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How John Edwards Makes His Millions Grow Tom Middleton The presidential candidate one newspaper has labeled "Richie Rich in bib overalls" is a remarkably sophisticated investor. Former Sen. John Edwards has exploited the middle of his famous three H's -- his $400 haircuts, his hedge-fund consulting and his new 28,000-square-foot home -- to spread his fortune around a maze of trusts and accounts that total something between $29.5 million (his campaign's estimate) and $62 million (the high end of ranges described in his federal disclosure). Edwards' sprawling, 48-page campaign-finance disclosure for 2006 (.pdf file) reveals substantial investments in limited partnerships, subprime-mortgage lenders and an offshore hedge fund. The latter two run contrary to stands he has taken as a candidate. Man of the people -- and profitsEdwards is running as a populist, but profits on his stock investments alone would distance the candidate from the cause. Edwards has raked in hundreds of thousands of dollars in capital gains from stock in Apple, BP PLC, Burlington Resources, Medtronic and Schlumberger and Halliburton, where Vice President Dick Cheney was once CEO. Edwards generated most of his wealth as a trial lawyer, but last year his principal employment was as a senior adviser to Fortress Investment a large hedge-fund operator, for which he received $479,512. His and his wife's investment in Fortress Investment Fund III (Fund D) totaled between $1 million and $5 million. Fortress, based in New York, owns subprime lender Nationstar Mortgage, formerly Centex Home Equity. The Dallas company calls itself "one of the nation's leading mortgage lenders offering nonprime mortgages and home-equity loans." As a presidential candidate, Edwards has lashed out at subprime lenders, saying they are "pulling a fast one on hardworking homeowners." Fortress Investment Fund III is based in the Cayman Islands. Edwards' campaign said he opposes offshore tax havens and, "as president, he will end them." A mighty FortressEdwards has said he worked for Fortress to learn more about financial markets and their link to poverty. He is the former director of the Center on Poverty, Work and Opportunity at the University of North Carolina in Chapel Hill. He evidently learned a good deal because his portfolio is aggressive and slanted toward Wall Street's most complex deals. He has accounts, including a trust for his children, with Atlantic Trust Private Wealth Management and Oak Hill Capital Partners Fund. Two investments, Drawbridge Global Macro Fund and Drawbridge Special Opportunities Fund, are Fortress hedge funds that specialize in what his disclosure form characterizes as "global markets, strategies and instruments." Fortress and a private-equity firm last month agreed to acquire Penn National Gaming the third-largest gambling concern in the United States. The Financial Times reported: "If the deal is completed, some of Mr. Edwards' money could be put to work in a controversial industry that he wants to regulate more closely. When a senator, Mr. Edwards co-sponsored a bill to ban gambling on amateur sports." Penn does not operate in Nevada, which is the only state that allows betting on amateur sports. Edwards has at least $7.5 million invested with Fortress and its hedge funds. Fortress is the second-largest shareholder of Odyssey Marine Exploration, which recently recovered 500,000 silver coins from a 300-year-old shipwreck. According to Federal Election Commission records, Fortress employed more of Edwards' campaign donors than any other company, with combined contributions of nearly $125,000 in the first quarter. Fortress also hosted a fundraiser for Edwards in March that garnered him more than $1 million. Edwards has said he supports a bill pending in the Senate that would disallow hedge funds that go public from treating their profits as capital gains, which are taxed at a much lower rate. Trial lawyers have been Edwards' biggest supporters, accounting for nearly one-third of the $23.1 million he has raised, as of July 15. Fortress contributions totaled $187,850. Is he liberal? He's not conservativeEdwards' investments differ markedly from those of such rivals as Democrat Barack Obama and Republican Rudolph Giuliani. They are conservative investors. Edwards is the opposite. While he owns several million dollars' worth of tax-free North Carolina bonds, much more was invested in hedge and mutual funds. In his 401(k) plan with Kirby & Holt, a personal-injury law firm he founded (as Edwards & Kirby), Edwards reported interests in a host of individual securities, ranging from an energy limited partnership to bonds and short-term debt of Detroit's Big Three automakers. After Edwards' $400 haircuts became public knowledge, he said he had reimbursed his campaign for them. They are the least of his luxuries, however. His new $5 million home is on 102 acres. That's one-sixteenth the size of the ranch of another well-coiffed Southern aristocrat, President Bush, but both parcels are valued about the same. Whether both will eventually become legacies of presidents of the United States will be not be settled by their barbers or their brokers. And with Edwards a distant third in fundraising behind Sen. Hillary Rodham Clinton and Obama, he's a long shot to find out. But he can certainly fall back on his investments. They include many of the things he rails against, and those investments are good. Richie Rich in Bib Overalls By Philip Gailey John Edwards is right - there are two Americas, one for the rich and another for everyone else. He lives in the former and campaigns in the latter, and sometimes he forgets where he is. In the "other" America, there is Edwards, dressed in denim jeans and a work shirt, announcing his second Democratic presidential bid against the grim backdrop of a New Orleans neighborhood devastated by Katrina. Then he shows up in the "rich" America, getting $400 haircuts and advising a New York hedge fund for the kind of "wealthy insiders" he denounces on the campaign trail. The haircuts and the hedge fund are instructive, if not definitive, in trying to understand Edwards' political character - and judgment. Why would a presidential candidate who joins union picket lines, beats up on Wal-Mart and campaigns as a populist champion of American workers indulge himself in something as extravagant as a $400 haircut and then bill it to his campaign donors, not all of whom are rich trial lawyers and hedge fund managers? What was this son of a textile mill worker thinking? When the embarrassing story broke, Edwards reimbursed his campaign for two haircuts totaling $800, but not for the more than $470 his campaign spent on makeup for the candidate. That's the least he could do. He certainly can afford it - he listed his net worth at between $14-million and $45-million in his 2003 Senate filing. But I wonder how Edwards would explain to a Wal-Mart worker that his $20 campaign donation had gone toward a $400 haircut by Torrenueva Hair Designs in Beverly Hills, Calif. It's beyond the comprehension of working people for whom $800 can be a month's rent. After leaving the Senate and starting his second presidential bid, Edwards opened a poverty think tank at the University of North Carolina in Chapel Hill. He also built a 28, 000-square-foot compound on 102 acres valued at more than $5-million. No one should begrudge Edwards his wealth or his dream house. The Roosevelts and the Kennedys lived well, and so do the Bushes. But commuting to a poverty center from a mansion fit for a Saudi prince doesn't exactly burnish his populist image. Appearances matter in politics, although not the kind Edwards is concerned about. Edwards also did something else that undercuts his populist message - about the same time he was opening his poverty think tank Edwards became a paid adviser to a New York-based hedge fund, Fortress Investment Group. As the Washington Post reported last week, it was "an unusual choice of employment for Edwards, who for years has decried offshore tax shelters as part of his broader campaign to reduce inequality." While Fortress was incorporated in Delaware, the Post said, "its hedge funds were incorporated in the Cayman Islands, enabling its partners and foreign investors to defer or avoid paying U.S. taxes." By the time Edwards left the hedge fund last year, the Post reported that he had received more than $167, 000 in donations from Fortress employees and executives for his 2008 presidential campaign. In his speeches, Edwards often decries the "two different economies in this country: one for wealthy insiders and then one for everybody else." Again, what was Edwards thinking? He didn't need the money, and surely he must have known how it would look for a populist presidential candidate to be involved with hedge funds, a controversial segment of the investment market that attracts wealthy insiders looking for outsized returns and tax havens. A campaign spokeswoman told the Post that Edwards still believes offshore tax shelters are wrong and that as president he would end them. The $400 haircuts probably have done more damage to Edwards' political persona as the champion of the poor than his business and fundraising relationship with a hedge fund, a term that you will rarely hear on Main Street. A presidential candidate is in trouble when he becomes grist for late-night television comedians, who pounced on Edwards' tonsorial gaffe. Then there was the video of Edwards checking his appearance in a small compact mirror while combing, fluffing and spraying his hair before a television interview. It ended up on YouTube to the tune of I Feel Pretty. Someone should explain to Edwards the difference between grooming and primping. Okay, you say what Edwards pays for a haircut matters less than what he would do as president about health care and Iraq. I agree. But a candidate's judgment matters, too, and so far Edwards has done little to inspire confidence in his judgment or his sincerity. It appears there are not only two Americas but two John Edwardses.
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A Feast
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