The Oregonian

The power broker

Neil Goldschmidt's latest ventures continue his Oregon legacy

11/21/03

JEFF MAPES, GORDON OLIVER and SCOTT LEARN

In just five days, Neil Goldschmidt has cemented his role as the state's most important power broker by taking on two new roles that could shape Oregon's economy for years to come.

Goldschmidt is poised to take over the chairmanship of one of the state's most powerful businesses -- Portland General Electric -- at the same time that he's been tapped to lead an overhaul of the state's higher education system.

The pending utility deal, announced Tuesday, could put Goldschmidt at the helm of a company that plays a big role in shaping not only the state's economic development but also its backroom politics.

And his appointment last week by Gov. Ted Kulongoski to head the board of the higher education system gives him a central role in figuring out how to take the state's colleges and universities to a higher level.

The former Democratic governor and Portland mayor has never been far from power. Since leaving public office in 1991, Goldschmidt has repeatedly been at the center of important -- and for him, often lucrative -- battles at the intersection of private deal-making and public policy.

His access to the state's political and business leaders is already legendary and will likely grow if he becomes chairman of the state's largest utility as part of a buyout from bankrupt Enron.

His higher education portfolio adds to a list of charitable activities, profitable business opportunities and public-private economic development deals that are dizzying in their breadth and complexity.

More than once, from an 18th floor law and lobbying operation in downtown Portland's KOIN Center, Goldschmidt and his chief partner, Tom Imeson, have made deals that reshaped the face of the region. For example, working for Bechtel, the global construction company, Goldschmidt helped broker the construction of a light-rail line to Portland International Airport that was built at near-record speed and without any federal money in exchange for giving Bechtel development rights.

He started the volunteer reading program -- Start Making a Reader Today -- that has spread to 266 schools in 28 Oregon counties and is recognized nationally for helping young children learn to read.

Sometimes though, Goldschmidt mystified and angered many civic observers -- such as when he helped Weyerhaeuser in its hostile takeover of Willamette Industries, a move that stripped Portland of its last Fortune 500 company headquarters and led to job losses at mills.

A chart of his personal and business connections rivals the design of an electronic chip for complexity. His partner, Imeson, is a former PacifiCorp executive and one-time Mark O. Hatfield aide who served his own stint on the higher education board.

Goldschmidt's wife, Diana, is also a former PacifiCorp executive who is now on the Oregon Investment Council, which has $950 million invested with Texas Pacific Group, the firm seeking to buy PGE.

The current governor, Kulongoski, owes his own political resurrection to Goldschmidt. Left for politically dead after a landslide loss for governor in 1982, Kulongoski recovered when Goldschmidt put him in charge of the Department of Insurance and Finance in 1987.

To put it simply, said Gerry Frank, the former chief of staff to Hatfield and a statewide figure in his own right, "Neil Goldschmidt is unquestionably the most effective and powerful person in this state."

Goldschmidt may not be the physical whirlwind he was as mayor in the 1970s, but at age 63, the ideas still flow out of him at warp speed.

"He has an obsessive energy that doesn't seem to quit," said Gretchen Kafoury, a former city commissioner. "He throws out ideas, and half of them aren't worth considering. But he's a thinker and a doer, and he goes after things with a passion people don't see much anymore."

Colleagues say Goldschmidt can be alternately gruff and charming, and he isn't afraid to yell at clients when they don't see things his way. He's impressed by business success. He speaks in awe, for instance, of Nike founder Phil Knight, whom he worked for in the 1980s. "There's not a day when I worked there where I was smarter than he was."

Goldschmidt's role in PGE plan

It could take months before the courts and utility regulators decide whether to allow Texas Pacific to buy PGE from Enron for $2.35 billion.

Already, however, the scrutiny of Goldschmidt's role has started.

Is he simply a well-known Oregon face for a Texas firm that aims to make a quick financial killing? Is this really a better deal for ratepayers than having the city of Portland purchase the utility?

And what's in it for Goldschmidt? Is his participation about public service or making money?

"When am I doing evil?" he said with a laugh in an interview Thursday morning. "Why don't you just say it?"

Goldschmidt said Texas Pacific will pay his firm for work while the deal is still pending, but he doesn't know the amount yet. Portland developer Tom Walsh, the other local board member named by Pacific Group, said he refused compensation until a sale is approved.

Goldschmidt and Imeson said the money would replace income they are giving up because they have to drop one of their biggest clients, PacifiCorp, the state's other major private electric utility. Goldschmidt said he also would receive stock options.

Goldschmidt said Texas Pacific approached him two weeks ago to become chairman of a new company that would own PGE. He acknowledged that he doesn't have a detailed understanding of the finances. But he said he is convinced that Texas Pacific and its founder, David Bonderman, have the best chance to turn PGE back into a free-standing utility headquartered in Portland.

"I just want to end the Enron deal here," Goldschmidt said, "and I think this is the smartest and the best way to do it."

Goldschmidt is skeptical that PGE could be successfully converted to public ownership, a view he advanced in opposing the unsuccessful Multnomah County ballot measure to create a people's utility district.

Public-power advocates are livid about Goldschmidt. Since stepping down as governor, "he's been mostly a corporate henchman," said Bill Michtom, a member of the Oregon Public Power Coalition.

Portland Commissioner Erik Sten, who spearheaded the city's effort to look at buying PGE, said Goldschmidt showed no interest in Enron until "he had a stake in it."

"If this works out well and Texas Pacific is somebody we can really build a relationship with, then I think it will prove that the decision to bring in Neil was a good one," Sten said. "If they really are just trying to maximize the profit and get out fast, then it won't reflect real well on his quick decision to get in."

Recruiting Goldschmidt and Walsh makes it much harder for the city to consider condemning the utility. Walsh has been a Sten mentor, and Mayor Vera Katz respects Goldschmidt.

Goldschmidt said his duty on the board "is to make the business as successful as possible." At the same time, he said, his responsibility goes beyond investors to PGE's 755,000 customers. "The potential to help them or hurt them is huge."

Higher education board

Goldschmidt was also wooed -- this time by Kulongoski -- to take over the unpaid chairmanship of the higher education board. Kulongoski said Goldschmidt was the right person to pursue one of the governor's top goals: establishing a new method of financing that would ensure any qualified Oregon student could afford to go to college.

At first, Goldschmidt resisted, citing family obligations. Finally, he agreed after Kulongoski came over to his home in Portland's West Hills and personally pitched the idea to him and his wife.

During the past decade, Goldschmidt's name has popped up in one high-stakes battle after another. He helped Nike on international trade issues. He sought unsuccessfully to help Eugene lumberman Aaron Jones conduct a huge swap of private forest for federal timberlands. He worked for Blazers owner Paul Allen, Hyundai Semiconductor, the trade association of the airline industry and at least a couple of railroads.

One sign of his clout is his work for Saif, the state-owned company that provides workers' compensation insurance. Saif is embroiled in a battle with a competing insurer, Liberty Northwest, that would like to see Saif sold to the private sector.

Since the beginning of 1998, Goldschmidt's firm has been paid nearly $1 million to help Saif protect its status, according to documents obtained by John DiLorenzo, a lobbyist working with critics of Saif.

DiLorenzo notes with some awe that Goldschmidt's firm is now getting $20,000 a month from Saif while the firm is paying another lobbyist, Larry Campbell, $8,000 a month. But it is Campbell who is highly visible in the Capitol; DiLorenzo says he never sees Goldschmidt's fingerprints.

"It's got to be pretty high-level lobbying, like maybe with the governor," said DiLorenzo, "because I never see him lobbying."

Goldschmidt said much of his work involves advising Saif officials on strategic issues. He downplays the extent of his lobbying with legislators and the governor.

Perhaps Goldschmidt and Imeson's most controversial client was Weyerhaeuser of Federal Way, Wash., one of the world's largest wood-products firms. In late 2000, it launched a hostile takeover of Willamette, one of Oregon's most venerated companies. Immediately, business and political leaders received calls from Goldschmidt assuring them that the takeover would not hurt the state.

"It surprised me, for a guy who purports to do well for Oregon," said former Willamette Industries CEO Duane McDougall.

Goldschmidt and Imeson -- who has the firm's larger expertise on the timber industry -- insisted that Willamette faced an eventual takeover in any event, likely from a European company.

"There's absolutely no substance to that at all," said McDougall, insisting that Weyerhaeuser was the only real threat to Willamette's independence.

Whatever the case, Goldschmidt said he's quick to reject clients who make it sound "like it's just going to be a gold mine."

"Just because they want to hire his name," added Imeson, "we won't do it. We have to be comfortable with what it is that they're trying to achieve."

What's clear is that Goldschmidt loves the big deal, the broad stroke. He did when he was the mayor working on a flurry of projects that revitalized downtown and -- less successfully -- as governor when he was trying to get the state to adopt an ambitious "children's agenda."

More recently, he joined a fledgling campaign to expand the Park Blocks in downtown Portland and suggested adding retail and parking to the mix. Goldschmidt "has a passion about wanting Portland to be developed in his vision," said Jim Westwood, a Portland attorney who heads the Park Blocks Foundation.

"He has a lot of liberal values, but he's more of a developer," said Ernie Bonner, the city planning director when Goldschmidt was mayor. "He's more of a guy who wants to make things happen."

"People sometimes are surprised when they see him in situations where he is dealing with big money, where he's dealing with big investments," Bonner added. "I think that's not only where he's very good, but he's comfortable there. That's what he wants to do."

Len Bergstein, a veteran Portland political consultant, said Goldschmidt can tear apart a problem and figure out a new way to solve it. "He's always understood the limitations of the private and public sectors and constantly sought interactions where they make sense."

Often, said Bergstein, "it's a situation that's as ripe for conflict of interest as it was with Glenn Jackson," who was a legendary power broker in Oregon from the 1950s to the 1970s.

Jackson built PacifiCorp into a powerful company, owned a regional newspaper chain and chaired the Oregon highway commission. In his time, he was the go-to man for political candidates and anyone else looking to make something big happen in Oregon.

Goldschmidt initially brushed off the comparison to Jackson, but acknowledged that "I learned a lot from him."

One of the big lessons, Goldschmidt added, is that "it may actually be possible to do a lot of good as a private citizen."

Jeff Mapes: 503-221-8209; jeffmapes@news.oregonian.com