Friends in High Places

Schweitzer wins seat on board of company he intervened on behalf of during auto bailout

Former Montana Gov. Brian Schweitzer / AP
May 8, 2013

Former Montana Gov. Brian Schweitzer won a seat on the board of a major mining company on May 2 and will now benefit from a deal he brokered on behalf of the company as the state’s Democratic governor.

Schweitzer and a New York hedge fund won four of eights seats on the board of Stillwater Mining Co. last week, one of multiple companies in which Schweitzer personally invested after using his official position to advance their financial interests.

Critics say the deals raise questions about a potential abuse of power.

"Schweitzer is apparently quite a wheeler-dealer, and his business dealings merit further scrutiny," said Matthew Vadum, editor at the Capital Research Center.

Schweitzer is considering a run for the Senate seat being vacated by the retiring Sen. Max Baucus (D., Mont.).

"I think [Schweitzer’s critics] will use this if he does decide to run for higher office," predicted Steve Stanek, a financial expert at the Heartland Institute.

"I’d say he has looked for ways to enrich himself," Stanek said. "It would certainly not be the first time that someone in office has done that."

Schweitzer has been mentioned as a potential dark horse presidential candidate.

Political observers say Schweitzer’s populist credentials could be an asset in a presidential run. Those credentials were on full display in 2009, when he exercised his sway as governor to preserve a lucrative contract for Stillwater.

As the federal government bailed out General Motors (GM) in July 2009, the automotive company announced that it would kill a contract with Stillwater for palladium and platinum in favor of cheaper foreign sources.

The GM contract was important to Stillwater’s financial success, since the "overwhelming majority" of platinum and palladium produced by the company was used in automotive catalytic converters, according to the Associated Press.

"GM officials made it clear they are not interested in reconsidering the terminated supply contract," Stillwater said in a news release at the time.

Schweitzer was enraged.

"Damn right, I'm mad," he said. "They reached into my pocket [via the bailout] so they can stay in business and then they take actions to put Montanans out of business."

Schweitzer even said he would stop driving his Chevy pickup truck in protest.

He sent letters to then-Treasury Secretary Timothy Geithner and chief White House economist Larry Summers, who co-chaired the administration’s automotive task force, expressing his displeasure at GM’s decision.

GM renewed its Stillwater contract the following year.

Within two months of leaving the governor’s mansion, Schweitzer purchased 25,000 shares of Stillwater stock. He later joined the hostile takeover attempt of the New York hedge fund the Clinton Group. The hedge fund did not respond to a request for comment by press time.

Stillwater executives see opportunism in Schweitzer’s attempt to take over the company.

"We’re going to have a higher share price, and these guys see that and on the cheap they want to take control of a company as well-positioned as we are," CEO Frank McAllister told the Associated Press.

Montana political experts say Schweitzer’s investment in a company whose interests he advanced as governor reflects his leadership style.

"Schweitzer ruled Montana’s state bureaucracy and political class with an iron fist during his tenure as governor," said Carl Graham, CEO of the Montana Policy Institute.

"His reputation among insiders for rewarding friends and punishing enemies rivaled that of the Copper Barons in Montana’s history books," Graham said.

Just as the populist appeal of Schweitzer’s work on Stillwater’s behalf obscures perceptions of cronyism, his advocacy for the wildly popular Keystone XL Pipeline involved a deal that enriched a company in which Schweitzer subsequently invested.

Schweitzer said he spent 18 months of his governorship convincing TransCanada, the company building the pipeline, to build an "on-ramp" to the pipeline in Montana.

The goal was to enable Montana oil producers, many of which draw crude oil from the Bakken shale formation, which sits below Montana and North Dakota, to cheaply ship oil to refineries and export terminals.

The president of Oklahoma-based Continental Resources, which owns more North Dakota drilling acreage than any other oil company, met with TransCanada in 2008. Continental CEO Harold Hamm said "they weren't interested" in hauling Bakken oil via the pipeline.

That all changed after Schweitzer went to bat on Continental’s behalf. He threatened to tie up the pipeline, which was slated to run through Montana, in red tape.

"I said, ‘Tell you what I’ll do to TransCanada. I’ll tie one leg up there, and they’ll start listening,’" Schweitzer told the Washington Post. "That’s exactly what I did."

"Guess what, the next thing we know we're having a meeting," Hamm said. "TransCanada, producers, [Schweitzer] was present, as was the governor of North Dakota. And TransCanada felt that an on-ramp seemed pretty feasible. It's amazing how some of those things come about."

Schweitzer personally brokered the meeting that resulted in an agreement between TransCanada and Bakken producers, according to TransCanada CEO Russ Girling.

"The spark was the governor," Girling told the Post. "He said: 'I can see growth and a pipeline coming through my back yard. You, TransCanada, and producers have to get together.' He pushed it, and we're all glad he did."

Hamm called Schweitzer his "new best friend." The Bakken on-ramp was officially announced in September 2010.

At some point between December 2010 and December 2012, Schweitzer bought stock in Continental Resources, according to biennial financial disclosure forms filed with the Montana Commission on Political Practices.

Schweitzer did not return requests for clarification on when he bought the stock or how much he owns. Continental also did not respond to a comment request.