Goldschmidt's Midas Touch

The ex-governor profited from ties made while in public office.

More than any other governor in modern Oregon history, Neil Goldschmidt accumulated considerable wealth after leaving office. In addition to his financial holdings, Goldschmidt and his wife own two Portland homes, a winery in Dundee and a share of the Woodlark building on the North Park Blocks.

The story of Goldschmidt's transformation from public servant to private power broker has been told many times. But documents made public only this month provide new insights into his post-Mahonia Hall dealings. They also offer details about two cases in which his wealth derives from organizations he assisted while Oregon's governor from 1986-1990.

The first involves SAIF Corp., Oregon's largest provider of workers'-compensation insurance. The second involves Renaissance Bankcard Services, a highly successful issuer of credit cards.

In both cases, there was a undeniable public benefit to the actions Goldschmidt took as governor. And in both cases, there was a significant financial benefit that Goldschmidt later reaped as a private citizen. Those private benefits began at a time when Goldschmidt needed money most: shortly after agreeing to pay $350,000 to a former neighbor he'd sexually abused beginning when she was 14 (see "The 30-Year Secret," WW, May 12, 2004).

In 1989, then-Gov. Goldschmidt engineered sweeping changes in workers'-compensation rules that lowered insurance costs for many businesses and ultimately saved SAIF hundreds of millions of dollars.

The changes were the culmination of a blueprint designed by Eugene lawyer Stan Long, whom Goldschmidt picked to head the state-run agency. Goldschmidt files released earlier this month include a 1987 memo from Long noting, "If SAIF's rates were reduced by 15 percent, it could underbid all the other insurers in the state and monopolize the industry."

Long proved prophetic. SAIF, a publicly owned, self-financed insurer, has seen its market share rise nearly 50 percent, while its only real private-sector competitor, Liberty Northwest, has seen its market share cut by more than a third.

Shortly after leaving office, Goldschmidt opened a consulting business. SAIF has been a lucrative client, paying him more than $1 million since 1996. SAIF spokesman Ken Van Osdol says the payments to Goldschmidt were for strategic advice and in no way represented a payback.

SAIF's payments to Goldschmidt have drawn considerable criticism. But they were small compared with the payday Goldschmidt reaped from a personal relationship he cultivated as governor.

In 1987, ITT Corp., a publicly held New York-based conglomerate, was interested in entering the credit-card business, particularly high-interest cards issued to people with poor credit.

ITT's credit-card boss was a former concert cellist named Irving Levin. Part of Levin's interest in coming to Portland was personal--he saw it as an attractive place to raise his family. He was also aware that Oregon, unlike many states, had no laws limiting the amount of interest banks and credit-card companies can charge. A January 1988 state analysis, found in Goldschmidt's archives, notes that "ITT appreciates several aspects of Oregon's banking code, particularly the absence of usury laws."

Levin established the new company, First Consumers National Bank, in Portland in 1988, but he still needed a change in Oregon law to begin operations.

Archives show that Goldschmidt reached out to Levin, who was one of the first dinner guests invited to the newly renovated governor's mansion, Mahonia Hall. "The company, food and wine all left their impression, and we came away feeling optimistic about the chances to resolve regulatory issues," Levin wrote to Goldschmidt in January 1988.

Records show that changing Oregon banking law to accommodate Levin's company was one of Goldschmidt's top priorities in the 1989 legislative session. The bill enabling First Consumers to begin operations sailed through the Legislature.

Months later, however, due to unrelated litigation, ITT put First Consumers up for sale. While it's common for a governor to recruit new employers, Goldschmidt took the unusual step of trying to help Levin find a buyer.

He introduced Levin to prospective suitors, including Nike CEO Phil Knight and New York's wealthy Tisch family (owners of the Loews movie-theater chain) and U.S Venture Partners. "I am very grateful for the efforts you're making on our behalf," Levin wrote to Goldschmidt in December 1989.

ITT eventually sold First Consumers to the Spiegel catalog company. Levin left to start a similar operation called Renaissance Bankcard Services. In 1997, six years after leaving office, Goldschmidt joined Renaissance's board.

In 1999, Levin sold the company to Household Finance Corp. for $300 million.

That sale valued Goldschmidt's 265,449 shares of stock at $8.3 million, according to SEC filings. It is unclear what he paid for his stock or when he bought it, but the company's second-largest investor, Bill Reesman, says that stock was available for about a dollar a share for much of the '90s (although it was only available to insiders, since the company was privately held).

Neither Levin nor Goldschmidt was available for comment on what role the former governor played at Renaissance or how he was able to accumulate nearly 5 percent of the company's stock.

Just a few years earlier, Goldschmidt claimed that he possessed virtually no assets. In early 1995, Goldschmidt agreed to compensate a woman whom court records say he'd sexually abused for three years when she was a teenager. According to people familiar with the settlement, Goldschmidt borrowed that money.

WWeek 2015

Willamette Week’s reporting has concrete impacts that change laws, force action from civic leaders, and drive compromised politicians from public office. Support WW's journalism today.