Clement, other locals associated with key figure in latest Clinton finance tangle

Journal report calls into question the fundraising tactics of a Hillary Clinton backer whose firm counts the former mayoral candidate and several other well-known Nashvillians as advisors

Email | Print By Ken Whitehouse and Richard Lawson

As the fallout continues from one fundraising scandal that has dogged the campaign of U.S. Senator Hillary Clinton for president, another is developing. And this time, there is a Nashville connection.

This morning, The Wall Street Journal raised questions about a political fundraising practice called "bundling" and specifically pointed to campaign contributions made to the Clinton campaign by businessman William Danielczyk.

Danielczyk is the founder of the Washington, D.C.-area private-equity firm Galen Capital. That company has an office locally in Burton Hills, and several well-known Nashvillians are involved with it — perhaps most notably, former congressman and recent mayoral candidate Bob Clement.

Clement is listed on Galen's website as a "senior advisor" to the company, and he has a voicemail extension in the local office's telephone directory. According to the company's web site, the Galen advisory board also includes David Bartholomew, president and chief executive officer of Staffmark; Farzin Ferdowsi, who owns Taco Bell franchises in Nashville; and Stephen Harlan, president and CEO of Harlan Electric. Joe Kelley, retired chairman and CEO of American General, sits on Galen's board of directors.

The WSJ report mentions that Danielczyk is the investor who took over the now-defunct Nashville aviation company FractionAir in 2004. That firm sold fractional ownership in private charter jets. It drew an A-list of owners who bought the shares, including former Vice President Al Gore, Tennessee Titans coach Jeff Fisher, former Titans star Eddie George, the late music industry veteran Buddy Killen and the late John Lindahl, co-founder of State Industries.

Trouble seems to follow Danielczyk. In addition to the FractionAir troubles, he has taken two companies into bankruptcy in the past and faced a class-action lawsuit filed by angry investors who felt like he had defrauded them. FractionAir staved off bankruptcy but was grounded by the Federal Aviation Administration.

According to today's WSJ report, the wife of a Galen employee in the Washington area says that she and her husband were reimbursed by him for a campaign donation made to the Clinton campaign, a charge that Danielczyk flatly denies.

Federal law prohibits anyone from being reimbursed for campaign contributions because that would allow individuals to circumvent rules that limit donations to $4,600 per person. The practice of "bundling" contributions has been under scrutiny recently amid controversy over the activities of Democratic fundraiser Norman Hsu on behalf of Clinton.

Bundling occurs when an individual raises money from friends, family, and others and then delivers the checks to a political campaign in bulk. While the individual has only given the maximum of $4,600 allowed by law, in the eyes of the campaign they are credited with having raised much more. The practice is bipartisan and was arguably most effectively employed by the 2000 campaign of President George W. Bush.

FractionAir was the subject of a NashvillePost.com investigative report last year after the company nearly went into bankruptcy. Clement was involved with FractionAir until late 2005. An aide at the time said he left because he didn't agree with the company's direction. Former employees say Clement had turned a blind eye to the company's mounting troubles under Danielczyk.

FractionAir owners sued. After some contentious discussions, Galen infused capital into the company to pay off owners, former employees and vendors — some fully, others partially and some not at all.

Prior to FractionAir, Danielczyk took Reli-Communications Inc. into bankruptcy (a copy of the filing is available at this link) in addition to Independent Telephone Services (a copy of the filing available at this link.)

The Reli-Communications bankruptcy resulted in a class-action lawsuit. Investors sued Danielczyk and two other company executives, R. Paul Gray and Eugene R. Biagi. The lawsuit seized on the three's claim, in making their pitch to potential investors, that they had successfully run two healthcare companies MilleniumHealth and Ambulatory Healthcare.

The lawsuit (a copy available at this link) stated that those successes were fabrications. "In truth, both companies were financial disasters by the time the defendants finished running them into the ground," stated the lawsuit, which was later settled.

Danielczyk has devoted a page of Galen's website to discussing unspecified “past business experiences” in his career. It reads in part:

"I have been able to apply my own personal experiences of successes and failures in business over the years which can be a great asset to companies. I have never shied away from my past and have been fortunate to be given other chances in my career. I am most proud of the fact that Galen has stepped up to assist clients by even infusing their own capital, which other firms would have not done."