WASHINGTON — Many Nebraskans know the story of how young, decorated war veteran Bob Kerrey decided to open a restaurant with his brother-in-law 40 years ago, when the pair needed several loans to get the idea off the ground.
“We had pledged our bicycles and everything else,” Kerrey told The World-Herald. “We were 100 percent leveraged.”
What they might not know so well is how Kerrey made millions after two terms representing Nebraska in the Senate, after his political celebrity helped him land a job running the New School in New York.
His background and connections led to lucrative gigs as consultant, adviser or board member for various companies, including Tenet Health Care, MacAndrews and Forbes and the Jones Group. That work pumped his earnings up to about $4 million for 2011 and the first part of 2012.
Kerrey says he gave up most of his private-sector positions to run for Nebraska's open U.S. Senate seat against Republican State Sen. Deb Fischer.
That includes his spot on the board of Tenet, the country's third-largest hospital operator. His 10 years on the Tenet board included times when the company ran into problems with the federal government. In 2006, the company shelled out $920 million to settle government allegations of unlawful billing practices related to Medicare. Kerrey has said that members of the board were unaware of the practices and that the company has since become a model of compliance. During the 15-month reporting period, Tenet gave him $148,702.
A fair amount of Kerrey's recent corporate work has involved companies associated with two billionaires, Sidney Kimmel and Ron Perelman, both of whom have supported his campaign.
Perelman is the chairman and CEO of MacAndrews and Forbes. Harland Clarke Corp., a subsidiary of MacAndrews and Forbes, paid Kerrey $416,000 last year for his work as chairman of M&F Worldwide Education Holdings. Kerrey was in charge of its existing education businesses, as well as evaluating future investments. The company's GlobalScholar offers online services such as tutoring and homework support.
Another MacAndrews and Forbes company, AM General, paid Kerrey $111,000 for advice on how the operation could maintain its relationship with the Pentagon. The company was making improvements to its Humvees to keep the vehicle relevant as military operations wound down in Iraq and Afghanistan.
Kerrey got a spot on the board of the lottery company Scientific Games, which reported that he was designated for election by MacAndrews and Forbes Holdings, their largest stockholder. They cited his experience in government and paid him $188,371 in deferred compensation. Perelman declined an interview request, but a spokeswoman provided a statement:
“Bob's wealth of experience as a businessman, educator, Navy SEAL, governor and senator has given our businesses invaluable insight and brought clear, critical thinking and new ways of dealing with complex issues in today's global marketplace.”
In 2004, Kerrey joined the board of the insurance company Genworth. The company touted Kerrey's experience as a university president and in politics, saying he “provides the board with information and insight into ... governmental relations and legislative/regulatory issues.” Genworth paid him $10,000 last year.
Republicans have criticized Kerrey over Genworth's attempts to seek federal bank bailout money in 2008, which one watchdog group labeled a bid to “jump on the gravy train.” After missing a deadline, Genworth abandoned its plans.
Kerrey said that as an insurance company, Genworth took a bath in the subprime mortgage meltdown, which left it scrambling to keep up required reserves.
“They needed capital,” he said. “Everybody needed capital about that time. Everybody was scrambling around trying to figure out how to survive financially.”
Kimmel, a filmmaker and philanthropist, has contributed at least $100,000 to a pro-Kerrey super PAC that has been airing commercials in Nebraska.
Kerrey landed a spot on the board of Kimmel's fashion company The Jones Group, which includes such brands as Nine West, Easy Spirit, Jones New York and Evan-Picone. The Jones Group paid Kerrey $965,000 last year.
Kerrey said he helped make the companies he worked with better for the community, shareholders and employees.
“They wouldn't have kept me on any of those boards, particularly after Sarbanes-Oxley (federal financial reforms), unless I was contributing,” Kerrey said. “I contributed and I learned a lot.”
Kerrey also was tapped to work as a consultant for the Sidney Kimmel Revocable Trust, which gave him $800,000 last year for advice on a company investigating low-energy nuclear reactions, more commonly referred to as cold fusion.
Kerrey's recommendation was that the whole operation be transferred from Israel to the University of Missouri's business incubator. A couple of the company's researchers have been hired by the university, which used a $5.5 million gift from Kimmel to establish the Sidney Kimmel Institute for Nuclear Renaissance.
“I think he would say he got his money's worth,” Kerrey said of Kimmel.
A spokeswoman for Kimmel's foundation declined an interview request.
While Kerrey has run businesses of his own, his restaurants and health clubs would hardly be the basis for serving on the boards of multibillion-dollar Fortune 500 companies like Tenet. He acknowledges that it wasn't just his business acumen the companies valued.
“There's no question that part of it is having been in the Senate and having an understanding of ... what's going on in Washington,” Kerrey said.
Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said political figures once routinely served on many boards for large fees, but that has changed over the past 20 years. He said serving on several boards while also heading a university raises concerns.
“It suggests someone is getting short shrift because of mere time commitments,” Elson said.
Still, the chairman of the New School board of trustees, Michael Johnston, said Kerrey's outside work never detracted from his duties.
“The university always, in his mind, came first,” Johnston said.
To Johnston, having a president serve on corporate boards helps the institution in several ways. The president makes connections with people in the business community who can help the school, either through fundraising or by having their companies recruit New School students. The practice also helps supplement the income of the school president, he said.
Kerrey's New School salary started at $170,000 a year. Over time, the board gave him raises. His salary had grown to more than $600,000 by the time he left.
His total university compensation for the 15-month reporting period, including some deferred compensation, was nearly $1 million. As president emeritus, Kerrey will continue drawing a salary through 2016, a realization that has angered students, staff and faculty.
While Kerrey's tenure was marked by clashes, Johnston praised his work for the school. In particular, he noted that Kerrey had a great relationship with the school's governing board.
“These are crusty old New Yorkers, some of whom are immigrants, and Bob forged extremely good bonds with them,” Johnston said. “And they have been very generous to the New School.”
World-Herald staff writer Matt Wynn contributed to this report.
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