John Kasich's Top Advisers Include Lehman Brothers Lobbyist: Failed Wall Street Firm's Fingerprints All Over Ohio Campaign

Lehman Brothers Lobbyist Form

CINCINNATI (TDB) -- A lobbyist who represented Lehman Brothers is a key figure in Republican candidate for Ohio governor John Kasich's campaign.  Robert F. Klaffky worked for the failed Wall Street investment bank as a registered "legislative agent" in Columbus between 2000 and 2008.  Those years coincide with Kasich's time as Lehman Brothers managing director.  Klaffky's lobbyist registration form shows he reported to a Lehman Brothers office on the 11th floor of a building at 399 Park Avenue in midtown Manhattan.  For a time, that address gilded the most expensive office building in the world.  It was purchased for $1.06 billion in 2002.  399 Park Avenue is a 41-story office building that houses the world headquarters of Citigroup.  Lehman Brothers collapsed in bankruptcy in late 2008 -- it demise worsened the Great Recession and waves of woe are still washing over the U.S. economy.  Klaffky stopped lobbying for Lehman Brothers in December 2008 when the firm went belly up. 

Klaffky's Ohio lobbyist registration documents can be found by searching here, which takes you to the portal of the Joint Legislative Ethics Committee. The Daily Bellwether has posted a 2008 form filed by Klaffky that discloses his affiliation with Lehman Brothers. Klaffky said he was engaged to handle "all issues pertaining to the client."   Kasich has tried to minimize his Wall Street connections during the campaign for governor.  For example, the Republican candidate's official biography posted on his campaign website does not mention that he was a Lehman Brothers executive.

Four months ago, Columbus Dispatch reporters Joe Hallett and Mark Niquette wrote a story naming the insiders in the campaigns of Republican Kasich and Democratic Gov. Ted Strickland. Lehman Brothers lobbyist Klaffky was lumped in the group that Kasich called his key aides.  But the story did not mention the identify of Klaffky's lobbying clients.  You can read the excerpt below: exeHneidentify the firm say w:

"Kasich described his campaign as "kind of like getting the band back together." It is a mix of longtime trusted aides from his years in Congress, such as Wayne Struble, Don Thibaut and Ben Kanzeg, and newcomers such as Hansen and communications director Scott Milburn.
Kasich gushes accolades when discussing campaign staffers and volunteers individually, saying, 'A better team, in my opinion, has never been assembled since I've lived in this state. I will live and die with them.'

"Along with paid staffers, an assortment of former co-workers, unofficial advisers and old friends can be found on any given day at Kasich's Downtown headquarters. Among them: former Lehman Brothers colleague and right-hand man Jai Chabria, who Kasich said is "like a member of my family"; Franklin County GOP Chairman Doug Preisse; lobbyist Robert F. Klaffky; and longtime personal friend Ron Hartman, a member of Kasich's Bible study group."

Ohio BWC Lost $56.4 Million In Lehman Bros. Investments: State Fund For Injured Workers Netted Two Pennies Per Dollar

BWC Report Shows Lehman Bros. Hit

CINCINNATI (TDB) -- The failure of Lehman Bros., the Wall Street investment bank that employed John Kasich, the GOP candidate for governor, was a financial calamity for the Ohio Bureau of Workers' Compensation.  Records dug up this week by The Daily Bellwether show BWC managed to recover just $1.54 million of $57.9 million invested in Lehman stock and bonds.  Kasich was a managing director at Lehman -- though he now tries to downplay his role at the bankrupt Wall Street firm.  A BWC investment committee report shows the Lehman holdings were liquidated two years ago as Wall Street collapsed in the worst financial mess since the Great Depression.  $10.5 million in Lehman stock was sold for $35,000.  That's right, $35,000.  $47.3 million in Lehman bonds was sold for $1.5 million.

 BWC also lost lesser amounts in AIG, Freddie Mac and Fannie Mae -- in all $94.6 million vanished as the bubble burst.  The Oct. 14, 2008 investment committee report said:  "The bulk of these losses were attributable to holdings in four troubled prominent financial services organizations whose financial conditions deteriorated rapidly due to each firms large exposure to troubled and illiquid mortgage-related assets."

BWC is a state insurance pool that is funded by businesses in Ohio who pay premiums.  If BWC's investments earn money, the premiums remain stable, or drop.  If it loses money, they go up.  Wall Street's reckless practices hurt the fund, of this there is no doubt.  Here is what the investment committee reported:

"Lehman Brothers, a large investment banking firm, was force to file for bankruptcy protection on September 15 [2008] as sit incurred a liquidity crisis precipitated by a rapidly growing lack of investor and institutional counterparty confidence resulting from its weak and deteriorating mortgage and real estate portfolios."

Kasich has contended on the campaign trail this year that he was not a wheel at Lehman Bros.  Instead, he portrays himself as a minor cog.  But there are proxy records showing he was more of a Wall Street insider than he now lets on.  Kasich was on the board of Instinet, an electronic stock trading operation in Manhattan that was a major Wall Street player and helped pioneer 24-hour trading. Instinet was bought by the NASDAQ stock exchange in 2005. There is more about the history of Instinet here. The company's proxy discloses Kasich's responsibilities at Lehman Bros., which seem to be far more extensive than his current claim that he headed a tiny two-person office in suburban Columbus. From the Instinet proxy:

John Kasich. Mr. Kasich, age 52, has been a Managing Director in the Investment Banking Group at Lehman Brothers since January 2001, where he has responsibilities across a range of industry groups, including health care, power and utilities, technology, retail and financial institutions. Prior to joining Lehman Brothers, Mr. Kasich was a member of the U.S. House of Representatives, representing Ohio’s 12th Congressional District, from 1983 to 2000, and served as Chairman of the House Budget Committee from 1995 to 2000. Prior to serving in the U.S. Congress, Mr. Kasich was an Ohio State Senator for four years. Mr. Kasich also currently serves as a director of Invacare Corporation and Worthington Industries, Inc., and is the host of the program “Heartland with John Kasich” on the Fox News Channel. Mr. Kasich is a graduate of the Ohio State University. Mr. Kasich has been a director of Instinet since June 2001.

 

Ohio Republican Party Wrecks Kasich's Qualifying Day: Presser Surfaces Blasting 'Ties To Lehman Brothers'

CINCINNATI (TDB) -- In November 2008, one didn't have to work for Lehman Brothers to be considered unfit for government service in a high office. According to the Ohio Republican Party, one just had to have "ties to Lehman Brothers," the bankrupt Wall Street investment house. John Kasich, a former Lehman Brothers managing director (2001-2008), qualified today as the GOP candidate for governor of Ohio. Wall Street is in his past, and so is his own party's criticism Wall Street executives. Today, The Daily Bellwether links to this Nov. 24, 2008 Ohio Republican Party press release that first raised the Lehman Brothers fitness issue. The state GOP targeted Lawrence Summers -- an Obama economic adviser -- with a headline that said "Summers Is A Managing Director Of A Hedge Fund With Ties To Lehman Brothers." It turns out that Lehman bought a 20% stake in the D.E. Shaw hedge fund in March 2007. By that time, Kasich had been a managing director for six years -- he was full time with Lehman Brothers. Below is the actual text of the Ohio GOP's concerns about Lehman Brothers:

"Summers Is A Managing Director Of A Hedge Fund With Ties To Lehman Brothers:
"[Summers] Is A Managing Director Of A Hedge Fund, D.E. Shaw Group, At A Time Of Distrust Of Wall Street." (Deborah Solomon and Michael M. Phillips, "The Obama Transition: Summers And Geithner, Two Contenders For Treasury Job, Have Close Career Ties," The Wall Street Journal, 11/8/08)
Summers Took On The Role Of Managing Director In October 2006. "In October [2006] Lawrence Summers, former Harvard University president and U.S. Treasury Secretary under the Clinton administration, was named managing director at D.E. Shaw; Mr. Summers also is known for his role in the bailout of Long-Term Capital Management in 1998." (Jacob Bunge, "Lehman Brothers Buys Into D.E. Shaw," [New York] Daily News, 3/13/07)
In March 2007, Lehman Brothers Bought A 20 Percent Stake In D.E. Shaw Group. "Lehman has also heavily expanded its investment banking capacities in Europe and Asia, and has built up its asset management capabilities. Its business trading and arranging financing for hedge funds have also picked up just this week Lehman took a 20 percent stake in D.E. Shaw Group, one of the world's largest hedge fund managers." (Joe Bel Bruno, "Lehman Brothers 1Q Profit Up 5.6 Pct.," The Associated Press, 3/15/07)
D.E. Shaw Founder David Shaw Said "We're Very Pleased To Be Associated With Lehman Brothers." David Shaw: "We're very pleased to be associated with Lehman Brothers. ... Lehman has demonstrated a strong commitment to investment management, and will be a valuable resource to us as we continue our efforts to innovate within both the absolute-return and benchmark-relative asset management areas." (Jacob Bunge, "Lehman Brothers Buys Into D.E. Shaw," [New York] Daily News, 3/13/07)"