For Alexander, Politics, Personal Gain Often Mix

WASHINGTON —  Shortly after Lamar Alexander was named University of Tennessee president in 1988, he planned to have the school put up guests for events and football weekends at the nearby Blackberry Farm inn.

But school administrators, citing conflict-of-interest concerns, cautioned Alexander against using the $200-per-night lodge as long as he remained a part-owner. Alexander assured them he had disposed of his interest in the property and proceeded to steer $64,626 in university business to the hotel.

Alexander left the school in 1991 to become U.S. Education secretary, and only then did university officials learn that his interest in Blackberry Farm had been transferred to his wife, according to a state comptroller’s audit. Had Alexander disclosed his wife’s involvement, university officials said, they would have objected to hosting events at the inn.

Today, Alexander campaigns for the GOP presidential nomination clad in his signature red-and-black-flannel shirts, cultivating the image of a Mr. Everyman who would shake up Washington. Yet records show that Alexander has himself benefited from being part of the political establishment, taking advantage of connections built over more than a decade of public service to become a multimillionaire. Since he was first elected Tennessee governor in 1978, Alexander’s net worth has soared from $151,000 to at least $3 million.

Following his surprising third-place finish in last week’s Iowa caucuses, and with polls showing his support growing in the final days before Tuesday’s New Hampshire primary, Alexander’s finances have come under close scrutiny. There are no indications that Alexander has done anything illegal. Indeed, he has provided extraordinary access to his family’s financial holdings by voluntarily disclosing his personal income tax returns dating back to his days as governor.

Alexander has described the lucrative investments as evidence of his sharp entrepreneurial skills. His standard reply to reporters’ questions on the campaign trail is, “I plead guilty to being a capitalist.”

In an interview last year, Alexander said: “I have worked hard and made a good bit of money. I have always been careful not to do any business with the state government or federal government and not do any lobbying.”

Asked about the Blackberry lodge ownership, however, he conceded that he regretted transferring the inn to his wife, Leslie B. “Honey” Alexander, who also has reaped large profits from investments.

“I got embarrassed by it and, while it was perfectly legal, if I had to do it over again I wouldn’t do it,” Alexander said.

*

The comptroller’s audit reported that Alexander failed to disclose his wife’s ownership of the Blackberry Farm property to college officials. An analysis also found that the inn charged the university considerably higher prices than comparable facilities in the Knoxville area.

The episode prompted the university’s Board of Trustees to adopt new conflict-of-interest policies preventing similar arrangements in the future and requiring financial transactions be handled in a “direct, open fashion.”

Before he was appointed university president, Alexander and his wife became independently wealthy during his two terms as governor between 1979 and 1987.

“If anything distinguishes Lamar Alexander’s career as a public official, it is how much that career has benefited Lamar Alexander,” Charles Lewis, executive director of the Washington-based Center for Public Integrity, wrote in the book “The Buying of the President,” which examines the financial interests of this year’s presidential candidates. Lewis estimates that Alexander earned a $1.9-million return on $20,000 worth of investments during the time he was governor and two years after.

In 1981, Alexander and six other investors each paid $1 for the option to purchase the Knoxville Journal for $15 million. Among the partners were Howard H. Baker Jr., Alexander’s close friend and mentor who at the time served as majority leader of the U.S. Senate.

It is not known precisely how Alexander, Baker and their partners were awarded the option by the heirs of the Journal’s owner. In the interview last year, Alexander said that the Journal was “my hometown paper and I wanted to be publisher.”

The partners decided against exercising their purchase option. Instead, they arranged for the Gannett Co. to pay $15 million for 95% of the newspaper’s stock. For his role, Alexander pocketed Gannett options and stock that he later sold for $623,000.

Republican opponents have pounced on the transaction as one example of how Alexander has profited handsomely from deals that are simply not available to the average investor.

In 1983, Honey Alexander purchased $5,000 of stock in Corrections Corp. of America, a company founded and financed by two of the governor’s friends. Two years later, Alexander supported a $250-million proposal by CCA to construct and maintain two new Tennessee prisons.

To avoid any potential conflict, Honey Alexander swapped her CCA stock for 10,000 shares of an insurance company called South Life Corp. In 1989, she sold the stock for $142,000.

*

In 1986, Lamar Alexander appointed the chairman of First Tennessee Bank to the university’s Board of Trustees and shortly afterward the bank gave him a $131,802 unsecured loan at the prime rate--an interest level that lenders do not offer to regular customers.

Later that year, weeks before he was to leave office as governor, Alexander wrote to some of the state’s top corporate executives on governor’s stationery to solicit support for a corporate child-care venture he planned to start. The company, Corporate Child Care Inc., was launched 2 1/2 weeks after Alexander left office. One of Alexander’s partners is Bob Keeshan, better known as television’s Captain Kangaroo.

Alexander’s $6,600 investment in Corporate Child Care is valued at more than $1 million today. In campaign speeches, he often touts the successful company and its 1,200 employees as an example of his entrepreneurial abilities.

Mark Merritt, Alexander’s campaign spokesman, said there is nothing improper about Alexander using the governor’s office to solicit personal business opportunities.

“I think it is a little unreasonable to expect a person retiring as governor to wait for several weeks to figure out his future status in terms of earning a living until he is already out of the job,” Merritt said.

One of the businessmen Alexander contacted in his final days in the governor’s office was Chris Whittle, a close friend for nearly two decades. Whittle paid Alexander $125,000 to become a consultant and gave him the opportunity to buy $10,000 in company stock. The firm, Whittle Communications, was planning to launch Channel One, a project to put television programming, including advertising, into public schools nationwide.

Alexander purchased the stock in August 1987, but his $10,000 check was never cashed by Whittle. In June 1988, when he was contemplating the University of Tennessee job, Alexander once again turned to his wife as the solution to a potential conflict. He transferred his stock to her and she wrote a $10,000 check dated Oct. 24, 1988, to Whittle. Two months later, after Time Warner bought part of Whittle Communications for $185 million, Honey Alexander sold her stock for $330,000, netting $320,000.

Lamar Alexander did not lose his golden touch after he left the Education Department in 1992. Tax returns for 1993 and 1994 show that Alexander earned $2 million, including $1 million in income from the law firm of his friend Baker while he devoted much of his time crisscrossing the country campaigning for the Republican presidential nomination.

“I think most of us would want a president who has made more good investments than bad ones,” Merritt said. “He has added value in just about every area he has touched, in private and in public.”

Times political writer Robert Shogan contributed to this story.