angeles Times Friday April 6, 2001 Home Edition Part A Part A Page 3 Metro Desk 3 inches; 74 words Type of Material: Correction
Jesse Jackson--In a March 13 story, The Times reported that one of the Rev. Jesse Jackson’s organizations in the Silicon Valley had called T.J. Rodgers, chief executive of Cypress Semiconductors, a racist and his company a “white supremacist hate group.” Those comments were not made by Jackson’s organization but by John Templeton, a spokesman for the Coalition for Fair Employment, which had co-sponsored a Jackson visit. Jackson’s California spokesman said at the time that Templeton did not speak for Jackson’s groups.

It was a powerful example of how Jesse Jackson’s personal and public lives overlap--and how the finances of Jackson, his relatives and his friends are closely intertwined with his charitable fund-raising machine.

Two of Jackson’s sons own a lucrative beer distributorship, thanks in part to introductions made by a wealthy friend of the minister’s. Jackson and his wife own stock in a company that has profited handsomely, if indirectly, from Jackson’s pressure on companies to do business with minority firms.

Jackson has acknowledged the payment to Stanford, who had been head of Rainbow/PUSH’s Washington office and moved to California in 1998 to start a new life. (Their daughter was born in May 1999.) When Stanford landed a new job in Los Angeles, it was as a consultant for Beverly Hills billionaire Ron Burkle, a frequent contributor to Jackson’s causes.

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For more than three decades, Jackson has crusaded for civil rights. He has sued, protested, boycotted and otherwise made life difficult for people and companies he believes don’t play fair when it comes to race.

Now 59, Jackson is in the midst of a major shift in the way he promotes racial equality, diversity and himself. It is a move away from traditional grass-roots organizing and toward Wall Street-style deal making--only with a twist: The deals combine racial politics with big money. Largely by hectoring firms when they are most vulnerable--at a sensitive stage of government review or during high-stakes litigation, for example--Jackson’s charities have more than doubled their annual intake of contributions in just a few years, to about $15 million. They have also nearly doubled their number of offices to nine nationwide, with two branches now in Chicago, Jackson’s base, and new offices in L.A., Palo Alto and Cleveland.

Most of the contributions now come as a result of Jackson intervening in corporate transactions.

In an interview, Jackson said his big-money deal-making marks the downbeat of the fourth and final movement of an African American “Freedom Symphony.” First came an end to slavery, followed by the right to vote, the demise of segregation, and now “access to capital.”

“This is,” Jackson said, “as legitimate a phase of our struggle as the phase to end segregation was.”

The model for this was the merger of telecommunications giants SBC and Ameritech.

In May 1998, Jackson called the proposed corporate marriage so fundamentally flawed, so detrimental to low-income customers as to be “antithetical to basic democratic values.” He urged the government to block it.

The next year, SBC and Ameritech donated $500,000 to the Citizenship Education Fund. Then Ameritech sold much of its cellular business, some of it to an African American businessman who is a longtime supporter and friend of Jackson’s.

By the fall of 1999, when the Federal Communications Commission voted to approve the merger, Jackson had become a powerful cheerleader, declaring the union to be “in the public interest.”

Jackson’s public lobbying and the contacts he has made in his efforts to court business have also added to his family’s net worth.

His sons Yusef, 28, and Jonathan, 32, landed Chicago’s largest Anheuser-Busch distributorship in 1998 after Yusef met beer scion August Busch IV. The two were introduced by Burkle, who has become something of a business mentor to the sons.

The sale of the distributorship to the Jacksons, some beer industry analysts say, was an astute move by Anheuser-Busch. In the 1980s, Jackson organized a boycott of the company over hiring and promotion practices. (Unlike some other African American clergyman, he has never been especially critical of beer industry marketing practices.)

Lucrative Deal With Broadcasting Firm

For Jackson personally, though, his most questionable business relationship may be with a company called Inner City Broadcasting, founded by old friend Percy Sutton.

Jackson and his wife, Jaqueline, were original investors in the privately held radio station and cable operator, putting in $10,000 in the early 1970s. They hold more than 23,000 shares, aides confirmed, with a current value of between about $850,000 and $1.2 million, though they would likely be worth more if plans to take the company public succeed.

Inner City has more than doubled its number of radio stations in the last few years as Jackson, along with other activists and some federal communications commissioners, has crusaded for more minority ownership in the industry.

Inner City, and Sutton, also invested heavily in ACTEL--African Continental Telecommunications Ltd.--an ambitious venture to take cellular telephone service to Africa. The company and Sutton--who serves on the board of Jackson’s Citizenship Education Fund and has been a well-known political player in New York for several decades--put $16 million into the venture, Sutton told a congressional committee.

As President Clinton’s special envoy to Africa, Jackson led a trade mission last year to the continent. Sutton was a member of the delegation, promoting ACTEL.

Jackson himself earns around $430,000 a year, he says, discussing his finances recently for the first time since 1988, when he was required to disclose them during his last bid for the White House. About $120,000 comes from one of his organizations, $260,000 for hosting a show on CNN, and the remainder in speaking and writing fees.

But Jackson says he has always been less interested in personal wealth than social influence. Those who know him agree.

He has pursued his causes on a few hours’ sleep, with a few good rhymes and an impressive depth of knowledge he often keeps hidden behind the couplets.

However, in the wake of the payment to Karin Stanford, the minister is facing new criticism. Stanford first caught Jackson’s attention with a scholarly book about his impact on foreign affairs. While at Rainbow/PUSH, she earned $120,000 a year--more than any other employee at the time and just as much as Jackson.

Jackson oversees four charities. PUSH is the religious arm, where Jackson gets his $120,000 and which does not have to disclose its finances. PUSH-Excel is a scholarship fund that raises about $1 million annually.

His best known organization, Rainbow/PUSH, takes in about $5 million annually. But the less well-known Citizenship Education Fund now brings in as much as $10 million a year.

Some of the dollars come from minority-owned corporations such as Georgetown Partners, which received the slice of Ameritech’s wireless operation after Jackson’s intervention.

Chester Davenport, head of Georgetown, said he contributes to Jackson “all the time, for all kinds of things, because I think that what he’s doing is worthwhile.”

Other donations have come from prominent companies soon after he has criticized them over race issues. Those include corporate giants such as Coca-Cola and federally subsidized mortgage broker Freddie Mac.

Some money comes from companies seeking government approval to merge--SBC, Ameritech, AT&T;, Viacom--and facing possible objections by the politically connected minister.

And, sometimes, the money pours in from all sides of a deal.

On the eve of Pepsi Bottling Group’s $2.3-billion initial public offering in May 1999, Jackson pressured PepsiCo chief Roger Enrico to give a piece of the deal to a minority-owned investment bank. If you want minorities to buy your product, he told Enrico, you should do business with them. At the last minute, Enrico, against the advice of his own top finance officers, named a small investment bank with close ties to Jackson as co-managers of the offering, a highly prized and lucrative slot.

That bank, Utendahl Capital Partners, has since donated tens of thousands of dollars to Jackson’s Citizenship Education Fund. Pepsi has donated considerably more, including $50,000 to the January conference in New York.

Jackson’s tactics in securing his deals are undoubtedly tough. Whether they are ethical--or productive in the long term--is becoming a matter of debate in both civil rights and business circles.

“If someone helps you out, you support them. I have no problem with that,” said Cliff Kelley, a former Chicago alderman and longtime Jackson friend. “All I care about is results. If you have a benevolent dictatorship that gets things done, fine.”

T.J. Rodgers, president and CEO of Cypress Semiconductors in San Jose, has a different view after Jackson’s recent efforts to promote diversity and raise money in Silicon Valley.

“It’s a shakedown,” Rodgers said. “The basic shakedown mechanism is, he declares racism based on dubious statistics. Then he gives you a chance to repent--and the basic way is to give Jesse money. The threat is you’ll be labeled a racist if you don’t. That scares business leaders.”

Rival Labeled Racist After Debate

Rodgers and Jackson squared off last spring during Jackson’s first concerted effort to promote minority hiring and raise money in Silicon Valley. Rodgers argued that the high-tech industry was much more racially diverse than Jackson was suggesting. After the two traded barbs in the local paper, Jackson’s local office dubbed Rodgers a racist and Cypress Semiconductors a “white supremacist hate group.”

Although Jackson has insinuated himself into a variety of financial transactions, he has focused his efforts in two arenas where vast sums of money change hands: media and telecommunications mergers, and investment banking.

Broadcast mergers and license transfers require approval from the FCC, and many also face federal antitrust reviews. Companies seeking government approval can find Jackson and his groups either troublesome adversaries or extremely helpful allies.

In some cases, corporations have paid handsomely to get Jackson off their backs.

In February 1997, Viacom sought permission to sell 10 radio stations for $1.1 billion to two other companies. Rainbow/PUSH filed a petition to block the transfer, contending that Viacom had reneged on a prior commitment to sell some broadcast properties to minorities.

Following negotiations with Rainbow/PUSH, Viacom and the two buyers donated $2 million to create a fund to promote minority ownership of broadcast properties. About a third of the money was overseen by a trustee, David Dinkins, former mayor of New York and a longtime Jackson associate. Dinkins later was replaced by the Washington lawyer and lobbyist Warner H. Session.

None of the money went to Rainbow/PUSH, per se. Such a payment might have violated the FCC’s “greenmail” rule, which prohibits an opponent of a license transfer from receiving money, even indirectly, in exchange for withdrawing the complaint. Nevertheless, Session later awarded $680,000 to the Citizenship Education Fund to run two conferences.

Jackson’s group ended its opposition, and the FCC approved the deal.

Jackson points out that, by law, the FCC must consider the public good in granting broadcast licenses. And some recent FCC commissioners, especially chairmen William Kennard and Reed Hundt, have openly exhorted media giants to hire more minorities and sell to more minority owners.

A civil rights organization, Jackson’s groups contend, would be remiss if it weren’t negotiating for minority interests. Said Billy Owens, Rainbow/PUSH’s chief financial officer: “This is what we do.”

What concerns some critics is the appearance of a connection between corporate donations to Jackson’s organizations and a change in Jackson’s position.

In February 1999, attorneys for about 13,000 minority Boeing employees had been trying for nearly a year to negotiate a settlement in a racial discrimination lawsuit. Jackson flew to Seattle, met with Boeing head Phil Condit and performed the task in a couple of days.

But 1,700 of the plaintiffs later formally opposed the settlement as too soft, and some questioned the company’s relationship with Jackson.

Within days of the settlement Jackson negotiated, Boeing made the first of several contributions to the Citizenship Education Fund, a donation of $50,000. That was nothing compared with the hundreds of millions of dollars in pension funds that, a few months later, Boeing sent to be managed by a handful of minority investment banks, at least some of which have supported Jackson’s charities.

Later in 1999, Jackson criticized the merger of AT&T; and TCI. Jackson reversed his position after the companies pledged to hire a minority investment bank to help handle a massive $8-billion bond offer. Blaylock & Partners, headed by Jackson friend Ronald Blaylock, got the contract.

Soon after, AT&T; donated $425,000 to Jackson’s Citizenship Education Fund. Blaylock & Partners donated $30,000 to the same fund in 1999.

Many of the beneficiaries of Jackson’s advocacy were doing well before his efforts on their behalf.

Chester Davenport was worth an estimated $90 million before Jackson intervened on his behalf when Ameritech was forced to divest its cellular business as part of its merger with SBC.

As part of that merger, which Jackson had initially opposed, Ameritech sold its $3.3-billion cellular service--93% to rival GTE and 7% to Davenport.

When asked what Davenport brought to the table that other would-be investors did not, Verizon spokeswoman Bobbi Hennessey, emphasizing that the company, not Jackson, picks its business partners, said: “Primarily they brought to the table the opportunity for us do business with a minority firm.”

When all was said and done in this round of mergers and sell-offs, Jackson’s groups took in $500,000 from SBC and Ameritech and $1 million from GTE and Bell-Atlantic. When Bell-Atlantic merged to become Verizon, that new company kicked in $300,000.

For the most part, these companies say Jackson helped them be good corporate citizens.

“Whether you call him a conscience or a nudge . . . it’s been a helpful process with us,” said Martin Franks, a spokesman for CBS, which has sold broadcast outlets to minorities at the urging of Jackson and others. “We can talk about our sympathy with their goals . . . but it never hurts to have somebody keep you in touch.”

Robert Woodsen, head of the National Center for Neighborhood Enterprise and a conservative critic of Jackson, argues that Jackson’s forays into boardrooms have done little for the greater economic good of African Americans. And his tactics, Woodsen argues, work mostly to scare companies, not to improve race relations in the long term.

“He uses the black community to threaten corporations, but then who benefits? It’s not the black community. It’s a handful of black businessmen around Jesse Jackson,” said Woodsen, who is black. “And what it’s really doing is diluting the rich legacy of the civil rights movement. That legacy is now for sale.”

The impact of his deal-making, Jackson contends, should not be measured in dollars alone.

“It’s a big deal for us when we can break through at the highest levels of business,” Jackson said recently. When a Davenport or a Blaylock or a Sutton succeeds dramatically, he added, “the light that he casts excites people everywhere.”

*

Times Researcher John Beckham in Chicago contributed to this story.


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