The Missing Weeks

[January 26th, 2005] Last week, Attorney General Hardy Myers cleared Neil and Diana Goldschmidt of any criminal wrongdoing in their dealings with Texas Pacific Group. But at least two of Diana Goldschmidt's former colleagues on the Oregon Investment Council say she was guilty of an ethical lapse when she failed to tell the council her husband was being courted by the Texans as the council members were authorizing a huge investment of public cash with the firm.

Myers' report examined Texas Pacific's hiring of Neil Goldschmidt to help acquire and run Portland General Electric and his wife's role as a member of the OIC, an organization that invested $300 million in Texas Pacific.

The report is based on the findings of organized-crime investigator Steven Briggs, who interviewed 23 people and secured a number of phone records. In many ways, the report raises as many questions as it answers. For example, Briggs failed to interview key players who helped Texas Pacific get a foothold in Oregon, and while investigators did gather some documentation as part of the probe, such as phone records, it did not seek others, like Neil Goldschmidt's email. Most important, the inquiry was curiously narrow in its scope, focusing almost exclusively on a three-week period in the fall of 2003. And while the Goldschmidts apparently broke no law, they don't exactly come off as Mr. & Mrs. Clean.

On Oct. 29, 2003, Diana Goldschmidt and the rest of the OIC voted to give a subcommittee the right to invest $300 million with Texas Pacific. Later that very same day Neil Goldschmidt received a call from David Bonderman, a Texas Pacific partner. Bonderman told him Texas Pacific wanted to make a bid for PGE and asked Goldschmidt to help.

Goldschmidt then called his wife. According to Myers' inquiry, she noted the unusual coincidence of her husband being contacted by Texas Pacific only hours after she voted to invest state funds in the firm. Diana Goldschmidt told investigators that upon getting the call, she exclaimed something like, "My God, we just authorized the staff to give money for TPG."

The report does not say whether Diana Goldschmidt was aware that, had her husband's conversation with Bonderman taken place before her vote a couple of hours earlier, she might have broken criminal law.

It's what she did in the three weeks after that call, however, that has drawn criticism from others. Or rather, what she didn't do.

Although she learned of her husband's potential financial stake in Texas Pacific's plans on Oct. 29, Diana Goldschmidt kept that information secret until Nov. 18, when Texas Pacific officials and her husband held a press conference announcing their bid to buy the utility. For three weeks, Diana Goldschmidt chose not to tell her fellow OIC members or the council's staff of her financial entanglement with Texas Pacific. She remained silent even though it was during this time, on Nov. 10, 2003, that the OIC's subcommittee voted to actually invest the $300 million in TPG. (Goldschmidt did not sit on that subcommittee, which had been given the authority to invest on the Oct. 29 vote.)

Goldschmidt's silence did not sit well with State Treasurer Randall Edwards, who also serves on the investment council.

"She should have contacted my office to say that Neil had been approached," he told WW last week. "I think we should have been notified-at that point. I don't know if that would have changed anything, but the subcommittee might have reconsidered whether this made a difference."

Myers' report is largely silent on the matter of Diana Goldschmidt's silence, other than to say, "Diana Goldschmidt said that after learning of Neil Goldschmidt's potential involvement with TPG, she did not attempt to influence the Subcommittee to approve the $300 million investment at its Nov. 10, 2003, meeting." (See http://www.doj.state.or.us/releases/rel012105.htm.)

But Richard Solomon, who was appointed to the council in August 2004, also had problems with the actions of his former colleague (Gov. Ted Kulongoski forced Goldschmidt off the council last September).

Solomon says while Goldschmidt took her role as an investment-council member seriously, "her silence could give critics reason to question her motivation. The harm is that the public perceives the OIC is acting on behalf of private interest-and that is damaging to the council."

Myers' report also confirmed that Diana Goldschmidt wasn't the only OIC member who was tipped off about her husband's offer from Texas Pacific. As it happened, the day of the OIC vote, the Goldschmidts were headed to San Francisco, along with fellow OIC member Jerry Bidwell and his wife. Bidwell, a close friend of Neil Goldschmidt's, also kept mum about Texas Pacific's plans. He resigned his post in August.