Chris Dudley's curious choice of business partners - and what it might mean for Oregon voters (updated)
Kari Chisholm
So, in my late night meanderings across the internet, I stumbled into a Murmur this week from Willamette Week - one that's just crying out for more reporting, more investigation, more digging around. I'm just a blogger and a hack, but this thing looks really, really interesting.
The story starts at the Oregonian last week, when they reported on some of Chris Dudley's business deals:
Dudley and four others invested in a Los Angeles condo development called Wilshire Urban in 2007, said Roger Krage, a lawyer and executive at Gerding Edlen. The four others were Peter Stott, Eli Morgan, Patrick Terrell and Steve Shepard, all prominent, successful local investors. The project, completed during a historic housing crash, did not go well. Gerding Edlen ended up giving the building back to the bank, Krage said, costing the investors all of their equity investment.
OK, a real estate investment gone bad in the housing crash. Not a big deal.
That's where WW picked up the story:
One of the men, Eli Morgan, paid more than $200,000 to the Securities and Exchange Commission in 1998 to settle insider-trading charges relating to Enron’s takeover of Portland General Electric. Morgan bought PGE stock based on a tip improperly given to him by then-PGE director Peter Brix, who paid $109,000 to also settle insider-trading charges.
Hmmm. Let's connect those dots, shall we?
In 1998, Eli Morgan pays a massive fine after engaging in insider trading - which, of course, defrauds PGE investors and ratepayers. Nine years later, Chris Dudley decides to go into business with the guy and three other buddies.
Really?
The great unanswered question of 2010 is this: Who does Chris Dudley surround himself with? If he becomes Governor, who will he rely on for advice and judgment? After all, with zero experience in government - or even supervising a staff - he's going to turn to professionals. And while that's all well and good, ultimately, it comes down to how good Dudley's own judgment is about who he hires, who he partners with, who he trusts.
And in 2007, Chris Dudley chose to go into business with a guy fined nine years earlier by the SEC for insider trading?
Seriously? It seems to me that folks ought to be taking a more in-depth look into how Chris Dudley picks his partners, allies, and advisors. Based on this evidence, it seems that there are some real questions here.
Update: In the comments, some have suggested that it's possible that Chris Dudley didn't know his fellow investors in the project. I've done a bit more research, and I've solidified the connection between Dudley and Morgan. And it's actually so stunningly obvious, I'm sorry I missed it. At the time of the investment, 2007, Dudley was a vice president at M Financial - a firm that advises the "ultra-affluent" on how to stay that way. One of the four co-founders of M Financial was... Eli Morgan, who had been its president and CEO. Source here.
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11:55 p.m.
Oct 14, '10
Full disclosure: My firm built John Kitzhaber's campaign website. I speak only for myself.
11:27 a.m.
Oct 15, '10
FYI
When I hit post, it gave me a 404 Page Not Found error, but the post still went through.
11:25 a.m.
Oct 15, '10
Since I have never invested in private equity, maybe someone can answer this:
As I understand the article, Dudley invested with Gerding Edlen. Does that mean he would necessarily have known who the other investors were?
2:33 p.m.
Oct 15, '10
His day job is to be an investment manager. Due diligence is what those guys basically do for a living. So if he didn't know, he's incompetent.
I personally think he did know, but either way he shouldn't be handling any organization with a large budget.
Like the State of Oregon.
2:39 p.m.
Oct 15, '10
Wouldn't the due diligence have been on Gerding Edlen?
3:06 p.m.
Oct 15, '10
I think that there is a fair chance that Dudley did not know all the other investors at the time he made the investment. Frequently the developer seeks out investors and they may or may not know each other. However, with a group this small and the amounts this large some of them are likely to have discussed the deal with each other before they went in. Portland is also a pretty small town for this sort of thing so I wouldn't be shocked that they knew each other before hand. Given Dudley's business it may well have been he who helped recruit the other investors.
Regardless, you are right that the real due dilley would have been on Gerdling Edlen and the specific deal and not the other investors. That being said it would be worth a reporter's time to ask the question of how well Dudley knows Morgan.
3:03 p.m.
Oct 15, '10
The answer to this is no.
4:53 p.m.
Oct 15, '10
Well we know the investors in this Gerding Edlen condo project have donated just south of $100,000 to the Dudley campaign so far.
10:35 p.m.
Oct 16, '10
How much have they donated to Kitzhaber?
9:43 p.m.
Oct 18, '10
You tell me?
8:56 p.m.
Oct 15, '10
I've updated the post to address this question.
12:09 p.m.
Oct 16, '10
Good job. Now there is a story here. And yes, this info does give me pause when considering Dudley.
12:53 p.m.
Oct 16, '10
Not to nitpick, but Eli retired from M in 1996(your link). Dudley joined M in 2006(your link). This establishes a connection how?
3:02 p.m.
Oct 15, '10
And if he had an appearance on Martha Stewart's show, you'd similarly question his judgment? This seems like a stretch of an attack; how about focusing on what he does (or doesn't) say today?
4:54 p.m.
Oct 15, '10
Martha Stewart, she went to jail for insider-trading didn't she?
6:34 p.m.
Oct 15, '10
If he went partners with Martha in an investment deal I certainly would question it.
7:43 a.m.
Oct 16, '10
The tide is shifting towards Kitz. Survey USA now leaning Kitz, 46-45.
http://politicalwire.com/archives/2010/10/16/tight_race_in_oregon.html#disqus_thread
9:53 a.m.
Oct 16, '10
It appears they were all passive investors except for Gerding Edlen. Its like blaming someone for making the same investments as Bernie Madoff. This is a nonstory.
10:04 p.m.
Oct 16, '10
RIght. Because [passive investors sink almost $100,000 in the Dudley campaign just because. LOL