The Insolence of Office from Born to Run (The Life & Times of Bob Kerrey) Chapter 8

July 6, 2012

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Bob Kerrey’s mettle was severely tested not quite one year into his governorship. In November, 1983, the state’s largest industrial savings & loan was closed by Nebraska’s banking commission. Devastated depositors, many of whom swore they were led to believe their money was safe, lost $67 million dollars. They learned too late that their money wasn’t covered by Nebraska or federal agencies.

The Commonwealth Company, a family-owned savings and loan, was chartered by the state but was not subject to the regulations that governed other S&L’s. Since the 1930’s, the company had been owned and operated by the Copples, a prominent Lincoln family. Always regarded as stable, Commonwealth provided loans to thousands of middle-income people in the Lincoln area. In the 1960’s, the Copples’ reputation was assured when they completed the development of Capitol Beach, which transformed a salt swamp west of Lincoln into a lake surrounded by hundreds of nice homes. (Bob Kerrey’s parents moved there in the early seventies.)

In 1983, at age 86, E.J. Copple, the chairman of the board, was still active in the business. He and his son, Marvin, then in his late fifties, had pursued an aggressive marketing campaign for more deposits. Their approach was theoretically sound, given the continued appreciation of real estate in Nebraska since the 1940s. The Copples advertised that they would pay interest one-half to one point above the local market rate. Depositors flocked to their windows, and in ten years Commonwealth deposits had increased from $7 million to $67 million. Uninhibited by regulations, the Copples started making high-risk loans on land that might turn into residential developments or shopping centers. But a statewide drop in real-estate prices ensued, and before long Commonwealth’s actual worth was about one-tenth of the book value – the value being presented to depositors and state investigators. During the same period, Marvin Copple began loaning money to a brother and a brother-in-law who operated another financial institution in Nebraska.

Until the three Copples and the brother-in-law were sent to the Nebraska penitentiary, they enjoyed a life-style that was foreign to Lincoln’s families of quiet wealth.

Prior to 1983, many Lincolnites possessed a certain awe, if not reluctant appreciation, of the Copples and their free-spending ways. One of them was then-Attorney General Paul Douglas, who had been elected easily to a second term in 1982, the year Bob Kerrey was elected Nebraska governor. Douglas was undoubtedly the state’s most popular Republican, and the consensus at the time was that he eventually would be Governor himself or a U.S. Senator from Nebraska.

A barrel-chested, Greek-American bachelor with a wide smile and an engaging personality, Douglas began doing business with the Copples in the late seventies after socializing with them for a while. Douglas and a partner borrowed money from the Copples for investment in a residential development; later, on several occasions, Douglas took title briefly to residential lots as a straw man and then transferred them to someone in the Copple organization, the result being inflated property values and profit to Douglas. Although these transactions had little effect on the fall of Commonwealth, the press and the public perceived Paul Douglas as a principal player. Douglas, who had long nourished an image of worldliness and shrewdness, was called before a legislative committee to testify. Embarrassed by the fact that he had been seduced into the Copples’ scheme, and that he had exhibited major lapses of judgment (he was, after all, the state’s Attorney General while making deals with the Copples), Douglas hedged to the committee. In January 1985, Douglas was convicted of perjury. Although his conviction was ultimately reversed by the Nebraska Supreme Court, state law required that he resign. In Nebraska, when a constitutional official has to leave office, the governor must choose a replacement to complete the term.

Kerrey’s response to this duty was an indicator that he was not a traditional politician – that he was either a maverick or a potential statesman – or both. He appointed a prominent Omaha Republican, attorney Robert Spire. Spire had never been involved in politics, and only agreed to serve at Kerrey’s request.

When Spire was summoned to the governor’s office, he assumed Kerrey wanted his opinion on some of the leading Democratic contenders since he was familiar with most of the state’s legal community. Not long into the interview, however, Kerrey informed Spire that he wanted him as attorney general. A shocked Spire replied that he was a Republican, to which Kerrey repeated his offer. “I don’t care,” Kerrey said. “I want you.” Spire considered it for several days, then accepted.

Many Nebraska Democrats were furious. Republicans had had a lock on the office of attorney general for fifty years; now, because of a completely unexpected turn of events, the office opens up, and yet another Republican gets the nod. Kerrey was told it would be political suicide for a neophyte governor to make such a major appointment outside the party. Republicans were baffled – but naturally pleased – and some Democrats were impressed; still, doctrinaire Democrats wondered, “Who the hell does this guy think he is?”

DiAnna Schimek had recently been appointed Democratic state party chairman, and along with then-State Senator David Newell and activist Charles (Chuck) Pallesen, called for a meeting with Kerrey to discuss the Spire appointment. “Dave Newell and I both flew into a rage,” recalled Schimek, who met the governor at the state party headquarters in Lincoln.

“We had a real good thrashing out of the whole issue. Dave and I both made public statements criticizing the decision. For me, at least, it wasn’t anything against Bob Spire. I felt that when you worked your heart out for somebody of your party to become governor, then it seemed to me that you ought to expect at least some appointments, some major ones, if they come up.”

One Nebraska writer recalls being in Kerrey’s office when a group was discussing the appointment. Someone said, “Bob, you know the institutional Democrats, the machine Democrats, will really be pissed off,” and Kerrey responded, “Okay.”

“Okay, you’ll appoint a Democrat?” he asked with a hint of hope.

And Kerrey said, “No, it’s okay if they’re pissed off. Tell them I said, ‘Be pissed off.'”

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