04.12.12

Romney Saved Salt Lake Olympics From Scandal, But at What Price?

The GOP presidential hopeful touts his biggest managerial success on the campaign trail. Wayne Barrett digs into his relationship to some of the central figures in the scandal.

In mid-February, shortly after losing the GOP presidential primaries in Colorado, Minnesota, and Missouri, Mitt Romney returned to the scene of perhaps his greatest managerial success. It was the 10th anniversary celebration of the 2002 Winter Olympics in Salt Lake City, and Romney—battered by a bruising nomination battle and persistently low approval ratings—was likely eager to bask in the glow of the Games he is widely credited with rescuing from a disastrous bribery scandal.

Romney’s two-day visit included a $1000-a-head fundraiser, a private reunion with 400 associates from the Salt Lake Organizing Committee (SLOC), and a “Stars On the Ice” extravaganza at the EnergySolutions Arena, where the presidential hopeful addressed a crowd of 11,000.

It would not be an exaggeration to say that Romney considers his salvaging of the scandal-plagued Games as the turnaround point in his career—Turnaround was the name of his 2004 memoir detailing those years. Having lost badly in his 1994 Senate race against Ted Kennedy, Romney’s acclaimed management of the Salt Lake Games—on the world stage, no less—lifted him back into public prominence and propelled his successful campaign for governor of Massachusetts, which began just weeks after the Olympics ended. “I led an Olympics out of the shadows of scandal”  has been Romney’s frequent mantra on the campaign trail for the 2012 election.

But while Romney’s gold-medal acumen in managing the Salt Lake City Olympics has been widely covered, there has been virtually no examination, in this or the 2008 presidential campaign, of how he navigated the ethical swamp he landed in. As he comes closer to wrapping up the GOP nomination, even less has been written about the alliances he made with some of the key figures of the Salt Lake scandal--alliances that have been paying dividends ever since, and helping to finance his presidential ambitions.

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Newsweek's Michael Tomasky and David Frum debate whether Romney can close the gender gap and win the election

Prominent among these is Sead Dizdarevic, a New Jersey travel-company executive who is near the top of Romney’s pyramid of super PAC and campaign benefactors. If all family, corporate, and business-associate donations are included, people connected to Dizdarevic have contributed more than a million dollars to Romney. Dizdarevic, his company, and his family together have given $221,800.

Dizdarevic began giving to Romney in 2005, when he made a $500 donation to a Massachusetts Republican committee while Romney was still governor. He then became one of the earliest contributors to Romney’s first presidential PAC in September 2006. Joined by his wife, son, daughter, and a staffer, Dizdarevic has been giving ever since, with his company adding a $100,000 donation last November and the family adding another $100,000 this January—not small numbers for a man with little other history of campaign contributions.

Romney’s reception of these donations suggest that he’s untroubled by the conduct Dizdarevic himself described as an immunized witness in the 2003 corruption trial of the Salt Lake Olympic directors, Tom Welch and David Johnson, who preceded Romney. As early as the summer of 2000, federal prosecutors revealed that Dizdarevic—CEO of Jet Set Sports, which sells corporate ticket packages to the Olympics—and his sister-in-law had delivered $131,000 in cash “contributions” to Romney’s predecessors in four rushed hotel and airport meetings during the mid-1990s. Dizdarevic, who invoked the Fifth Amendment in his 2000 grand jury appearance until he was immunized from prosecution, would later admit that he made the payments in an attempt to snare his first exclusive Olympics hospitality contract.

In January 2000 Romney told the Salt Lake Tribune, ‘I’m not a G-man and I don’t intend to be.’

Neither Dizdarevic nor the SLOC reported these supposed donations in IRS filings, and Dizdarevic made his cash withdrawals at just under the $10,000 ceiling that would trigger a mandatory Treasury Department report. Those factors together led prosecutors to conclude that the payments were bribes, and the cash the SLOC brass needed to induce members of the International Olympic Committee (IOC) to award the 2002 Games to Salt Lake. According to the Tribune, Dizdarevic’s sister-in-law gave the final “donation” of $44,000 to a SLOC executive en route to Budapest, where the IOC would make the selection. One of the former executives admitted keeping $15,000 to $18,000 of Dizdarevic’s cash to cover the expenses of an IOC member’s son spending a summer in his house.

In May 2000, 15 months after Romney took over the Salt Lake Games and two months before Welch and Johnson were named in a 15-count indictment that featured the “contributions,” Romney entered into that exclusive hospitality contract with Dizdarevic. Dizdarevic has enjoyed near-monopoly control of elite Olympic ticket/accommodation packages ever since.

Romney knew prosecutors were investigating Dizdarevic’s payments, but decided to give Dizdarevic the contract anyway. In fact the forward-fixated Romney declared shortly before the deal with Dizdarevic was signed that he wouldn’t conduct “a parallel investigation” to the FBI’s, telling the Deseret News in January 2000: “I’m not a G-man and I don’t intend to be.”

But in an August 2000 interview in the Salt Lake Tribune, Romney was quoted as saying that the SLOC had approached “a governmental investigative body” before awarding the contract and “asked if they were aware of misconduct by Jet Set and if anything would embarrass us.” It’s hard, Romney said, “for these agencies to say ‘they’re good or they’re bad,’ but they indicated ‘no.’”

The case’s lead prosecutor, Richard Wiedis, told The Daily Beast he has no recollection of any such inquiry. If Romney’s office did ask about the payments prior to Dizdarevic’s trial testimony in 2003, Wiedis said, “I don’t believe we would have commented on that evidence.”

In the 2000 Tribune interview, Romney also said that the SLOC hadn’t included any cancellation or renegotiation language in the Jet Set contract, despite whatever concerns had prompted his purported contact with prosecutors. Since the contract was confidential, there is no way to determine if it didn’t include an escape clause, which would be unusual, especially in these circumstances. “We entered into a contract and if they have done something wrong, we’ll feel bad about being in that contract,” Romney told the Tribune. In later recountings, Romney did not appear to feel bad about the contract. In Turnaround, he praised Dizdarevic for contributing “hospitality elements, tens of thousands of tickets for our youth program, and even a magnificent Christmas party for all our SLOC employees.”

Romney said that Dizdarevic’s payments in the SLOC bribery scandal ‘obviously raised red flags in our minds.’

Romney’s campaign did not reply to emailed inquiries about his relationship with Dizdarevic. Three years after the indictment of Welch and Johnson, the case was dismissed midtrial by a Utah federal judge, but not before Dizdarevic took the stand to testify that when a Romney predecessor first asked him for cash, he said: “As much as you want. As much as I have.” And when he was asked by defense attorney Blair Brown why he didn’t list these “contributions” as charitable deductions on his tax returns, Dizdarevic contended they were a “business expense,” adding: “Why would I? The organizing committees or the bid committees for me are not charitable donations. For me, that is a business. That is the only thing I have.”

At the end of his cross-examination, Brown took implicit aim at Romney, whose SLOC was theoretically the victim of the fraud Welch and Johnson were accused of committing with Dizdarevic and others. He asked Dizdarevic if Welch and Johnson were gone in 1999 and 2000, when the intent letter and contract with Romney were signed. “That is correct,” Dizdarevic said.

“And when it became public that you made these cash contributions which the government claims are improper, did the supposed victim, the organizing committee, try to end its contract with you?” Brown asked.

“They did not,” Dizdarevic said. “Did they continue to cooperate with you from 2000 until the end of the Games?”

“Even more.”

“And since then?”

“And since then.”

“Okay. And you have made $7 million from your work for the alleged victim in this case? … With the cooperation of the alleged victim?”

“With the help of the organizing committee.”

In the end, investigations by a state ethics panel, the IOC, and the USOC all blasted the SLOC’s gifts to IOC members, leading to guilty pleas by two individuals tied to the Salt Lake committee and the removal of 10 IOC members.

Meanwhile, the SLOC contract with Dizdarevic helped to make him what Portfolio magazine called the “indispensable, if unofficial, fixer” of every Olympics since 2002. The Wall Street Journal estimated that Dizdarevic did $80 million in Olympic-related sales in 2002 alone, including handling $23 million in Games tickets, filling 18,000 hotel beds, and providing 132,000 restaurant meals. Most of his three-day corporate packages sold for $20,000 to $30,000, minus airfare.

**

The $1,000-a-head Romney fundraiser in February was cohosted by a Utah businessman named D. Fraser Bullock. In 1999 Bullock was handpicked by Romney to be COO for the Olympics, a move Romney has referred to as his “best day” as Olympics CEO. In Turnaround, Romney referred to Bullock as his “Sancho Panza.” Nolan Karras, who was Utah governor Mike Leavitt’s representative on the SLOC, said: “You could not have had a Mitt Romney without a Fraser Bullock.”  When Romney relocated immediately after the Games, Bullock replaced him as CEO.

When combined, Bullock’s own contributions, plus those of his family and corporate connections, total $778,172 given to Romney’s campaigns. Asked now if he’s ever had any concerns about Dizdarevic’s ethics, Bullock, who became Jet Set’s sole minority investor in 2008, said simply: “No.” He insisted that Dizdarevic, who also paid undisclosed millions in sponsorship fees to the SLOC and the U.S. Olympics Committee, “was just like a whole bunch of other businesspeople” that donated to the Games. “That wasn’t a problem,” he explained. “It’s what the people did with the money that received it.”

Mark Lewis, the SLOC executive hired by Romney who negotiated the contract with Dizdarevic and whom Romney described in Turnaround as “great,” echoed Bullock’s view. Acknowledging that Dizdarevic’s cash payments to Welch and Johnson “were known before the contract was signed,” Lewis told The Daily Beast. “The bad actors, if you will, were the people who took the money and used it for improper purposes, not the people who gave them the money.” Lewis, who was named after the Games to head a foundation that inherited $76 million in Olympic profits to maintain the sports venues, insists that “there was a lot of due diligence done by our committee and our legal counsel before we made any deals with Jet Set Sports.”

Lewis’ view is perhaps unsurprising, since he left the foundation in 2003 to begin consulting for Jet Set, among others, and became its president in 2005. Like Bullock, Lewis is a bridge today between Dizdarevic and Romney, serving as the presidential campaign’s finance co-chair in Montana. He says he “trades” phone calls and emails with Romney now and has “asked a lot of people if they would make a contribution to Mitt’s campaign regardless of where they live,” inside or outside Montana, but that he’s not responsible for Dizdarevic’s donations. Lewis and his family have contributed $8,850 to Romney’s campaign. He said he would forward our emailed list of questions to Dizdarevic, but then stopped taking our calls. (Dizdarevic himself did not respond to messages left with Jet Set Sports.)

Checks at the center of the SLOC scandal included a $10,000 reimbursement of SLOC staffer Jason Gull, who bought everything from a vibrator to a violin for IOC members.

While Romney praised Dizdarevic in Turnaround, he used him in 2000 as the rationale, albeit a very temporary one, for cutting off the SLOC’s advance payment of Welch and Johnson’s legal fees. Romney said then that Dizdarevic’s payments, detailed in the indictment, “obviously raised red flags in our minds” and that the new charge meant that his two predecessors might no longer meet the “standard of conduct” indemnification clause of the SLOC bylaws, which precludes fraud, criminal conduct, or malicious and willful misconduct. In the same interview, however, the conflicted Romney also said that he hoped Welch and Johnson would be cleared. “I’m pulling for them on a personal basis,” he announced. Romney decided soon thereafter to pay Welch and Johnson’s fees, suing the SLOC’s insurer to ultimately cover nearly $12 million in fees. And that was the last anyone ever heard from Romney about the “red flag” Dizdarevic. According to The Real Romney, by Boston Globe reporters Michael Kranish and Scott Helman, Romney tried to cajole the two former directors to take a plea before they were indicted, but that was just a sign of how desperately he seemed to want the case to disappear. In the end, the assumption of the legal bills seemed to do the job, muting the cantankerous former executives—as did Bullock’s decision in 2002 to pay them $1.2 million in withheld compensation.

**

As tangled as the ties between Romney, Bullock, Lewis and Dizdarevic are, there is another player whose ties to Romney do not depend on campaign contributions: the leadership of the Mormon church.

In 1999 Dizdarevic retained a Utah-based destination firm, Meetings America, which was partly owned by Kathleen Hinckley Barnes, the daughter of the then-Mormon prophet and president, Gordon Hinckley. Gordon Hinckley was also a high-school classmate of Romney’s father, George Romney, and Hinckley’s nephew, Michael, was an investor in Meetings America.

The Romney and Hinckley families were so close that Mitt’s sister Jane married another Hinckley nephew and Mitt went to Harvard Business School with Clark Hinckley, Gordon’s son, who with his wife, Kathleen, has contributed $4,600 to the Romney campaign, part of the $8,650 donated by the principals and family members associated with Meetings America. Kathy Barnes did not respond to emailed questions from The Daily Beast.

Dizdarevic commissioned Meetings America to assemble Olympic tour packages at the same time that he, Lewis, and Romney were negotiating the initial letter of intent signed later that year. Kathy Barnes’s husband, Alan, was working at the SLOC at the time and, as the Salt Lake Tribune later reported, had been one of “a handful of people” who’d signed checks to benefit IOC members, including a $10,000 reimbursement of SLOC staffer Jason Gull, who bought everything from a vibrator to a violin for IOC members.

The Tribune reported that while working for Romney, Alan Barnes told the FBI that he saw nothing wrong with the living stipends, tuition payments, pharmacy expenses, and other gifts he authorized for IOC members and their families, a portion of the million dollars in handouts that became the core of the federal case against Welch and Johnson. Judy Cannon, who was Kathy Barnes’s partner in Meetings America, says that Alan Barnes “quasi-retired” from SLOC in 2000, “though maybe technically he was” still with the committee, and “was just in our office” working at Meetings “every day” until he died suddenly in January 2001. Nonetheless, when Barnes died, Romney told reporters that he was just about “to promote” him, praising “the good work he’s done here” and announcing that he was going to the funeral. With the trial of Welch and Johnson then scheduled for mid-2001, promoting Barnes would have been odd, since he apparently had another full-time job working for a SLOC subcontractor and his benign view of the IOC largess made him a likely defense witness.

Dizdarevic’s retention of Meetings America, and Romney’s apparent willingness to ignore Alan Barnes’s complicity in the IOC payments as well as his conflict-of-interest second job, suggests just how special these intertwined business relationships had become. Romney interacted often with two organizations that included Kathy Barnes—the Salt Lake Convention & Visitors Bureau, which she chaired and which was a major backer of the Games, and the Chamber of Commerce, where she and Romney joined the board during the same 1999 meeting.

Asked if Dizdarevic retained Meetings because of its Hinckley and SLOC connections, Cannon said: “I would be curious too. I’m not sure what his exact motives were.” But the Barnes/Hinckley subcontract was par for the course for Dizdarevic, who was no stranger to greasing palms in the interest of getting Olympics-related business steered his way. Shortly before the 2000 summer games in Sydney, he was exposed for hiring the girlfriend of the Australian IOC representative. In 1996, he’d paid $225,000 to buy a company owned by the wife of the United States Olympic Committee’s marketing director, John Krimsky, a pivotal player Romney dealt with frequently. And in 1998 he’d given three of the top SLOC trustees 40-percent discounts on five-day trips to Japan for the winter games in Nagano.

The Sydney scandal made international headlines, the SLOC discounts were well known, and Romney conceded in a 2001 Salt Lake Tribune story that Dizdarevic’s business ties to Krimsky did “ring a bell.” But Romney still defended Dizdarevic’s actions, noting, for example, that Krimsky had left the USOC “as we were talking with Jet Set and as we signed with Jet Set,” and thus there would “have been no conflict at that point.” Or perhaps it was just another reason to look away.

**

Fraser Bullock says he and Romney had four or five meetings with Dizdarevic during the SLOC years and that no thought was ever given to canceling the contract. Bullock’s private-equity firm, Sorenson Capital, became an investor in Jet Set in 2008—only months after Portfolio’s profile of Dizdarevic noted the $200 million Jet Set expected in revenue from that year’s Beijing games and reported that his competitors complained that Jet Set’s monopoly may violate U.S. antitrust laws.

The story led with the old Salt Lake scandal, citing court records that “intimated” that Dizdarevic “had put the idea that the games could be bought into the local officials’ heads.” The profile also characterized Dizdarevic as perfecting the art of what he delicately calls the ‘advanced royalty’—paying off Olympic pooh-bahs for the ultimate service monopoly.”

In 2009 the Seattle Times raised questions about Bullock’s key role on the eight-member coordination commission of the IOC for the 2010 Winter Games in Vancouver, which oversaw tickets and other operations issues, even as he refused to disclose just how big his investment in Jet Set was. Bullock told the Times that the commission approved Dizdarevic’s Vancouver contract before he invested in the company.

“We knew about Jet Set and they continued to do great things for the Olympic movement and we decided to make the investment,” Bullock told The Daily Beast. Asked if Dizdarevic took on any other investors, Bullock says: “No, we were the only ones.” Dizdarevic testified in 2003 that he and a trust for his children owned 100 percent of Jet Set.

Bullock and his family have given $210,275 to Romney’s campaigns, while his business partners, investors, employees, clients, and their families have tallied $568,897. “I’ve raised money from 30 to 40 people,” Bullock said. Bullock met Romney when both were partners at Bain in the 1980s, and Bullock’s Sorenson Capital is a virtual Bain West, packed with former Bain executives, though the company has a more ex-SLOC and Mormon tilt. Bullock is himself a regional administrator for the church in south Utah, a director of its for-profit conglomerate, and chair of its retirement nonprofit for church employees.

“I tried to get Mitt to invest” in Sorenson, Bullock said, “but he said he couldn’t because his investments were in a blind trust and he had no control at all.” Were it not for that obstacle, Romney could, presumably, be a partner of Dizdarevic’s today, with Jet Set featured as a “portfolio company” of an equity firm Romney partly owned, just as it currently is on Sorenson’s website.

Another former Bain partner extremely close to Romney, Bob Gay, claims in his bio that he “organized Sorenson Capital,” but that his commitments in 2003, when it was formed, “prevented him from day-to-day involvement” in the firm. He says the Sorenson family, one of the richest in Utah, asked him to create it and that he “provided seed money, contributed the largest ‘partner’ co-investment in the fund, and brought the founding group of partners together,” including Bullock. Gay appeared in a TV commercial used in both the 2008 and 2012 campaigns recounting how Romney closed Bain for three days to organize a search through the streets of New York for Gay’s runaway teenage daughter.

The ties between Sorenson Capital and Romney are so extraordinary that partners or staff at all seven of the major financial firms that invested in its first fund in 2004 donated to Romney, including the one that employs Jason Gull, the SLOC staffer who purchased the violin and vibrator for an IOC member. Principals from nine of the companies that Sorenson invested in, not counting Jet Set, added hundreds of thousands more in donations.

Twelve partners or staffers at Sorenson or its affiliate, West Rim Capital, have given to Romney’s campaign, including John Bennion, who worked directly with Dizdarevic as Games services director at the SLOC and, Bullock said, suggested to Bullock that they invest in Jet Set. Romney’s personal assistant at the SLOC, Donna Tillery, and its transportation director, Matt Lehman, also work at Sorenson and donated to Romney. Without naming names, Bullock said he did “encourage” people associated with Sorenson to give to Mitt.

The connections here are more than a decade old now, but they are as fresh as the latest political contributions, some of which came into the Romney kitty as recently as his anniversary visit to Salt Lake. The ethical indifference these ties reveal are at least as important an insight about the candidate’s character—and his executive moral compass—as the deficit-to-profit games were a measure of his managerial skill.

Research assistance was provided by Jillian Anthony, Irina Ivanova, Clarissa León, Nicole Marsh and Kyle Roerink.