A Freddie Mac Money Trail Catches Up With McCain
Few advisers in John McCain's inner circle inspire more loyalty from him than campaign manager Rick Davis. McCain and his wife, Cindy, credit the shrewd, and sometimes volatile, Republican insider with rescuing the campaign last year when it was out of money and on the verge of collapse. As a result, McCain has always defended him—even when faced with tough questions about the foreign lobbying clients of Davis's high-powered consulting firm. "Rick is a friend, and I trust him," McCain told NEWSWEEK last year.
Last week, though, McCain's trust in Davis was tested again amid disclosures that Freddie Mac, the troubled mortgage giant that was recently placed under federal conservatorship, paid his campaign manager's firm $15,000 a month between 2006 and August 2008. As the mortgage crisis has escalated, almost any association with Freddie Mac or Fannie Mae has become politically toxic. But the payments to Davis's firm, Davis Manafort, are especially problematic because he requested the consulting retainer in 2006—and then did barely any work for the fees, according to two sources familiar with the arrangement who asked not to be identified discussing Freddie Mac business. Aside from attending a few breakfasts and a political-action-committee meeting with Democratic strategist Paul Begala (another Freddie consultant), Davis did "zero" for the housing firm, one of the sources said. Freddie Mac also had no dealings with the lobbying firm beyond paying monthly invoices—but it agreed to the arrangement because of Davis's close relationship with McCain, the source said, which led top executives to conclude "you couldn't say no."
The McCain campaign told reporters the fees were irrelevant because Davis "separated from his consulting firm … in 2006," according to the campaign's Web site, and he stopped drawing a salary from it. In fact, however, when Davis joined the campaign in January 2007, he asked that his $20,000-a-month salary be paid directly to Davis Manafort, two sources who asked not to be identified discussing internal campaign business told NEWSWEEK. Federal campaign records show the McCain campaign paid Davis Manafort $90,000 through July 2007, when a cash crunch prompted Davis and other top campaign officials to forgo their salaries and work as volunteers. Separately, another entity created and partly owned by Davis—an Internet firm called 3eDC, whose address was the same office building as Davis Manafort's—received payments from the McCain campaign for Web services, collecting $971,860 through March 2008.
In an e-mail to NEWSWEEK, a senior McCain official said that when the campaign began last year, it signed a contract with Davis Manafort "in which we purchased all of [Davis's] time, and he agreed not to work for any other clients." The official also said that though Davis was an "investor" in 3eDC, Davis has received no salary from it. As to why Davis permitted the Freddie Mac payments to continue, the official referred NEWSWEEK to Davis Manafort, which did not respond to repeated phone calls. One senior McCain adviser said the entire flap could have been avoided if the campaign had resisted attacking Barack Obama for his ties to two former Fannie Mae executives, which prompted the media to take a second look at Davis. "It was stupid," the adviser said. "A serious miscalculation and an amateurish move." Still, this adviser said, McCain's faith in his campaign manager remains unswerving.
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Michael Isikoff has been an award-winning investigative correspondent for Newsweek since 2004. He has written extensively on the U.S. government's war on terrorism, the conflicts in Iraq and Afghanistan, presidential politics and other national issues. His book, "Hubris: The Inside Story of Spin, Scandal, and the Selling of the Iraq War," co-written with David Corn, was an instant New York Times best-seller when it was published in September, 2006. The book was hailed by the New York Times Book Review as "fascinating reading" and "the most comprehensive account of the White House's political machinations" in the run up to the war in Iraq. Since January 2009, Isikoff has been an MSNBC contributor, making regular appearances on the Rachel Maddow Show and Hardball w/ Chris Matthews.
Ever since the events of September 11, Isikoff has broken repeated stories about the U.S. government's war on terror and won numerous journalism awards. His blog "DeClassified: Investigative Reporting in Real Time," which appears regularly on Newsweek's Web site and is written with MarkHosenball, has become a must-read for senior U.S. intelligence officials. Isikoff and Hosenball won the 2005 award from the Society of Professional Journalists for best investigative reporting online.
Isikoff's June 2002 Newsweek cover story on U.S. intelligence failures that preceded the 9-11 terror attacks, along with a series of related articles, was honored with the Investigative Reporters and Editors top prize for investigative reporting in magazine journalism. He was honored, along with a team of Newsweek reporters, by the Society of Professional Journalists for coverage of the Abu Ghraib scandal. For that coverage, Isikoff obtained exclusive internal White House, Justice Department and State Department memos showing how decisions made at the highest levels of the Bush administration led to abuses in the interrogation of terror suspects. Isikoff was also part of a reporting team that earned Newsweek the National Magazine Award for General Excellence in 2002, the highest award in magazine journalism, for their coverage of the aftermath of the September 11 terror attacks.
Isikoff's exclusive reporting on the Monica Lewinsky scandal gained him national attention in 1998, including profiles in The New York Times and The Washington Post and a guest appearance on "Late Show with David Letterman." His coverage of the events that lead to President Bill Clinton's impeachment earned Newsweek the prestigious National Magazine Award in the Reporting category in 1999. Isikoff's reporting also won the National Headliner Award, the Edgar A. Poe Award presented by the White House Correspondents Association and the Gerald R. Ford Journalism Prize for Reporting on the Presidency. In 2001, Isikoff was named on a list of "most influential journalists" in the nation's capital by Washingtonian magazine.
Isikoff is the author of "Uncovering Clinton: A Reporter's Story," a book that chronicled his own reporting of the Lewinsky story and was hailed by a critic for The Washington Post-Los Angeles Times news service as "the absolutely essential narrative of the scandal with revelations that no one would have thought possible." The book, also a New York Times bestseller, was named Best Non-Fiction Book of 1999 by the Book of the Month Club.
Isikoff came to Newsweek from The Washington Post, where he had been a reporter since September 1981. There he covered the Justice Department and the Persian Gulf War, reported on international drug operations in Latin America and worked on the Post's financial news desk. Isikoff graduated from Washington University with a B.A. in 1974 and received a Masters in Journalism from Northwestern University's Medill School of Journalism in 1976.
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