Orbiter of Power


Orbiter of Power

His political savvy helped him get a jump on the world satellite market.

by Dave Eisenstadt

#1 Bernard L. Schwartz, 71, New York, N.Y. Party: Both. $661,000 total contributions.

View Schwartz’s itemized contributions.

The problem for Bernard Schwartz was this: How does an aggressive New York businessman who’s no more than a blip on the Beltway radar screen break into the tightly knit ranks of those aerospace executives invited to talk turkey with the secretary of defense a couple of times a year?

He did it the old-fashioned way: He gave money. Schwartz, the CEO of Loral Space & Communications, has given massive contributions to Democrats and a whopping $217,000 since 1993 to the Democratic Leadership Council (the political group Bill Clinton once chaired). And he’s done far better than merely getting access to the secretary of defense. Last fall the administration actually considered Schwartz as a candidate for the defense post. Then last December, after his election contributions topped all others, Schwartz received the ultimate sign that he had arrived: He celebrated his 71st birthday with an intimate White House dinner with the president.

Schwartz, who declined to be interviewed for this article, is an anomaly in the aerospace industry, which is mostly captained by Republican-leaning engineers and former military officers who fly their own planes. Schwartz — a Brooklyn native, a Wall Street veteran, and a lifelong Democrat — has sometimes stirred resentment among other aerospace executives, who sense he’s in aerospace not out of patriotism, but simply in order to make money. They can’t argue with his success: Since acquiring Loral in 1972, he has transformed the company, then worth $7 million and near bankruptcy, into a $3 billion giant. Although no one questions Schwartz’s Democratic leanings, his recent giving has raised eyebrows. “When I was there, [Schwartz gave] only begrudgingly,” says a former Loral executive. “There’s obviously a clear business rationale for this.”

For one, Schwartz’s contributions may have prompted favorable treatment from regulators and lawmakers. In 1993 the Clinton administration and the then-Democratically controlled Congress approved a law allowing defense companies to charge taxpayers for the costs of mergers and acquisitions. Schwartz capitalized on the legislation last year when he sold Loral’s defense business to Lockheed Martin, reportedly pocketing close to $27 million in personal stock gains. In fact, Schwartz has been the industry’s most aggressive buyer and seller for years, and each of his many deals was approved in short order by the Pentagon and the White House. “The Democrats have not messed with any antitrust issues in defense,” says former Assistant Defense Secretary Lawrence Korb. “With Schwartz buying and selling as he has, he’s done pretty well.”

Since selling Loral’s defense-related operations to Lockheed, Schwartz has focused much of his attention on Globalstar, a Loral venture he hopes to turn into a giant in global satellite telecommunications. Such satellite-based services would let you call your office from the ski slopes, reach the main office from the Himalayas, or download stock tips while on a fishing trip in Chile.

Globalstar’s prospects were helped considerably by Ron Brown, the late secretary of commerce, who invited Schwartz to travel with him on at least two international trade missions. One 1994 trip to China proved particularly lucrative: As a result of negotiations that began there, Schwartz reeled in satellite transmission rights in China worth billions. Since then, he has landed exclusive agreements with phone companies in more than 100 countries, including France and Brazil.

The U.S. Trade Representative’s office has also helped Globalstar by convincing 68 nations that attended a World Trade Organization meeting in February to open their telecommunications markets to foreign providers much sooner than expected. It’s a huge boon for U.S. satellite makers — and Globalstar, which is set to launch its 56-satellite service in 1998, has a jump on most of the competition.

Schwartz’s current goal, according to Loral lobbyist Steven Flajser, is to obtain a rewrite of a 1964 international agreement that limits how many companies can get into the global satellite business. Coincidentally or not, Clinton advocates rewriting the agreement so that it would allow U.S. companies such as Loral to put more commercial satellites in orbit.

In addition to his own contributions, Schwartz also avails his political friends of another tremendous resource: Loral employees. “At certain times, memos came out to key executives asking for contribution checks,” says a former Loral employee.

According to 1995-96 FEC records, more than 300 Loral employees contributed at least $300,800 through Loral PACs to 186 members of the House and Senate, especially to candidates on crucial committees, such as Rep. Jane Harman (D-Calif.), who sits on the House National Security Committee. In addition, 62 Loral employees gave $22,100 directly to Harman in 1996.

Last August, Schwartz put on a fundraiser for Harman near Loral’s Palo Alto, Calif., offices. Loral employee John Brock, a registered Republican, says he did not attend, but later wrote out a $250 check to Harman’s campaign. Asked why he contributed to a Democratic congresswoman who represents a district 350 miles away, Brock says, “She’s very outspoken in support of our industry.” Brock then adds that he also gave because the fundraiser was organized by his boss.

Harman declined to discuss her relationship with Schwartz, but did take the time to notify Loral that Mother Jones had called her office. “If you call us about Bernard Schwartz,” says Mark Kadesh, Harman’s chief of staff, “we’re going to tell Bernard Schwartz.”

But a Republican congressman who has known Schwartz for years was less reluctant to speak — provided he wasn’t identified by name: “Let me tell you, that fuckin’ guy, he always pushed the envelope with me. He always came by and asked for things.”

Meanwhile, Sen. Carl Levin (D-Mich.), the top Democrat on the Senate Armed Services Committee, collected at least $12,000 from Schwartz and a Loral PAC for his successful 1996 re-election campaign. Schwartz, Levin says, gives primarily because he is a Democrat. However, the senator adds, “Has he ever raised [a business] issue with me at any time? I can’t tell you that he hasn’t.”

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