July 06, 2004
Nicolas Hanauer Scandal
Last month I mentioned the gathering scandal involving Nicolas Hanauer, the mega-millionaire investor who has paid $185,000 to get Washington state initiative I-884 on the November ballot (44% of the campaign's warchest). I-884 seeks a billion dollar a year increase in the state sales tax to fund public education, while Hanauer is a director and investor in a company called TeachFirst that would be a direct beneficiary of I-884's statutory spending. It is not necessarily a scandal that a businessperson with a financial interest in a ballot initiative would pay to get the initiative on the ballot. The scandal is that the state's media has not reported on Hanauer's financial stake in I-884, even though (a) the newsrooms are aware of Hanauer's financial stake in the initiative and (b) they are otherwise scrupulous about reporting on the financial interests of initiative campaign backers. Perhaps this scandalous lapse in reporting is attributable to the fact that the major newspapers have all but endorsed I-884 (see the Seattle P-I and the Seattle Times)
But this is not the first time Nick Hanauer has been at the center of a campaign finance scandal. Two years ago Hanauer was the largest individual donor to the Seattle Monorail campaign. But it's been years since Hanauer even lived in Seattle. At the time of the November 2002 Monorail vote until the present, he has lived in a gated community called The Highlands in the northern Seattle suburb of Shoreline. According to public filings, Hanauer and his wife contributed $18,000 to the Monorail campaign. After the election, the newly formed Monorail agency appointed campaign contributor Hanauer to its board. His board membership was challenged when it was discovered he didn't live in Seattle and was therefore ineligible to serve on the board. He then changed his voting address to a Seattle condo owned by his brother, but ended up resigning the Monorail board anyway in light of the controversy.
The above is all published news from more than a year ago. But I've also discovered some additional unreported details that raise some serious questions about Hanauer's ethics and integrity.
First, official campaign filings from the 2002 Monorail campaign give Hanauer's address as The Highlands, Seattle, even though his home is very clearly in Shoreline. This misstatement was made in multiple filings to both the state Public Disclosure Commission (here and here) and to the Seattle Ethics and Elections Commission here. Why would he misstate his own city unless he wanted to mislead people into thinking that he lived in Seattle? Was the Monorail board seat which required a Seattle residence a pre-planned quid pro quo?
Second, although he might have changed his voter registration to a Seattle condo at some point last year, the latest county voter file shows that he and his wife are currently registered at ... The Highlands, Shoreline. Now it was awfully generous of the Hanauers to donate all that money in order to impose a multi-billion dollar tax hike on the good people of Seattle. But if their official residence is Shoreline, they don't have to pay the Monorail tax, and I'd be surprised if they would go to the trouble of bypassing the vehicle registration rules just to pay a tax they're not required to pay. If they think the Monorail tax is such a good idea, why don't they register to vote and register their cars in Seattle so they can pay the tax along with the poor shnooks who never wanted the tax in the first place?
And I hope the newspapers start to pay more attention to Nicolas Hanauer and his role in the campaigns he so generously funds.
Posted by Stefan Sharkansky at July 06, 2004 12:07 PM
FYI - The correct address for decades for the Highlands has been:
Seattle, WA 98177
It was only when Shoreline was incorporated a few years ago that the address changed. However, many residents continued using Seattle in their address and continued to get their mail without problem. Also, most Highlands residents were opposed to the creation of Shoreline precisely because it diverted their property taxes (no small revenue stream) from the entire city of Seattle to a tiny suburb. Also, I believe there is a significant difference between a Spokane, a Yakima or even an Everett resident pushing the monorail versus a Shoreline resident. Shoreline and The Highlands are both directly on the border of Seattle. Furthermore, residents of Shoreline and The Highlands generally do not work or even shop in Shoreline, but go into Seattle on a daily basis. Therefore they have a vested interest in seeing Seattle's transportation system improved whether through a monorail or another form of mass transit. That all being said, I agree there is a conflict in having a board member push for a tax that he doesn't have to pay, but I would argue that Mr. Hanauer's intentions are not malicious or self-serving. The appropriate response would be to have Mr. Hanauer and his fellow Shoreline residents pay the extra tax if they wish to benefit from having a monorail.
While it is true that I am an investor and board member of Teach First, it is not true that this association will in any material way benefit from I884.
First, my investment in Teach First represents approximately 1 part in 10,000 of my net worth. If you consider the dilution that has occured since my investment, even if TF succeded beyond our wildest dreams, the return on my investment would not even register with my accountants. My interest in TF is consistent with many of my activities, to make Public Education in the USA the best in the world.
Second, even if Teach First were to benefit from more money in Washington's public Schools it would represent only 1/50th of the possible revenue for the company. There are 50 states, and needs for ESL help (the company's primary product)are greatest elsewhere.
No doubt you are looking for motivation. If you do not want to believe that my wife and I, having grown up middle class and gone to public schools ourselves, and having found ourselves the beneficiaries of almost incomprehensible good fortune, just want to give back to the community in the highest leverage way that we can-by funding public education-then believe this;
That wealthy citizens like us have a dispraportionate stake in insuring that America works for all citizens, not just the fortunate few. It is broad and equal opportunity and widespread success that creates a country that is fun to live in and can produce the life that we are now so fortunate to lead.
If you are looking for some bad guys in this fight, go after the business leaders in this state who have been pounding the table about standards and accountabilty for decades and now don't want to focus the resources on the problem necessary to get kids up to those standards. Go after them!
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I am a neighbor of Nick's and can assure you that his intentions towards public education are pure and deeply held. I wish we had many more like him and his lovely wife who would devote their own substantial passion, intelligence and resources towards difficult but important social issues.
The author's cynacism is perhaps understandable in this day and age, but his analysis, logic and focus are naively shallow here.