American Crossroads' "Driver Error" Attack Collides Head-On With Facts

October 06, 2010 5:19 pm ET

In a new ad attacking Alexi Giannoulias, Illinois State Treasurer and Democratic candidate for Illinois' open Senate seat, American Crossroads plays fast and loose with the facts. In addition to making misleading claims about Giannoulias' role with his family's Broadway Bank and his oversight of the state's college investment plan, the ad misuses a quotation from a newspaper article and falsely suggests that Giannoulias used $26,000 in taxpayer money to fund the purchase of an SUV.  In reality, Giannoulias played a limited role in Broadway Bank's failure, and the state's college investment plan lost money when a bond fund went awry. Additionally, the quotation from a newspaper article the ad uses was in reference to the bond fund's managers, not Giannoulias, and the SUV he drove was used as his Illinois state vehicle and was not paid for with taxpayer money.

American Crossroads: "Driver Error"

Alexi Giannoulias is quite a driver. He helped drive his family's Broadway Bank into a ditch. Now as Treasurer and head of the Bright Start College Savings fund, Alexi fell asleep at the wheel. Under Giannoulias Illinois families lost $150 million they had saved to pay for college. But spent $26 thousand in Bright Start funds to buy an SUV. It's clear - friends don't let friends vote Alexi.

The SUV Was Used As Giannoulias' State Vehicle And Was Not Paid For With Taxpayer Funds

The SUV Purchased By Giannoulias' Office Was Used As His Illinois State Vehicle And Was Not Paid For With Taxpayer Money. According to the Chicago Tribune:

Scott Burnham said the SUV is not exclusively driven by Giannoulias but is part of a pool of a dozen cars used by workers to travel the state promoting treasurer's office programs, including Bright Start.

"They use it just like any vehicle is used by the entire staff," Burnham said. "Bright Start is a large part of the treasurer's office, and marketing the program and Illinois residents is critical."

[...]

Though the SUV is registered to Illinois license plate No. 6, Burnham said there are three such vehicles with that plate and that Giannoulias drives all of them, plus his personal car, which also is a Ford Escape Hybrid.

Giannoulias' office bought the Ford Escape in October 2007, according to state records obtained by the Tribune.

An identical car was purchased at the same time with funds from the Illinois Public Treasurers' Investment Pool, which allows towns and other taxing districts to pool their assets and have them invested by the treasurer's office.

Burnham said it is Giannoulias' discretion how operating money for the office's various funds are spent. He noted that the money for the SUV didn't come from parents' investments, but from a fee the firm that handles the investments pays to the treasurer's office to offset the cost of running the program.

"All of the funds pick up a portion of the expenses of the treasurer's office," Burnham said. "But we're not talking about taxpayer dollars here." [Chicago Tribune, 5/4/09, emphasis added]

Giannoulias Played A Limited Role In Broadway Bank's Failure

Giannoulias Wasn't Even At Broadway Bank When More Than 90% Of Its Failed Loans Were Made. According to Factcheck.org: "Giannoulias was fresh out of law school when he joined the family business, and says his role in the bank's failure was limited. Both he and the bank have said that only 9 percent of the nonperforming loans held by Broadway at the beginning of 2010 were made during his time at the bank. Furthermore, not all of those were approved by him. He has said that he takes his "share of the responsibility for mistakes that were made ... in investing too heavily in commercial real estate and not diversifying into other sectors." He denied that the loans were "reckless or risky," though. [FactCheck.org, 10/1/10]

  • Since The Beginning Of 2009, More Than 200 Community Banks Have Failed Because Of The Economic Downturn. According to FactCheck.org: "It's also true, asGiannoulias points outon his website, that more than 200community banks have failedsince the beginning of 2009, and theshutterings continue, because of the economy's downturn and particularly the collapse of the real estate market. Unfortunately, Broadway has lots of company." [FactCheck.org, 10/1/10]

The Words "Fell Asleep At The Wheel" Were Used In Reference To OppenheimerFunds, Not Giannoulias

The Words "Fell Asleep At The Wheel" Were Used In Reference To The Core Bond Fund's Managers, Not Giannoulias. According to FactCheck.org:

The ad charges that Giannoulias, who is state treasurer, "fell asleep at the wheel" while overseeing the Illinois Bright Start 529 college investment plan. On screen there's a mock highway sign with the quote "bad investment choices...leading to outsized losses" and a citation to the Chicago Sun-Times. It's a reference to losses in one of the funds the plan owns, the Oppenheimer Core Bond fund, in 2008.

The words in the ad indeed appeared in a Chicago Sun-Times story last year. But they were used in reference to the Core Bond fund's managers, not to Giannoulias. Those managers, as the Morningstar investment research firm put it, "gained exposure to the battered commercial mortgage-backed securities market through derivatives that had a leveraging effect on the fund, amplifying losses." Remember credit default swaps?

And a Giannoulias spokesman said that Illinois was the first state to notice problems with the fund and investigate. Of the approximately $150 million of investors' money that was lost in the Core fund (one of 21 funds owned by Bright Start, which is a $2 billion program), Giannoulias reached a settlement with Oppenheimer to recover $77 million. [FactCheck.org, 10/1/10, emphasis added]

  • $150 Million Of Investor's Money Was Lost When Oppenheimer's Core Bond Fund Went South. According to FactCheck.org: "Here's what happened: the Bright Start 529 plan is managed by OppenheimerFunds, as are those of several other states. Oppenheimer put some of the money that individuals had invested in the 529s into its own Core Bond fund. Bond funds are normally prudent and relatively safe investments. But in this case, things went wrong.... Core Bond was just one of 21 funds that Bright Start owned, so most of the money in the 529 was not affected." [FactCheck.org, 7/9/10]
  • Giannoulias Reached A Settlement With Oppenheimer To Recover $77 Million Of The Investors' Money. As reported by the Chicago Tribune: "The $77 million settlement with OppenheimerFunds Inc., announced Tuesday by Treasurer Alexi Giannoulias and state Attorney General Lisa Madigan, would partially reimburse about 65,000 account holders." [Chicago Tribune, 12/23/09]
  • Republican Mark Kirk, Giannoulias' Opponent, Initially Blamed Oppenheimer — Not Giannoulias — For The Fund Going Awry. The Chicago Tribune reported: "But rather than criticize the first-term Democratic state treasurer, Kirk went after 'a state bureaucrat that has a bad record.' Asked by a reporter who that bureaucrat was, Kirk replied it was the person who ran the Oppenheimer 'core plus' fund-who is not a state employee. That's the argument that Giannoulias has been making in trying to recover the funds." [Chicago Tribune, 10/12/09]
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