Coelho was a familiar figure to union leaders. He’d built a powerful national fund-raising machine as a California congressman in the 1980s, before resigning in 1989 amid allegations that he had used political connections to make a killing in junk bonds. (No charges were ever brought.) Coelho was also the consummate schmoozer, salesman and arm-twister. Gore was going to win, he told the union leaders, and now was the time to get on board. While it also took a big push from AFL-CIO president John Sweeney to land Gore the endorsement two weeks later, one top campaign strategist said “the whole thing coalesced” with Coelho’s pitch. “If Tony hadn’t been in there, I don’t know how it would have turned out.”
Coelho embodies the paradox of Gore’s campaign. While preaching reform and renewal, Gore has entrusted his election to a cadre of entrenched Washington insiders. It’s headed by Coelho, a onetime candidate for the priesthood who has for the most part delivered handsomely for the vice president. Hired a year ago by Gore at the recommendation of Commerce Secretary Bill Daley (who turned down the chairman’s post), Coelho brought order to a campaign in disarray and solidified Gore’s standing on Capitol Hill, where he has never been especially popular.
But Coelho’s stewardship has also come at a price. State and Justice Department officials continue to probe allegations that he used his position as commissioner to the 1998 Lisbon World’s Fair to further his own business interests. And the Securities and Exchange Commission is looking into charges that Coelho and a partner tried to enrich themselves at the expense of a New Jersey gaming company. Coelho declined repeated requests for an interview. But his attorney, Stanley Brand, said his client has done nothing wrong. Top Gore strategists also insist that the inquiries don’t amount to much, legally or politically. “I don’t think voters care about it,” said speechwriter Bob Shrum. But other campaign insiders are anxious–about both the often-complicated specifics of the probes and the drip-drip of bad press that comes with coverage of protracted investigations. Some are reconciled to coping with a chronic problem. “Tony is just part of the baggage we all have to carry,” said another senior adviser.
While capable of considerable charm, Coelho has also made enemies with a sharp-edged management style. Last year, as he moved to take control of a campaign hampered by multiple power centers, he forced longtime Gore lieutenants like Ron Klain and Peter Knight to the sidelines. More recently, some aides have dug in and survived. Campaign manager Donna Brazile resisted Coelho’s efforts to dispatch her to the Democratic National Committee. Angry about leaks, Coelho grounded traveling press secretary Chris Lehane for a week after he returned from his honeymoon last month. A truce was arranged after other Gore staffers went to bat for Lehane. But the power struggles have flattened morale at the Nashville, Tenn., headquarters, where spirits had been high at the end of the victorious primary season. “Everyone here has been completely disheartened,” said one aide.
Coelho’s defenders say the criticism is unfair. “When I measure him against what I’ve seen in other campaigns, he has hardly been divisive,” said senior strategist Tad Devine. But even friends allow that Coelho’s hard-bitten style is not for everyone. “Tony’s a very driven guy, and he makes a lot of decisions based on gut instinct,” said former aide Tom Nides.
Coelho may wish that his instincts had kept him away from Nunzio DeSantis. A former Albuquerque, N.M., pharmacist who made his fortune in mail-order prescriptions, DeSantis was a large, blustery sun-belt Republican, inclined to bully where Coelho would schmooze. But sometime after the two men met a decade ago (Coelho’s Wall Street investment firm handled DeSantis’s money), they discovered a mutual passion: the casino business. Coelho had gotten a taste of the profits to be made when he sat on the board of Las Vegas gambling giant Circus Circus in the early 1990s. DeSantis believed that gaming cash might help Autolend, a struggling company he controlled with a subsidiary that bought life-insurance policies at a discount from AIDS patients. In 1996 Coelho joined the Autolend board.
The company drifted in and out of bankruptcy court. But through another Albuquerque businessman, Joseph Corazzi, Coelho and DeSantis learned of an opportunity to buy control of a gaming company at a fire-sale price. International Thoroughbred Breeders (ITB) operated two New Jersey racetracks, but the company’s founder and biggest shareholder, brokerage-firm owner Robert Brennan, faced a $75 million civil judgment for luring hundreds of thousands of small investors into worthless “penny stock” investments. State regulators threatened to revoke ITB’s gambling licenses unless Brennan sold his interest in the company.
Coelho and DeSantis believed that the real prize in ITB’s portfolio was El Rancho, a derelict hotel-casino on the Las Vegas strip. They hoped to ride Vegas’s new wave of family-friendly attractions by transforming El Rancho into Countryland, a Nashville-themed development with two hotel towers designed in the shape of cowboy boots. Backed by what they said was a prospective $100 million commitment to the project from a Los Angeles investment firm, Coelho and DeSantis bought Brennan’s minority controlling interest in ITB in early 1997. Coelho, the company’s new chairman (DeSantis was CEO), touted the lucrative marriage of slot machines and country music. “The potential,” he said, “is explosive.”
Coelho got that right. The takeover quickly descended into an ugly exchange of charges and countercharges. He and DeSantis struggled with holdover board members for control of the company, alleging that the remaining directors were trying to help Brennan retain power. The old board members contend that they were only looking out for shareholder interests. At contentious board meetings, DeSantis tried to bludgeon the opposition into submission. “Time to vote. Forget this s–t. Time to vote,” he said, according to the transcript of one session. By comparison, Coelho was the voice of reason, futilely quoting from Robert’s Rules of Order. To make matters worse, Countryland’s prospective underwriter, SunAmerica insurance, decided that it could not move forward with its $100 million investment because of concerns about the project and its management.
Meanwhile, Brennan holdovers on the board charged in court papers that Coelho and DeSantis were engaged in a “self-enrichment program” that was draining the company of funds. Company financial filings reported some of the transactions in dispute. DeSantis drew a $450,000 salary; Coelho was paid a $10,000-a-month general fee. ITB also paid $10,000 a month to sublease a portion of DeSantis’s Albuquerque office. The two flew in jets leased from a company that employed DeSantis’s son as a pilot.
In perhaps the most controversial transaction, Coelho signed a document that committed ITB to pay DeSantis and Joseph Corazzi (who originally interested DeSantis and Coelho in the Countryland deal) up to $7.2 million in fees to help ITB lease two New Mexico racetracks. The company made a $600,000 down payment, but the two never obtained the leases. Moreover, according to company documents, ITB claimed on one lease application that it had a Nevada gambling license. In fact, the company had not even applied for one. DeSantis told NEWSWEEK he was unaware of the false claim. Corazzi could not be reached for comment.
The feud ended in a January 1999 out-of-court settlement. Its terms included repayment of the $600,000 to ITB and the departure of Coelho and DeSantis. Coelho declined to answer questions about his tenure at ITB. But attorney Brand said all the allegations are the product of a bitter business dispute and were never proved in court. Moreover, said Brand, Coelho signed off on the racetrack deal after it had been reviewed by professionals.
Coelho’s friends say they are certain he would step aside as Gore’s campaign chairman if his legal difficulties escalated. “He would be out of town in a minute,” said one. For his part, Coelho says he has no interest in a job in a Gore administration. That may be just as well. With his troubles, trying to land a spot might be the toughest task of all.
