The GOP’s Judd Matheny: Lobbyist for Hire
From Sunday’s Tennessean: When executives at 3D Financial wanted to keep their line of work, offering high-interest loans to the down-and-out, free from additional state regulations, they went to their local legislator. State Rep. Judd Matheny showed them how it’s done. Matheny, a Republican from Tullahoma, instructed the company in the art of what he termed the “pre-emptive strike:” Make strategic campaign contributions, targeting key committee members and legislative leaders.
Indeed, last month, as lawmakers prepared to reconvene to impose ethics reform in the wake of Operation Tennessee Waltz, Matheny assisted the firm’s political action committee as they spread more than $20,000 to dozens of state legislators. The second-term House member even wrote a cover letter to accompany the checks, typed on his campaign stationery, touting the company and its effort to be “quite pro-active” in the General Assembly.
Matheny said he is merely performing work for his constituent, a title loan company. Some of his colleagues aren’t convinced.
“I was so astounded, I can’t tell you,” said Sen. Rosalind Kurita, D-Clarksville, who received a $500 check from the firm, as well as letters from Matheny and 3D Financial included in a single package mailed to her home. “It is inappropriate, it is strange, it is offensive.” She said she returned the check.
Most legislators interviewed for this story said it was rare for a lawmaker to have such a personal role in directing PAC money controlled by a private business to legislators. “I’ve never seen that,” said Rep. Rob Briley, D-Nashville. “How bizarre.”
And House Minority Leader Bill Dunn, R-Knoxville, appeared uncomfortable talking about Matheny’s role in distributing the PAC cash. How lawmakers raise money “depends on the representative or senator,” he said.
Some on Capitol Hill believe Matheny is coming perilously close to violating a law passed last year that forbids lawmakers from being paid as consultants for companies with business before the state. One week before the 3D campaign contributions were mailed, Matheny himself received a $5,000 contribution from the company, campaign disclosure records show.
And in addition to instructing 3D where to target campaign contributions, Matheny also advised it on which lobbyists to hire. Taking his advice, 3D last year became a client of Smith Johnson & Carr, one of the top lobbying firms on Capitol Hill. The company issued a statement that its contributions were legal.
Others say Matheny’s actions handicap efforts to ratchet down the influence of money on the political process in the wake of Operation Tennessee Waltz, an FBI bribery sting in which lawmakers were charged with taking cash in return for pledges to support bills.
Legislators have been in Nashville since Jan. 10 in a special session devoted entirely to crafting ethics laws. The bulk of the Matheny-directed contributions were mailed Dec. 20, just weeks after a bipartisan House and Senate ethics panel hammered out a compromise ethics bill and as many lawmakers were writing amendments that are now under discussion.
Title lending, one of 3D’s businesses, has always been controversial. Critics say it forces the poor to exchange the title to their car to get a loan, often at interest rates much higher than those of bank loans. If the car owner can’t pay back the loan, the company seizes the car.
Defenders of the practice say that the title loan companies are lenders of last resort. Banks wouldn’t touch folks who have only a car to their name and might need $200 or $300 to pay an emergency bill.
3D Financial officers sought to head off additional regulation by enlisting Matheny, making themselves available to lawmakers and sending the wave of campaign contributions last month. “That’s why I think this is a pre-emptive strike,” Matheny said last week. “In fact, I know it is, from my conversations with them, to regulate the industry fairly, instead of something that comes in that puts the industry out of business.”
Ed Davenport of Tullahoma and his family, who own 3D Financial, approached Matheny in the late summer of 2004, concerned about the effects a recent wave of negative publicity might have on the industry. Just months before, people in Memphis complained that a title loan company there was charging interest rates reaching 264%. Reports about it in The Commercial Appeal newspaper sparked legislative hearings and the creation of a legislative committee on predatory lending. 3D is in favor of regulation, Matheny explained, but wanted to “make sure there’s not an attempt by any entity to misrepresent what they’re trying to do.”
The representative introduced 3D officials not only to lobbyists, but also to Rep. Charles Curtiss, D-Sparta, a legislator who could successfully sponsor a bill on behalf of 3D and other title loan companies. By the end of the 2005 legislative session, the title loan companies could declare at least a partial victory. “They didn’t get everything they wanted,” Matheny said.
New laws would force upon them additional fees, and they would be overseen by the state Department of Financial Institutions instead of being regulated by their local county governments. But the new laws did not address the triple-digit interest rates that burden borrowers who put their car titles on the line.
Because of that, groups such as the Memphis-Shelby Anti-Predatory Lending Coalition and the NAACP have said they want regulation to crack down further. In addition, agents with the Department of Financial Institutions are due to release a report on the industry Feb. 1 that could spark additional regulation.
With more government oversight on the horizon, 3D asked Matheny what to do for the 2006 legislative session. “I told them, ‘Your bills would go through the commerce committee,’ and that I would put my efforts on members of the Commerce Committee in the House and the Senate,” he said.
Matheny helped aim 3D Financial campaign contributions at nearly three dozen lawmakers in the recent wave of campaign contributions. Among the recipients of the campaign cash in the recent mass mailing were the chairmen and vice-chairmen of the House and Senate Commerce committees, where Matheny said title loan legislation would first be heard. They got $1,000 each. Other Commerce Committee members received $500 checks, and the Democratic and Republican caucus funds each got $2,500.
The head of House Ways and Means, Rep. Craig Fitzhugh, was also a co-chairman of the predatory lending committee. He got $500. “I don’t know who they are,” Fitzhugh said last week of 3D, “but it gave it a little air of credibility because it came from another legislator.”
Matheny said he is not doing anything more than acting on behalf of a constituent. He knows the owners of 3D Financial because his daughter goes to school with one of the Davenport children, he said. “My constituent asked me a question, and I told them what to do,” he said, explaining why he directed 3D to contribution targets and a lobbyist. “That’s what they asked me about, and that’s what I told them.”
3D officials said they would only respond to questions faxed to them. The Tennessean faxed a page of questions about Matheny, their lobbying efforts on Capitol Hill and their campaign contributions. The written reply from 3D Chief Executive Officer Mildred Fletcher read: “In response to your questions, we at 3D Financial PAC actively exercise our rights under current Tennessee law to contribute to the campaigns of those legislators, irrespective of party affiliations, whom we feel best to represent the citizens of the great state of Tennessee.”
3D Financial will be a presence on Capitol Hill, Matheny said. “They just want to be involved with the discussion,” Matheny said. “They feel they have taken a very high ground, and they want to keep it there.” Only one thing is missing for 3D Financial in 2006. It does not have a lobbyist. The contract 3D had with Smith, Johnson & Carr had run out Oct. 17. “They didn’t feel they needed a lobbyist for next year,” Smith, Johnson & Carr’s Bo Johnson said.
