For McFadden, a career in the cross hairs

ST. PAUL -- Republican Minnesota U.S. Senate candidate Mike McFadden has never been a public official, so his business career has become the field of attack.

He has made millions of dollars in business and regularly is portrayed by Democratic opponents as "investment banker Mike McFadden," an out-of-touch plutocrat.

He tends to refer his “business background” in public remarks, though he says he’s “very proud” of his work.

U.S. Sen. Al Franken’s campaign has scoured public records and come up with more than 7,000 job cuts in several states it says resulted from the work of McFadden and his investment bank colleagues over the last two decades.

Nonsense, McFadden said. Blaming his firm for decisions made after it sold a business shows Democrats have no idea what investment bankers do and reflects the party’s standard strategy “to demonize anyone’s business background that runs for public office.”

Franken first ran an ad criticizing McFadden’s firm for incorporating abroad, though it was actually the firm’s parent company.

Franken, who won his Senate seat six years ago by 312 votes, said it is not being an investment banker that makes McFadden unsuited for the Senate, it is his record of prioritizing profits above people, as in the foreign incorporation that saved his parent company money at taxpayers' expense.

But Franken’s argument is complicated by the fact that he is invested in McFadden’s parent company as part of a mutual fund of “socially responsive” stocks. His staff says it is a small part of his holdings and not under his direct control.

Nobody disputes that McFadden’s firm contractually had no role in making operational decisions involving the companies it sold.

The game in the Senate campaign, for Democrats, has been to see how closely they can associate McFadden with bad outcomes for regular folks and, for McFadden, to distance himself from the harsher realities of corporate deal making while maintaining that his business background gives him special insight into what government can do to help companies grow.

McFadden was one of the first dozen or so employees at the Minneapolis investment bank Goldsmith, Agio, Helms. He joined in 1993 with the title of managing director. He became co-CEO in January 2007.

Later that year, the global financial firm Lazard bought Goldsmith and changed its name to Lazard Middle Market. McFadden retained the co-CEO title.

He stayed in that job till 2013, when he took a leave of absence to run for Senate.

McFadden represented business owners who wanted to be bought, typically companies worth between $20 million and $300 million or more.

According to a report he filed in August 2013, he’s worth between $15 million and $57 million.

As part of the sale of a business, McFadden said, he was brought in as a “service provider” along with lawyers and accountants, and his job ended on closing day. Usually buyers didn’t disclose what their plans were, he said.

Perhaps not, said Lawrence Mishel, president of the Washington, D.C.-based Economic Policy Institute, but the investment banker would certainly have made clear where any cost-cutting opportunities were as part of attracting the highest price for the company.

“He’s not making the decisions, but he’s certainly not doing his job if he’s not teeing up the decisions,” Mishel said.

McFadden said most of his deals involved healthy companies that buyers wanted for growth opportunities, not to strip down and sell off.

The investment banker’s primary job is to create value for his or her client, said Paul Vaaler, professor of law and business at the University of Minnesota.

In 2008, McFadden went on the board of a company he had sold, Allen Edmonds. That suggests in that particular deal he went far beyond being a matchmaker, Vaaler said.

Democrats criticize Allen Edmonds, a shoemaker, for opening operations in the Dominican Republic, shutting a plant in Maine and laying off about 80 workers.

McFadden said he and other board members helped the company weather rough economic times by foregoing their own pay and reinvesting in the business.

As for his firm’s restructuring work, McFadden said Lazard Middle Market strictly negotiated terms of the debt with creditors. It had no role in decisions about cutting costs or changing the business to make it viable.

However, on Lazard Middle Market’s Web site, the restructuring team says it does “situation assessment,” which includes review of the business plan and cash-flow forecast as well as “potential for asset sales.”

Coming from a corporate background can cut both ways for a political candidate.

McFadden points to a Gallup poll from this summer showing 81 percent of Americans think the country would be better governed if more people with business and management experience were elected. On the other hand, an NBC News/Wall Street Journal poll from last fall found 42 percent of respondents felt negatively toward Wall Street firms, compared with 14 percent who had positive feelings.

McFadden’s basic argument about why his business background fits him for public office is that he had a hand in growing his own firm from a handful of people to more than 100 and that he had an up-close view for 20 years about what small-business people and entrepreneurs needed from government to make them successful.

He said that he also learned how to negotiate.

“Think about it, when you’re selling your business, it’s your dearest asset," he said. "You want the best. You want someone that’s going to be the best at representing you and that can get things done. If someone walks into the negotiations and is a flame thrower, nothing gets done. You’ve got to be principled, you have to have integrity and you’ve got to be able to bring parties together to ultimately get things accomplished.”

To the Franken team, McFadden’s background is the perfect preparation to run another investment bank.

“As a senator, your whole goal is people first, not profits first,” said Franken campaign spokeswoman Alexandra Fetissoff. "And he (McFadden) has not shown a shift in that mentality that he’s essentially cultivated throughout the course of his business career

“Bad for workers, good for workers; no matter what, he got paid.”

The St. Paul Pioneer Press and Forum News Service are media partners.