This past week, in its ongoing effort to protect Hillary Clinton from any challenge from Joe Biden, the New York Times ran a major story entitled, “Banking Ties Could Haunt Joe Biden in a Race With Populist Overtones.” The Times was especially concerned with “Mr. Biden’s own history with the financial services industry, an economic power in his home state of Delaware.” Not to mention those “critics who saw him as too-close to credit-card companies.” You think so? It’s an old story, actually, at least as old as Byron York’s report in the January 1998 issue of The American Spectator.

In the 1996 campaign, a Republican businessman named Raymond J. Clatworthy challenged Joseph Biden’s run for a fifth term as senator from Delaware. By many accounts, Clatworthy ran a hapless, hopeless race. He tried to portray Biden as a soft-on-crime liberal. It didn’t work. He tried to portray Biden as a big-government tax-and-spend liberal. That didn’t work, either. He even brought in Hollywood GOP icon Charlton Heston to campaign for him in all three of Delaware’s counties. Still no luck; the popular Biden maintained a strong lead in the polls going into election day.

Despite his frustration, Clatworthy stuck to the issues. He had to; early in the race, he had vowed to stay away from personal attacks. Then, less than two weeks before election day, one of Clatworthy’s campaign consultants ran a so-called “push poll” in which campaign workers call voters ostensibly to learn their opinions but in truth to spread damaging information about the candidate’s opponent. Clatworthy’s callers said that earlier in the year Biden had sold his house to a top executive of the Delaware-based credit card company MBNA. The price, they said, was twice the home’s value, suggesting that MBNA had bought off Biden as well as his house.

Biden disputed the claim and provided the local paper, the Wilmington News-Journal, with an appraisal of the house fixing its value at $1.2 million—exactly the price that the MBNA executive, a man named John Cochran, had paid. The home deal, it appeared, was on the up-and-up.

Biden called the accusation “immoral and unethical,” and in short order the whole thing blew up in Clatworthy’s face. The Delaware state Republican chairman called Clatworthy’s campaign “crazy” to suggest that Biden had sold his house in a sweetheart deal. Clatworthy’s press secretary told the News-Journal that the home sale was “not an issue we’re going to deal with in this campaign.” And Clatworthy was forced to fire the consultant who came up with the idea.

It is perhaps not necessary to add that Clatworthy lost big when election day came around. Biden captured 60 percent of the vote, and Clatworthy returned to his businesses in Dover. According to the pundits and pollsters, the episode left many in Delaware with a strong distaste for negative politicking; at the very least, it seems unlikely that anything like the Biden house caper will be repeated anytime soon.

But as much as he bungled the issue, it turns out Clatworthy was on to something: Biden and MBNA have indeed developed a pretty cozy relationship. John Cochran, the company’s vice-chairman and chief marketing officer, did pay top dollar for Biden’s house, and MBNA gave Cochran a lot of money—$330,000—to help with “expenses” related to the move. A few months after the sale, as Biden’s re-election effort got under way, MBNA’s top executives contributed generously to his campaign in a series of coordinated donations that sidestepped the limits on contributions by the company’s political action committee. And then, a short time after the election, MBNA hired Biden’s son for a lucrative job in which, according to bank officials, he is being groomed for a senior management position.

Of course, lots of members of Congress have intimate ties to corporations in their states or districts. And lots of companies encourage their employees to make big campaign contributions (MBNA has given more to some Republicans than it gave to Biden). And certainly lots of children of influential parents end up in very good jobs. But the Biden case is troubling because all those ingredients come together in one man–along with a touch of hypocrisy. After all, this is a senator who for years has sermonized against what he says is the corrupting influence of money in politics.

Joe’s Money Crunch

It has become a minor ritual each year in Washington: political observers scan the latest financial disclosure reports from Capitol Hill and marvel at how many members of the Senate are millionaires. The list is headed by names like Kennedy and Rockefeller, but it also includes lawmakers like McCain, Helms, and Murkowski. In all, at least 39 of the 100 members of the Senate qualify for membership in the millionaires’ club.

Joe Biden isn’t one of them. Even though he has an income that is impressive by outside-the-Beltway standards—a senator’s salary is $133, 600 a year—Biden has struggled financially over the years. In his 1995 disclosure report, for example, Biden’s liabilities appeared to outweigh his assets. On the positive side, he had between $1,000 and $15,000 in an account at the U.S. Senate credit union and another $1,000-$15,000 in the Delaware state pension plan (disclosure forms do not require senators to reveal exact figures). Biden’s largest asset, valued at between $15,000 and $50,000, was six life insurance policies with the Connecticut Mutual Life Insurance company.

On the liabilities side, Biden had a loan of between $15,000 and $50,000 from the Senate credit union, plus another loan of between $15, 000 and $50,000 against the cash value of those Connecticut Mutual policies. He also owed between $15,000 and $50,000 on a line of credit from the Beneficial National Bank in Wilmington (he had just that year paid off a loan of between $1,000 and $15,000 with the Delaware Trust Company). And he co- signed two loans totaling between $100,000 and $250,000 for his sons’ college educations.

Biden would have had a negative net worth were it not for the value of his home. Although disclosure rules do not force senators to list the value of their personal residences, Biden chose to include a letter noting his “good faith estimate” that he had between $500,001 and $1,000,000 in equity in his home. Of course, to get that money he would have to sell the house, a lovely old mansion on three and a half acres of what used to be a du Pont family estate outside Wilmington. Biden bought the house in 1975 but had been thinking on-and-off about selling it for years; he almost sold it before his disastrous run for the presidency in 1988. But the deal didn’t happen until MBNA came along.

Big Spenders

Not too many years ago, MBNA was a relatively minor player in the credit card business. Today, it is the second-largest issuer of Visa and Mastercards in the country, and some analysts believe it will eventually overtake Citicorp to become the nation’s biggest credit-card bank.

MBNA president Charles Cawley created his company’s extraordinary success by focusing on something called the “affinity card” business. The idea is simple: MBNA markets cards to people who identify with groups or organizations to which they belong. Members of the National Education Association, for example, can get an NEA credit card—issued by MBNA. Fans of the Green Bay Packers can get a green-and-gold team card. Even luxury auto enthusiasts can get an MBNA-issued Jaguar owners card. MBNA has invented hundreds of different affinity cards and is always coming up with more. “They are the affinity business,” says Franklin Morton, a Chicago-based analyst who tracks MBNA’s fortunes. “They created the concept, they figured out how to market the hell out of it, and before anybody else figured out how to do it, they owned it.”

MBNA’s success has bred an extraordinary corporate culture, almost a cult of Cawley. “Many of the people in management and skill positions work very long hours,” says one observer. “They seem very committed, very dedicated to Cawley.” Others note that top officers all live close to each other, and MBNA encourages them to display the outward signs of success, like houses, clothes, and cars. “There’s a stress on putting your best foot forward,” another observer says. “Appearances matter.” But MBNA is perhaps best known for another corporate personality trait: its extravagant spending.

One recent profile in Barron’s magazine called Cawley & Co. ” plastic emperors.” Certainly they pay themselves royal salaries. According to documents on file with the Securities and Exchange Commission, in 1996 Cawley received a compensation package worth about $6.6 million, a figure significantly higher than that of chief executives at other credit card firms. (MBNA’s chairman, Alfred Lerner, is less active in the company’s affairs than Cawley; he received $6.4 million.) John Cochran received compensation of nearly $4.3 million. Two other top executives topped the $3 million mark. And they spend as much on their toys as they do on their salaries. According to Barron’s, the company maintains an extensive collection of antique automobiles, plus four Lear jets, plus two Gulfstream jets, plus a private golf course. There’s also a warm-weather hideaway in Boca Raton and MBNA’s “summer headquarters” in Camden, Maine, where Cawley has bought a $2.75 million home on the waterfront. “Moored in Camden’s picturesque harbor,” Barron’s reports, “you can see MBNA’s classic yacht, Affinity; its state-of-the-art cruiser, Impatience; as well as its snazzy sportfishing boat, So Far So Good and its power launch, Deliverance.”

Sold!

MBNA was originally based in Maryland, but in the 1980s moved to Delaware to take advantage of that state’s more liberal interest laws. Almost all of Cawley’s team of top executives moved to the Wilmington area, but John Cochran stayed behind at his home in northern Maryland, commuting to the company’s new headquarters. It appears that was not a workable long-term arrangement; by many accounts, Cawley wants his top aides close to him and to the office. According to MBNA officials, the company asked Cochran to move to Delaware.

At the same time, Biden was looking for a buyer for his house. How the two got together is not clear. When asked, an MBNA spokesman declined to offer any details, saying only, “That’s a very personal question.” However it happened, in February 1996 Cochran bought Biden’s house for $1.2 million. The price was not twice the home’s value, as Raymond Clatworthy’s pollsters claimed, but there is evidence to suggest it was a pretty darned good deal for Biden.

The appraisal that Biden gave the News-Journal during last year’s campaign—showing that the house was worth $1.2 million—was done several years earlier, at the time Biden took out loans for his sons’ education. In January 1996, as the purchase deal was under way, another appraisal was made, also putting the house’s value at $1.2 million. A spokesman for Cochran provided TAS with a copy of that appraisal.

It is customary for appraisers to evaluate homes in relation to similar properties in the area, or “comparables.” In the case of Biden’s house, the appraiser compared the home to another large old house about a quarter of a mile away. That house—which was in similar condition—was judged to be worth $1,013,000. It sold in August 1995 for $800,000 (it should be noted that the house did not have a pool, which Biden’s does; on the other hand the house had central air conditioning, which Biden’s did not, and it was on a larger lot). The appraiser also looked at two other newer houses in the area. One was appraised at $1,230,000 and sold for $1,007,500. The other was appraised at $1,163,000 and sold for an even $1 million. In all three cases, the homes sold for a good deal less than their appraised value. In comparison, it appears Cochran simply paid Biden’s full asking price. And, according to people familiar with the situation, the house needed quite a bit of work; contractors and their trucks descended on the house for months after the purchase.

A spokesman for Biden says there was nothing out of the ordinary in the purchase. “Senator Biden sold his house in Delaware at the appraised value,” the spokesman said. “That’s a matter of public record.” An MBNA spokesman says the same thing. “There was an independent appraisal done by Mr. Cochran’s mortgage company,” the spokesman says. “That appraisal was equal to the sales price.”

It appears that MBNA indirectly helped Cochran buy the Biden house. According to a statement in the company’s filing with the Securities and Exchange Commission—in which it is required to detail the compensation of top officers—in 1996 MBNA reimbursed Cochran $330,115 for expenses arising from the move. The statement says $210,000 of that was to make up for a loss Cochran suffered on the sale of his Maryland home. An MBNA official declined to comment on the payment.

Was the home sale a sweet deal for Biden? If you talk to people involved in real estate in the Wilmington area, you’ll quickly find that few want to approach the question. “I wouldn’t touch that with a ten- foot pole,” said one agent. Another declined to say anything. And a third agent said only, “In my opinion, (Cochran) overpaid.” None wanted to be identified by name.

Bundles of Joy

A few months after the sale, during the 1996 senatorial race, MBNA cemented its ties to Biden when company employees began showering him with campaign contributions. According to Federal Election Commission records, MBNA became by far Biden’s biggest single source of contributions. Company employees gave him $62,850 in the 1996 cycle, while the second-biggest contributor gave just $21,000.

Judging by the timing of the contributions, it appears that there was a concerted effort among top MBNA executives to support Biden. For example, according to Federal Election Commission records, on April 16 MBNA executive vice-president and chief technology officer Ronald Davies sent in $1,000. Kenneth Boehl, another top executive, also sent in $1,000 on the 16th. And senior vice-president Gregg Bacchieri. And William Daiger, another executive vice-president. And David Spartin, the vice-chairman and company spokesman. The next day, April 17, vice-chairman and chief financial officer Scot Kaufman sent $1,000, as did Bruce Hammonds, MBNA’s vice-chairman and chief operating officer. And John Hewes, senior executive vice-president of MBNA’s credit division. And vice-chairman and chief administrative officer Lance Weaver. On April 18, MBNA general counsel John Scheflen sent in $1,000. On April 20, group president David Nelms sent in $1,000, as did vice-chairman Vernon Wright. On April 22, John Cochran sent in $1,000. So did senior executive vice-president Peter Dimsey. And finally, on April 26, Charles Cawley sent in his $1,000.

The law allows individuals to give $1,000 to a candidate during the primary phase of a campaign and another $1,000 during the general election phase. Once the primary contributions had been made, MBNA’s second wave of donations appeared in late August. On the 25th, Gregg Bacchieri gave another $1,000. On August 27, John Cochran sent in his $1,000, as did William Daiger and another top official, Robert Desantis. On the 28th, Ronald Davies sent $1,000, along with Bruce Hammonds and David Nelms. On the 29th, David Spartin sent in his $1,000, as did Vernon Wright and Kenneth Boehl (Boehl’s wife Kathleen also sent in another $1,000 on the 29th). On the 30th, John Scheflen sent his $1,000.

The contributions fit an established MBNA pattern. In 1995, the Wilmington News-Journal reported that Scheflen wrote a memo to top staffers advising them to make specific contributions during the 1994 campaign. According to the paper, the memo “advised MBNA executives which candidates to give to, how much to give and when to give it–and to send photocopies of their checks to the bank’s general counsel.” Scheflen reportedly sent a follow-up memo asking to be informed in writing if an employee decided not to give. If you do not plan to make any suggested contributions,” Scheflen wrote, “I would appreciate it if you would so note.”

The practice is known as “bundling,” and it is something that troubles campaign finance watchdogs. “When you bundle the individual contributions,” says Ellen Miller of the public interest group Public Campaign, “you can give more than with a political action committee.” And the practice raises another question: Are the contributions truly voluntary? ” When you do it in the workplace, many people feel there are unwritten rules, and certain pressures that can be applied with a wink and a nod,” says Kent Cooper of another public interest group, the Center for Responsive Politics. ” You might feel coerced into giving.”

MBNA officials say there was no such coordination or coercion in the 1996 Biden contributions. When asked why many top executives contributed the same amount at the same time, spokesman David Spartin responded, “We all know each other very well. We all talk among each other, and made our contributions.”

Such help is particularly valuable for Biden, a longtime advocate of campaign finance reform, because Biden does not accept money from political action committees. He has also been a vocal critic of bundling. The practice makes a politician beholden to rich companies, Biden said during a debate on finance reform in 1993. “You are much less indebted to the 200 electricians who gave you two bucks apiece,” Biden said, “than you are to the 50 du Pont family members who gave $2,000 apiece.” (In 1996, du Pont contributions to Biden were dwarfed by those from MBNA.) When asked about Biden’s acceptance of MBNA contributions, a spokesman for the senator would say only that Biden “is proud of the support he has received from the business community in Delaware.”

Mystery Job

A few weeks after Biden was re-elected in November 1996, there came yet another tie between the senator and MBNA when the company hired Biden’s son Hunter (the younger Biden is a Yale Law School graduate who was admitted to the bar this year). MBNA officials seem delighted with their new executive. “Hunter Biden is an outstanding young man,” a bank spokesman says. “We’re very fortunate to have him here at MBNA.”

Beyond that, the company is not eager to talk. First, a spokesman declined to discuss Biden’s salary. Then, when asked what young Biden is doing for the bank, the spokesman paused and said, “That’s not something we get into details on.” When pressed, the spokesman said, “He’s a talented young guy that we are grooming for a management position.” The spokesman said Hunter Biden has been “moving around the bank” as part of his introduction into the business. Hunter Biden himself declined to discuss his salary or his job.

Reform? Me?

In 1993 Joe Biden, along with fellow senators John Kerry and Bill Bradley, sponsored a campaign finance bill that would have, among other things, sharply limited the influence of political action committees and the practice of bundling. In March of that year, Biden appeared before the Senate Rules Committee to testify on behalf of his proposed reforms. He was openly critical of other bills that would have imposed less severe restrictions. Such moderate measures, Biden said, were “like moderate chastity. There ain’t no such thing.”

Then Biden told the committee about an experience he had in 1972, during his first run for the senate. He was just 29, with a chance to become the second-youngest senator in American history. But he needed some quick cash for campaign ads. Looking for support, he visited a group of rich businessmen. Biden said they asked him, “Joe, what’s your position on capital gains?” Biden said he knew what to say to get the donations he desperately needed. I knew the right answer for $20,000,”

Biden said. “I knew the right answer for $30,000. I knew the right answer for $40,000.” But as Biden tells the story, he wouldn’t say what the fat cats wanted to hear, and went away with nothing. It was a tough call, one that could have cost him the election. But Biden said he learned an important lesson about “the manner in which money corrupts.”

It might be interesting to hear the young Joe Biden’s reaction to a case that would arise twenty-five years later. A top executive of a rich and spendthrift company buys the home of a financially strapped senator, paying a generous price. After that, virtually the entire top management of the company gets together in a coordinated campaign to donate money to the senator, getting around campaign contribution limits. And then, after the senator is re-elected, the company hires the senator’s son.

What’s the right answer for that?