Harry Reid's Long, Steady Accretion of Power & Wealth
By Adam O'Neal - April 24, 2014
The first of two parts
Last month, as the Senate was busy negotiating the final details of its Ukraine aid package, Majority Leader Harry Reid became temporarily distracted with a campaign finance issue. Since winning re-election in 2010, Reid’s campaign had purchased gifts for supporters and donors from vendors like Bed Bath & Beyond, Amazon, Nordstrom, and the Senate gift shop, among others. But one round of spending was directed to a less recognizable firm: Ryan Elisabeth, a jewelry line.
In 2012 and 2013, the campaign spent $31,267 purchasing gifts from the company, which is owned by Reid’s granddaughter, Ryan Elisabeth Reid. All told, she took in nearly seven times more cash than all vendors of donor gifts combined during that period of time.
Veteran Nevada political journalist Jon Ralston first reported the news after receiving a tip about the expenditures. (Ryan Elisabeth’s last name did not appear on the FEC reports, and the senator’s office initially failed to confirm her identity.) While Sen. Reid does not appear to have broken the law, he understood that the purchases created a perception of favoritism. Lamenting the unwanted attention heaped on his granddaughter, he decided after the news broke that “it would be best to pay for her work out of my own pocket.”
This was not the first time that Reid had mixed family and politics -- or potentially run afoul of ethics rules.
Harry Reid has spent more than 40 years in government, starting as a small city’s attorney and eventually becoming the most powerful senator in the country. He has raised tens of millions of dollars in political contributions, established himself as an institution in Nevada politics along the way, and made himself a very wealthy man. His humble roots -- from growing up in a remote desert town to working six days a week as a Capitol police officer while in law school -- are legend in Washington and Nevada. Reid exhibits the toughness of a once destitute boy who completely transformed his life through determination, hard work -- and good luck.
Some who have watched Reid closely over the years, however, say that his political and economic ascendance has made him increasingly willing to use his power (and apparent electoral resilience) in ways that appear unsavory or nepotistic. The jewelry purchases are only the latest example.
David Damore -- a University of Nevada, Las Vegas professor whose research focuses on Silver State politics -- has closely followed Reid for years. He said that the balance between helping family and constituents is a common tension for powerful politicians. “I’m going to put this politely: Their personal interests, they seem to see, represent the common good. They don’t differentiate those two.”
Another longtime Reid-watcher believes that the latest string of incidents, stretching over the last decade, is just a result of more coverage of Reid -- and not a product of him changing his style.
“As he’s become more known and a much higher dollar target for his critics, anything he does to assist his family now pegs on the radar,” said John L. Smith, a columnist who has written about Nevada politics for nearly as long as Reid has been in Washington. “I don’t think he’s changed his personal method of operation throughout his whole career.”
Smith added, “I can’t see him ever denying his family a break or an opportunity if he could provide it. I guess that’s just part of being a dad and a guy with a certain level of influence.”
Nowhere is Reid’s influence more profound than in his home state, where he has built a dizzying network of mutually beneficial political, personal, and business alliances. These associations benefit Reid, his family, his close friends, and, very often, the state that he loves. The sphere of influence took decades to create.
After returning from law school at the George Washington University, Reid was hired as city attorney in Henderson (the southern Nevada city where he had attended high school and met his wife, Landra). In 1966, he ran for a position on a local hospital’s board of trustees after, he recalled, being taken aback at the chairman of the board’s rudeness.
He won the election and two years later sought a promotion to the Nevada Assembly. While in the Assembly, Reid further developed relationships with important players in state politics and began honing his image as a strong consumer advocate. After two busy years introducing a record number of bills, Nevadans elected Reid to be their 25th lieutenant governor. (He ran on a ticket with Mike O’Callaghan, a close friend and mentor.)
At 31, the boy who had grown up in an alcoholic miner’s cabin stood just a heartbeat away from becoming his state’s most powerful politician. But Reid felt he could achieve even more.
He ran for a U.S. Senate seat in 1974 but narrowly lost, despite the wide expectation that he would win. Reid later told The New Yorker, “Everything was in my favor. But I was young and impulsive and I attacked everybody.” A year later, he ran for mayor of Las Vegas and lost again, that time by a much wider margin. Reid collected himself, temporarily abandoning the pursuit of elective office, and worked as a lawyer in Las Vegas.
But he returned to public life in 1977 when O’Callaghan, still governor, appointed his former second-in-command to be chairman of the Nevada Gaming Commission. The job -- seen then as undesirable, difficult, and perhaps dangerous -- further burnished Reid’s reputation as a tough and honorable public servant. While running the Gaming Commission, Reid publicly jousted with mob bosses, tried to choke someone for attempting to bribe him (in front of FBI agents who were filming the sting), and dealt with the aftermath of his wife discovering a bomb attached to the family car.
By the time he decided to run for a newly created House seat in 1982, Reid had standing as a politician with uniquely strong integrity -- and guts. He had taken on a powerful telephone company as a freshman in the Nevada Assembly, while also sponsoring innovative air pollution legislation. Nevadans also closely associated him with O’Callaghan, by then a popular former governor nurturing a reformist legacy. Reid’s show of strength and resilience during his Gaming Commission tenure rounded out his picaresque political profile. Still relatively young, he spent just two terms in the House before graduating to the Senate in 1987. He has been there ever since.
But Reid’s political ascent didn’t stop when he arrived at the upper chamber. A savvy behind-the-scenes player, he became Democratic whip in 1999. After alternating between majority whip and minority whip for several years, his caucus elected him minority leader in 2005. Democrats took control of the Senate after the 2006 midterm elections, and Reid has served as majority leader ever since. For most of the past decade, he has been the most powerful lawmaker in the United States Senate. He is also indisputably the most powerful politician in Nevada -- Democratic or Republican.
“You don’t go far in Nevada before you run into Harry Reid, or one of his people, or somebody who he’s helped come along, or someone he’s helping come along,” explained Steve Sebelius, a Nevada political journalist and longtime Reid-watcher. “His reach is pretty far. … He’s at the top of the heap.”
“It’s like an iron fist inside a titanium glove,” said Sebelius of Reid’s control over the state’s Democratic Party. “His people are firmly in control. Who runs is who he wants to run, and who doesn’t run is who he doesn’t want to run. There’s no one on the Republican side with that kind of influence and control.”
Damore suggested that Reid -- because of his extensive in-state political network and status as Senate majority leader -- may be “the most powerful politician in Nevada state history,” an assertion that several other state political experts agreed with (or at least saw some merit in). But Nevada politicos don’t really debate about the degree of Reid’s power. Rather, the question is whether he has always used it appropriately.
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After being asked whether his personal reimbursement to the campaign for Ryan Elisabeth’s jewelry served as evidence of wrongdoing, Reid replied, “No, in fact, it wasn’t.” He added, “I'm just very fortunate I could write that check.”
Contrary to popular belief, Reid arrived in Washington wealthy; he had a net worth of at least -- and likely more than -- $1 million, according to the Las Vegas Review-Journal. Although Reid had spent most of the previous 15 years in public office, or pursuing public office, he still proved to be a robust earner. After his term as lieutenant governor ended in 1975, he would not return to public office full time until 1983. (The Gaming Commission is only part-time work.) That left Reid approximately eight years to work as a private-practice attorney.
As a former public official with strong political connections, he found lucrative work in Las Vegas. It appears his personal boom was simply part of the broader expansion of Nevada’s economy. Some attorneys at the time, particularly those with political networks, would occasionally receive payment in the form of real estate. Given Nevada’s rapid growth, such payments would become extremely valuable over time. It’s unclear if Reid received land as compensation then, but he certainly made good money and invested in real estate early on.
Theoretically, working as a lawmaker should have severely limited Reid’s earning potential. In the early 1980s, members of Congress received a salary of about $70,000 per year. Though pay has generally risen -- and Reid receives more than most lawmakers because of his leadership position -- he has never earned more than $200,000 per year in salary.
Yet, his estimated net worth peaked at around $10 million just a few years ago, and he has remained consistently wealthier than when he entered Congress. (Reid reported that his net worth in 2012 was somewhere between $2.8 million and $6.3 million. His 2013 financial disclosures will be released later this year.) As of 2012, real estate composed about one-third of his portfolio. The rest was made up of government bonds; stakes in energy, electronics, pharmaceutical, and chemical companies; and other investments. He also possesses significant mining claims potentially worth hundreds of thousands of dollars.
How did Reid manage to grow his net worth so significantly while raising a large family, on a public official’s salary, and incurring the expenses associated with maintaining two residences on opposite sides of the country? Reid has lived frugally -- before buying a house in recent years, he kept just a trailer in his hometown of Searchlight -- and he has made undeniably savvy investments. More significantly, however, is his willingness to enter political and ethical gray areas to make money.
Reid has walked a fine line over the years, occasionally breaking rules or engaging in brazenly unseemly behavior during his pursuit of wealth. Further, he has also used his position to save money in ways that the general public can’t -- a practice that creates public relations issues and raises questions about the senator’s ethics. As for any illegal behavior or obvious wrongdoing, Jon Ralston told RCP, “There’s been some smoke but there’s never any fire on that.”
There is quite a bit of smoke.
In 1998, Reid invested $400,000 in an undeveloped residential property located on the outskirts of Las Vegas. Reid’s partner in the deal was attorney Jay Brown, whom Ralston describes as a “master manipulator.” Reid transferred his share of the property to a company Brown controlled in 2001. By transferring the land to Brown’s firm, Reid avoided legal liability and some taxes. But Reid didn’t note the transfer -- or that he had any stake in the company -- in his financial disclosure forms, despite rules requiring such transfers to be reported. By 2004, Brown’s company sold the land, which had been rezoned for a shopping center, and Reid received $1.1 million. He reported the sale as if he had always had control of the property.
When the Associated Press asked Reid about the deal during a 2006 interview, he hung up on the reporter. A spokesman later said that “there were several legal steps associated with the investment during those years that did not alter Senator Reid's actual ownership interest in the land.” However, there was no physical proof that Reid had any stake in Brown’s company. The story may have caused Reid public embarrassment -- he amended his ethics reports to include the full history of the property -- but he walked away from the deal some $700,000 richer.
That isn’t the only problematic land deal Reid was involved with at the time. In 2002, he put $10,000 into a pension fund controlled by another friend, Clair Haycock. The payment gave Reid a sizable parcel of land in Bullhead City, Ariz. According to the Los Angeles Times, Reid purchased the land for one-tenth of its estimated value (and one-fortieth of what it had sold for a decade earlier). Two actions created suspicion afterward. First, Reid sponsored an $18 million earmark for a bridge that would connect Laughlin, Nev., and Bullhead City. This bridge would likely increase property values in the area. Reid also introduced legislation that would benefit Haycock’s lubricant company. Reid aides denied that his support for the earmark or lubricant dealer bill was related to the land purchase. By 2011, Reid’s initial $10,000 investment was valued at between $250,000 and $500,000. The property did not appear in his 2012 disclosure.
While some of Reid’s most lucrative deals involved land, he also benefited from investments in stocks. Near the end of the 2005, he invested between $50,000 and $100,000 in the Dow Jones U.S. Energy Sector Fund, which held shares in several major oil companies. According to National Review, the fund closed at $29.15 on the day Reid purchased. Nearly three years later, in August 2008, Reid sold some of his shares, which closed that day at $41.82. Two months later, Reid-supported legislation that would cost oil companies billions in taxes and regulatory fees passed. The Energy Sector Fund’s shares plummeted to $24.41 each.
While six-figure investments and million-dollar land deals most greatly impact Reid’s wealth, he also manages to save money through some of the perks that come with being the most powerful politician in Nevada (and the U.S. Senate, for that matter).
In 2004 and 2005, for example, he received ringside seats to three boxing matches from the Nevada Athletic Commission. Arizona Sen. John McCain attended one of the fights with Reid and paid $1,400 to reimburse the commission. Reid did not. However, after receiving criticism for accepting the tickets while considering legislation involving the commission, a Reid spokesman said that the senator would no longer be accepting “these kinds of credentials in the future.”
For years, Reid also took part in the bipartisan tradition of riding on corporate jets at a discounted rate. Between 2001 and 2005, he took 35 trips on corporate planes. Ethics rules required him to reimburse the firms -- such as MGM Grand and U.S. Tobacco -- the cost of a first-class plane ticket, which is significantly less than a private jet rental rate. Two years after the Jack Abramoff scandal, the Senate enacted new rules requiring senators to pay prohibitively expensive charter rates to ride on a corporate jet.
While in Washington, Reid stays in a one-bedroom condo he owns at the Ritz-Carlton. Each year, residents contribute money to a holiday bonus fund for Ritz staff. Between 2002 and 2005, Reid spent campaign cash -- not his own money -- to contribute a cumulative total of $3,300 to the holiday fund. His office said that his lawyers had approved the transfers and that a clerical error had prevented them from being properly disclosed. (The explanation was suspect, as several ethics experts said the expenditures clearly violated campaign finance regulations.) Reid reimbursed the campaign and admitted no intentional wrongdoing.
“There is kind of a pattern. He’ll do something pretty bold. There’ll be a lot of publicity about it, and he’ll step back. But then it happens again,” observed Sebelius. “It’s not as if somebody has made a mistake, learned from it … and it never happens again. This keeps happening.”