Bloomberg News

Menendez Aided Donor in Failed Bid to Prevent Merger

March 22, 2013

When Spanish Broadcasting System Inc. President Raul Alarcon Jr. wanted to block the merger of two corporate rivals, he found an ally in Robert Menendez.

Menendez, then a U.S. House member, introduced a bill to delay the merger in 2003 and testified at a Senate hearing, becoming the most outspoken lawmaker against the deal, according to one person involved. The New Jersey Democrat, now a U.S. senator, also owned stock in Spanish Broadcasting and has received campaign donations from SBS executives for two decades.

Ten years later, Menendez’s efforts on behalf of SBS are being echoed in new allegations involving the lawmaker and another contributor. Federal investigators are looking into whether Menendez, now a U.S. senator, intervened on behalf of a wealthy Florida donor and friend, Doctor Salomon Melgen. Menendez, who heads the Foreign Relations Committee, faces a grand jury inquiry over his ties to Melgen, according to the Washington Post, as well as a Senate ethics panel probe.

“Going to bat for a well-heeled donor who supported your campaign is exactly what’s at the heart of the investigation,” said Bill Allison, editorial director at the Sunlight Foundation, a Washington-based watchdog group.

Menendez’s support of SBS is just one action he has taken to help his financial backers. He has also obtained almost $13 million worth of earmarks for special projects benefiting companies represented by top donors, according to data compiled by Bloomberg.

Private Jet

In the case of Melgen, Menendez intervened in two cases involving the West Palm Beach, Florida, ophthalmologist, one in a billing dispute with the government and another regarding a port-security contract in the Dominican Republic. Menendez also reimbursed Melgen for two flights on the doctor’s private jet.

His actions on behalf of SBS ultimately failed, with regulators approving the union between Univision Communications Inc. (UVN) and Hispanic Broadcasting Corp. Yet Alarcon has continued to support the senator -- last year, he gave $100,000 to a super-PAC backing his re-election -- as have other executives of Coconut Grove, Florida-based SBS.

Since Menendez’s first race for the U.S. House in 1992, SBS employees and their families have given $113,700 to his congressional races, making them his 10th-largest source of cash, according to the Center for Responsive Politics, a Washington research group that tracks donations.

Leadership PAC

They donated $38,000 to Menendez’s leadership PAC -- a fund that pays travel costs and makes donations to other candidates’ campaigns -- from 1999 to 2012, according to a computer-assisted analysis of Federal Election Commission data.

Alarcon donated $10,000 to a legal defense fund set up to help Menendez fight a recall effort in New Jersey; $30,400 to the Democratic Senatorial Campaign Committee in 2009, when Menendez, 59, was chairman of the Senate Democrats’ fundraising arm; as well as the $100,000 last year to a super-PAC that spent $582,500 for his re-election effort. SBS has given $137,000 to New Jersey Democratic committees since 2002, state Election Law Enforcement Commission records show.

Joseph Garcia, senior executive vice president of SBS, and Chris Plunkett, a company spokesman, didn’t return telephone calls seeking comment. Rosemary Mercedes, a spokeswoman for Univision, declined to comment.

‘Community Voices’

“This charge about a 10-year old merger was untrue when it was made by Republican politicians seven years ago, and it is untrue today,” said Tricia Enright, a spokeswoman for Menendez. “Senator Menendez -- and many others -- opposed the Univision- HBC merger because he has long believed media consolidations can lead to the shrinking of community voices, and his investment in SBS, which was fully disclosed publicly at the time, had nothing to do with that position.”

SBS argued that the union between Univision, the largest Spanish-language television network, and Hispanic Broadcasting would give them a dominant share of that market. Menendez, who then owned between $1,000 and $15,000 in SBS stock, spoke out against the alliance more than any other lawmaker, according to telecommunications lawyer Andrew Jay Schwartzman, who was aligned with the congressman in opposition.

His views were at odds with many of his fellow Democratic members of the Congressional Hispanic Caucus, including then- Chairman Ciro Rodriguez of Texas and Jose Serrano of New York, who backed the deal in letters to the Federal Communications Commission. Hispanic Republicans such as Representative Ileana Ros-Lehtinen of Florida also endorsed it.

Letter to FCC

Menendez made his objections known in a letter to the commission, in testimony before a Senate panel and in a speech on the House floor, when he introduced legislation to try to block the transaction.

Menendez, who bought his SBS stock in 1999 for between $15,000 and $50,000, sold it in 2006 for between $1,000 and $15,000, disclosure records show. After selling the SBS stock, he reported assets of between $300,000 and $615,000, all in a rental property and two bank accounts. Lawmakers are required only to list their holdings in broad ranges.

Allison said the stock holdings “further raise questions as to whether he has a conflict of interest.”

In opposing the merger, Menendez was backed by Democrats including Senators Hillary Clinton of New York and Edward Kennedy of Massachusetts. They argued that the deal would allow Univision to dominate Spanish-language mass media, which should be considered separate from the larger broadcasting industry.

Diversity ‘Champion’

“Throughout his career, Senator Menendez has been a champion for many issues important to Hispanic Americans, and advocating for a diversity of voices -- from the corporate boardroom to the local newsroom -- is an important part of that work,” Enright said.

Menendez and two other Hispanic Democratic representatives, Xavier Becerra of California and Silvestre Reyes of Texas, urged then-FCC Chairman Michael Powell in a September 2002 letter to “carefully review” the impact of the merger on the Hispanic community. Both sides have “raised a number of questions which we believe warrant further review,” they wrote.

Menendez went to the other side of the Capitol in July 2003 and testified at a Senate Commerce Committee hearing on radio ownership.

The Univision deal would “create unacceptable market power in Spanish-language media,” he said. “Virtually all Latinos would see and hear their news and entertainment from a single source.”

FCC Legislation

In September 2003, Menendez and Representative John Conyers, a Michigan Democrat, introduced legislation requiring the FCC to hold hearings before approving the Univision deal. Clinton, Kennedy and Mark Pryor of Arkansas introduced a similar bill in the Senate.

“There is simply no reason to rush this controversial merger through without adequate public review,” Menendez said when he introduced the bill. He said the FCC had “no regard for the impact this megamerger will have on Hispanic consumers or the Spanish-language media market.”

SBS, in a letter to the FCC the same day, argued that the merger would “drastically harm both competition and diversity in the Spanish-language broadcasting market.”

Both the Justice Department and FCC approved the union. In its Sept. 22 decision, the FCC said Spanish-language media competes with English-language broadcasters and listeners and viewers have access to both.

Merger Backed

“The implications of treating Hispanics as an insular group removed from the general mainstream of news, entertainment, and information are troubling,” said Powell and the two other Republican commissioners who backed the merger, Kevin Martin and Kathleen Abernathy. Both Democratic commissioners, Jonathan Adelstein and Michael Copps, dissented.

Menendez suggested at the time that political contributions influenced the decision. He called the vote “one that is clearly, clearly promoted by the White House.”

A. Jerrold Perenchio, then chairman and chief executive officer of Univision, gave $350,000 to the Republican National Committee in 2002, the year the merger was proposed, according to the Center for Responsive Politics. Two years later, he raised more than $100,000 for Republican President George W. Bush’s re-election.

For his part, Alarcon, the SBS president, came to Menendez’s aid last year, when the senator was seeking re- election.

Adelson Money

Majority PAC, a Democratic-leaning super-PAC, spent $582,500 on behalf of the incumbent, one of several Senate candidates it backed. Even as an October poll by Quinnipiac University put Menendez ahead of Republican state Senator Joseph Kyrillos, 55 percent to 37 percent, 18 percent of the frontrunner’s supporters said they were open to changing their minds.

Trying to get them to do so, a super-PAC partially funded by billionaire casino executive Sheldon Adelson and his wife, Miriam, began running ads against Menendez. The Patriot Prosperity PAC received $1 million from the Adelsons and spent $478,745 on advertising, FEC records show. The PAC also backed other Republicans.

The Democrats’ Majority PAC countered that with the help of the $100,000 from Alarcon, all in September, and $700,000 from Melgen, including $300,000 in October.

Melgen, the Florida ophthalmologist, is now at the center of the Menendez probe. The Washington Post reported March 14 that a grand jury is investigating ties between the two men.

FBI Raid

The FBI in January, along with officials from the U.S. Department of Health and Human Services inspector general’s office, raided Melgen’s West Palm Beach office as part of a probe into possible Medicare fraud, according to a person with knowledge of the investigation who asked not to be identified in discussing the matter.

Menendez in 2009 and in 2012 asked the Centers for Medicare and Medicaid Services about its finding that Melgen had overbilled the government by $8.9 million. Menendez has said he interceded only because the guidelines weren’t clear.

The senator also asked about a port-security contract in the Dominican Republic held by a company whose investors include Melgen.

Inquiries he made on Melgen’s behalf were a “normal process,” Menendez said in a Univision interview Feb. 8.

Menendez has denied any wrongdoing. He said he wrote a $58,500 check in January to reimburse Melgen for two 2010 trips to the Dominican Republic on the doctor’s private jet once the senator’s staff discovered the trips hadn’t been paid for.

Lifetime Contributors

Menendez has come to the assistance of other contributors.

His biggest lifetime sources of campaign cash are two law firms that lobby: Lowenstein Sandler LLP, whose employees have given $293,160; and DeCotiis, FitzPatrick & Cole LLP, whose employees have donated $171,800, according to the Center for Responsive Politics.

Both firms’ clients are among recipients of congressional earmarks that Menendez and other New Jersey lawmakers helped obtain, including Branchburg, New Jersey-based LifeCell Corp., which landed $2 million, and Hackensack University Medical Center, which obtained $6.4 million over two years.

That’s according to a Bloomberg News review of U.S. Senate and New Jersey state lobbying records and data from Taxpayers for Common Sense, a Washington-based advocacy group that supports less government spending.

To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net.

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net.


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus