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Federal investigators are trailing both Virginia Gov. Bob McDonnell and the major party candidates looking to succeed him. McDonnell is in the midst of a probe into his relationship with a prominent Virginia businessman who provided gifts to the first family — an investigation that’s also affecting Republican gubernatorial candidate, and current attorney general, Ken Cuccinelli. Meanwhile, authorities are looking into legality of foreign investments in an electric car company formerly owned by Democratic gubernatorial candidate Terry McAuliffe. We get insight into what these investigations mean for the current and future leadership of the Old Dominion.
- Robert Holsworth political analyst with VirginiaToday.com; and former Dean of Virginia Commonwealth University's School of Government and Public Affairs
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, from office democracies to workplace dictatorships, business coach Howard Ross is here to explore how management styles affect our jobs and how we do them. But first, how federal probes are threatening both Virginia's current leader and those looking to replace him. Governor Bob McDonald is facing trouble on multiple fronts as he continues to fight off probes into gifts he and his family accepted from a prominent Virginia businessman.
MR. KOJO NNAMDIReports surfaced this weekend that the businessman in the center of the investigation, Johnny Williams, has been cooperating with authorities for months. Gifts that Williams provided to Republican gubernatorial candidate Ken Cuccinelli, meanwhile, are making life difficult for his campaign, but federal authorities are also looking into a car company formerly owned by his Democratic opponent, Terry McAuliffe, and how it solicited foreign investors. Joining us to sort through it all and what it means for a state holding a nationally relevant gubernatorial election this fall, is Bob Holsworth, political analyst with Virginiatoday.com and former Dean of Virginia Commonwealth University School of Government and Public Affairs. Bob Holsworth, thank you for joining us.
MR. ROBERT HOLSWORTHKojo.
NNAMDIBob, when we began the year, the biggest questions about Bob McDonnell's potential legacy revolved around whether he could pass a transportation bill in his final legislative session as Governor. Now he's facing a federal investigation, and it's being reported that one of the biggest figures in that federal investigation has been talking to the feds. I love the phrase "talking to the feds" when what we all want to know is what has he been saying. From what you can tell, Bob, what do you think Bob McDonnell is up against here?
HOLSWORTHWell, clearly, the federal investigators, right now, are really looking to see whether there's been a (unintelligible) violation, whether there was some quid pro quo for all the gifts and loans that Johnny Williams provided both the Governor and his family over the past couple of years. Now, I think, perhaps one of the most disturbing comments that you saw in this kind of a sign for the Governor in the last report by the Washington Post was the Governor himself now describes Johnny Williams as someone who I thought was my friend, who had been a friend, but clearly they are in an adversarial situation right now with respect to this investigation.
HOLSWORTHAnd the Governor obviously has to be on tenterhooks wondering whether or not the federal investigators will see some kind of federal transgression here. The Governor has already said that he embarrassed himself and embarrassed the state by what he did, but he has claimed, up to this point, that he violated no Virginia law because, in fact, the Virginia laws are extraordinarily weak and lax in this respect. So, he says that there is nothing in Virginia to charge him about and we'll have to see whether this probe by the FBI and the U.S. Department of Justice and U.S. attorney here in Virginia come up and actually say there was some quid pro quo implied or promised in these transactions between Johnny Williams and Governor McDonnell.
NNAMDIThere's the Virginia laws and then there's what's known as the Virginia Way, a concept that people like to talk to about in the Commonwealth when they talk about bipartisanship and civility. How do you think the scandals dogging McDonnell are shaping an outsider's view of what the Virginia Way might mean today?
HOLSWORTHWell, it's certainly shaping it pretty significantly, Kojo, because for many years, Virginia has argued that we've been immune to the kind of corruption and influence peddling that we have seen, sometimes, in other states. We've seen Governors in Maryland go to jail, Illinois. We've all seen kinds of local officials in states like my home state of New Jersey go to jail, and Virginia has always said that our system works far better. But last year, you might recall, there was a watchdog group up in D.C. that essentially said Virginia was vulnerable to corruption because of the fact that we didn't have the appropriate safeguards and regulations in place.
HOLSWORTHAnd this scandal is just going to give more fuel to that fire.
NNAMDIWe're talking with Bob Holsworth. He is a political analyst with virginiatoday.com and former Dean of Virginia Commonwealth University School of Government and Public Affairs. We're talking about the investigation surrounding the current Governor and both of the contenders for his position. If you have a question or comment, give us a call at 800-433-8850 or send email to firstname.lastname@example.org. You can send us a tweet at kojoshow. Bob Holsworth, do you think lawmakers in Virginia are now locked into a position where they will have to tackle ethics legislation next year? Part of how we got here is that Governor McDonnell did not disclose gifts given to his family at first because, well, he wasn't required to do so by law.
HOLSWORTHWell, I think, certainly, we're going to see a whole host of ethics legislation next year, and I think we're going to see a lot of legislators jockeying to become the ethics person in Virginia because they're going to see this as something that's both necessary and required. They're certainly going to do it in terms of statewide office holders. I have no doubt we're going to see stricter regulations there. I presume they're also going to do it about administration officials, because we also have questions now circulating about certain agencies that may have taken gifts by people who work with them, as well.
HOLSWORTHSo, we're going to see that, and I think the open question is how strongly and strictly legislators apply the rules, that they are to apply to statewide officials, to themselves.
NNAMDIKen Cuccinelli, the Republican candidate who wants to replace McDonnell, also has received gifts from Williams in the past. To what degree is this McDonnell scandal affecting Cuccinelli's campaign, in your view?
HOLSWORTHWell, I think it's affected the Cuccinelli campaign significantly in a couple of ways. First, it is really simply dominated all of the attention that we've paid, in Virginia, to politics over the last couple of months. The reality is there is not much focus on this election yet, because everyone is really talking about the scandal. Secondly, I think what harms Cuccinelli, potentially more drastically, is that he had hoped that this campaign would be one where he could successfully question the ethics and business dealings of the Democratic nominee, Terry McAuliffe. Certainly, he believes he got a boost with the announcement that there's an SEC investigation of the company that McAuliffe used to chair called Greentech. That was announced last week. But, up until now, what has happened is that Cuccinelli, at least, until last week, had been on the defensive because of the fact that he had accepted about 18,000 dollars worth of gifts from Johnny Williams, as well.
HOLSWORTHAnd he himself had not disclosed all of those gifts. He continues to say that he won't return them because there are some gifts, such as a Thanksgiving dinner, where he says you can't unring that bell. But, overall, this still is not a good situation for Ken Cuccinelli, and particularly, what the Republicans are most worried about would be that the prosecutors, in some ways, continue to look at what's going on and don't make an announcement about a possible indictment, perhaps, until October. That would be the kind of October surprise that Ken Cuccinelli and the Republicans would not like to have here in Virginia, Kojo.
NNAMDILet's talk about the federal investigation involving the Democratic candidate Terry McAuliffe over how his former car company attracted foreign investors. Republicans were already eager to bring up that company, Greentech, which once located a plant in Mississippi instead of in Virginia. Anyway, what do they have here now that news of this probe McAuliffe has broken?
HOLSWORTHWell, I think we're going to see the Republicans and particularly outside sources who are supporting Republicans run ad after ad here in Virginia criticizing McAuliffe. They were going to do so long before this investigation came public, largely because they think that the whole operation was premised on the belief that you could sell, you could gain foreign investors by selling these visas which would require a 500,000 dollar investment by a foreign investor in this plant. McAuliffe tried to locate it in Virginia, but the Virginia economic development authority folks essentially said that they wouldn't do so because they couldn't see the efficacy of the business model that was being presented to them.
HOLSWORTHSo then it went to Mississippi and we've already seen any number of stories suggesting that the plant has not achieved what it set out to do. It really hasn't built many cars at all. Now we have this federal investigation, and what the federal investigation is focusing on, apparently, is not the fact that we had this visa investment recovery zone because they're legal and in fact encouraged under a federal program. But what they're arguing is that Greentech may potentially have defrauded investors by suggesting that they would not only get a visa but that, in some ways, their half a million dollar investment would be guaranteed.
HOLSWORTHNow, we have only read stories about that. We haven't heard from the SEC. McAuliffe essentially says that his company is cooperating and he thinks at the day they'll be cleared, but the fact that this is going on is certainly not good news for Terry McAuliffe, particularly at a time where the Democrats have been crowing, you might say, and privately smiling about the continuing investigation into Governor McDonnell.
NNAMDILet me see if that answers Stephanie's question in Washington, D.C. Stephanie, you're on the air. Go ahead, please.
STEPHANIEYes, hi. My question is, basically concerns the investigation regarding the foreign investments issue.
STEPHANIEAnd I guess I was just trying to determine what is it, exactly, that would violate the law, or why is it a violation of the law to seek foreign investments when probably any of us who have, for example, you know, investment funds in our portfolios, we invest in foreign companies. And many companies have investments...
NNAMDIWell, if you heard Bob Holsworth, he was saying that what the federal investigators are looking at is whether or not this company offered a guarantee to foreign investors, that they would get their 500,000 dollar investment back. But Bob, from what I'm reading, this visa program has also some national security implications because some lawmakers are worried that suspect individuals might have been using it to gain entry to the country. Do you know if that's a part of the investigation of Greentech?
HOLSWORTHWell, that could be part of the investigation, but I think that would actually speak more to the program itself than to what Greentech has done. But, clearly there are people who are not in favor of this visa investment program, who have raised the issue that people who we would not want in this country, for national security reasons, could potentially get a visa here, largely by investing in one of these visa investment zones. That in itself, I don't think, would be a violation by Greentech. It could be a potential fault with the program. What they're looking at with Greentech and some of these other companies that have been involved in using this visa investment opportunity, you might say, is whether or not they defrauded these foreign investors in the claims they made just as if a company defrauded an investor in this country.
HOLSWORTHSo, as the caller says, there's absolutely nothing wrong with seeking foreign investment. We do that all the time. This program might be a controversial program, but at least, at the moment, it's certainly perfectly legal. The question is whether the claims they made to attract these investors were claims that you could make under the law here.
NNAMDIStephanie, thank you very much for your call. Bob, do you see this story affecting the willingness of other prominent Democrats to go to bat for McAuliffe in this race? It's always been assumed that one of his greatest strengths would be his rolodex, his ability to raise money and get exciting people within his party to go to bat for him on the campaign trail.
HOLSWORTHWell, at least up until now, Terry McAuliffe has raised far more money than Ken Cuccinelli, been very effective at that. My assumption is that he will still remain relatively effective. We'll have to see whether this has an effect at the margins in raising money from other national figures. The big issue here, I think, comes in front of what this means for his relationship with the Clintons. And we're reading this in a very interesting way right now because on one hand, Bill Clinton has already given 100,000 dollars to the campaign, has been present at fundraisers for Terry McAuliffe. What will Hillary Clinton do here?
HOLSWORTHWill Hillary Clinton decide that she wants to link herself to McAuliffe or will she see that as maybe, if not at least a liability, a potential question mark in this regard. And then finally, I think we need to note that there is a Clinton connection to the Greentech company in that...
NNAMDIHer brother. Hillary Clinton's brother. Yes.
HOLSWORTHYeah, one of the companies that has been helping to raise money for Greentech is very prominent, has a very prominent position for Hillary Clinton's brother. So, my sense is that the Republicans are going to be digging and digging into this, not only because of what it means for the Virginia election, but because of what it might mean, in their mind, for the potential of tarnishing Hillary Clinton in 2016. And so this issue has far more implications, I think, than anyone has completely fleshed out so far, Kojo.
NNAMDIHere's Irene in Bethesda, Maryland. Irene, you're on the air. Go ahead, please.
IRENEHi Kojo. Nobody's talked about, what about the federal income tax implication of gifts? My understanding is if someone receives something more than 13,000 dollars, they need to declare it. So the Governor, his wife, his daughter, all received items worth more than 13,000 dollars. Why aren't they being investigated for income tax evasion? Likewise, Cuccinelli talks about well, I can't turn back the clock. Okay, you received something of value, you shouldn't have taken it, pay back the value of the gift.
HOLSWORTHKojo, the gift issue, I think she has a little bit reversed. The person who would have to declare the gift is actually the person who gave the gift, not the person who received the gift. So, that would be, in this instance, up to Johnny Williams more so than it would be up to the McDonnells. But there is a twist to this that could relate to the McDonnells, and that's this. And this is why I think the IRS is certainly probably involved in this investigation, as well. The IRS actually has fairly strict rules on what it considers a loan, and what it considers a gift. So, a loan does have to have some terms of payment, and those terms of payment cannot simply be, I'll just make up an example, that you would pay back the loan starting five years from now and there would be no interest. In that instance, the IRS might consider that income rather than a gift, or rather than a loan.
HOLSWORTHAnd the same would apply to a gift. The IRS thinks that a gift has to be something that's given for reasons of affection or for some disinterested purpose. If you gave a gift and you received a gift with the intent to compensate by paying something back, that might not be seen as a gift as well. So, the caller is correct that the federal investigation is probably looking into this, but they're looking in to see whether these were really loans and really gifts because a gift, in this instance, is certainly not something the McDonnells have to, in some ways, announce and disclose.
HOLSWORTHThe same thing is related to this loan issue and that is why the Governor was so careful, when he paid back Johnny Williams, to say publicly that he's paid back the loan and he's paid it back with interest. Because he wanted to make it very, very clear that this was a loan, not income.
NNAMDIIrene, thank you very much for your call. Finally, Bob Holsworth, is there an argument to be made that both of these scandals are hurtful enough to both of the campaigns, Cuccinelli and McAuliffe, that, in the end, they might just cancel each other out?
HOLSWORTHThat's certainly a possibility, Kojo. I mean, one of the interesting features that we've seen is that the polls haven't moved dramatically despite all of these scandals that we've seen. McAuliffe seems to have a slight three or four point lead in most polls and that's been pretty steady for the last month and a half. This is an unusual gubernatorial race for Virginia because we really have the prospect of both candidates' approval ratings being underwater by the end of this campaign, something that rarely happens here in Virginia, where Governors typically get elected with a pretty good mandate in terms of public approval rating.
NNAMDIBob Holsworth. He's a political analyst with virginiatoday.com. He's former Dean of Virginia Commonwealth University School of Government and Public Affairs. Bob, thank you for joining us.
HOLSWORTHAlways great to be with you, Kojo. You take care.
NNAMDIYou, too. We're going to take a short break. When we come back, Howard Ross is here talking about office democracies, comparing them to workplace dictatorship. We'll be talking about how management styles effect our jobs and how we do them. I'm Kojo Nnamdi.
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