delanceyplace.com 6/13/12 - lbj gets caught for corruption - almost

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In today's excerpt - in the days before John F. Kennedy's assassination, Vice President Lyndon B. Johnson was caught up in an escalating corruption scandal that at the very least might mean that he would removed from the 1964 ticket, if not forced to resign as Vice President or serve time in prison. Johnson had been involved in pay-for-influence practices so pervasive that it had turned a lifelong government employee into a millionaire many times over. In fact, at the very moment Kennedy was assassinated, Delaware Senator John J. Williams' committee counsel Burkett Van Kirk and General Accounting Office accountant Lorin Drennan were interrogating insurance broker Don B. Reynolds on the subject, and the editors of Life magazine were debating whether they should run a second story on the scandal in their next edition (Note that $1 in 1960 equates to roughly $7 in 2012):

"Reynolds told Williams that in 1957, having been advised that a 'political connection' would be helpful in building up his insurance business, he contacted [LBJ protege] Bobby Baker, a fellow South Carolinian, and they entered into an agreement under which he would make payments to Baker 'because,' as Reynolds was to put it, 'of his social contacts and his wide knowledge of people [whom he] could present to me.' Baker had shortly thereafter introduced him to [LBJ aide] Walter Jenkins. Johnson, that same year, had mentioned to Baker that he was having difficulty obtaining life insurance because of his heart attack, and Baker, as he would recall, 'told Senator Johnson about my partnership with Don Reynolds, and we agreed to seek the policy through him.' Reynolds secured Johnson $100,000 of insurance (in 1961, the amount would be increased to $200,000), whose pre­mium, he learned, would be paid not by Johnson but by the LBJ Company, with the checks signed by Lady Bird -- and when Reynolds obtained the policy, Baker brought him to the lobby outside the Senate Chamber so that he could hand it to Johnson personally. ...

"Reynolds, Baker was to say, 'was delighted' to be 'doing business with the big man.'

"The delight was soon to fade. Reynolds never spoke to Johnson again, but he did speak to Jenkins, because Jenkins called him in to tell him that in return for being allowed to write the policy and obtain the commission, about $2,500 per year, he would be required to purchase advertising time on the television sta­tion in Austin, KTBC-TV. When, Reynolds said, he protested that it made no sense for a Maryland insurance broker, unknown in Austin, to advertise on tele­vision there, Jenkins said that didn't matter. Baker, Reynolds said, 'prodded' him to buy the time. And after Reynolds made the purchase, buying $1,208 of airtime, another type of purchase was required. The Johnsons wanted a new stereo set, Baker told Reynolds, and Reynolds would have to supply it. Reynolds did, obtaining catalogs from various companies and giving them to Baker to give to the Johnsons; Lady Bird selected a Magnavox S-44 model in a cherrywood cabinet, an expensive set selling for about $900 in stores. Reynolds managed to buy it wholesale through a friend for $542.25; when Lady Bird wanted it deliv­ered quickly for a party she was giving, he had it delivered airfreight, which cost an additional $42.50. Although Jenkins would later deny, again and again, the advertising time and stereo set demands, Baker would confirm them -- 'He [Johnson] took the stereo, and he required Don Reynolds to buy the . . . advertis­ing. ... It was a kickback pure and simple,' he was to say -- as would Reynolds, who called the demands a 'shakedown.'

"More important, small an item though the stereo gift might be in itself, its disclosure might open up questions about Lyndon Johnson that were not small at all. The premiums on Johnson's life insurance had been paid by the LBJ Com­pany. There had been speculation for years about Johnson's relationship to that company. Lady Bird had purchased one small radio station in 1943 for $17,500. Since then, thanks in part to a twenty-year-long string of strikingly favorable rulings by the Federal Communications Commission (which, among other aspects, had left Austin as one of the few metropolitan areas with only a single commercial television station), the company had burgeoned into a chain of immensely profitable radio and television stations the length of Texas, and by 1963 it owned as well 11,000 acres of ranchland and major shareholdings in nine Texas banks.

"Johnson had quieted the speculations by his unequivocal denials that there was any relationship. He had said, over and over, for twenty years, that the LBJ Company was entirely his wife's business and he had noth­ing to do with it; that, as he claimed in one of many such statements, 'All that is owned by Mrs. Johnson. ... I don't have any interest in government-regulated industries and never have had.' But if Lyndon Johnson had no interest in the LBJ Company, why was it taking out insurance on his life? And, of course, his denials had omitted the salient fact. Texas was a community-property state, and therefore since Lyndon Johnson had an interest -- a half-interest -- in all the com­pany's income, he had become rich. If Reynolds' statements became public, it would cast doubt on Johnson's claim that there was no connection between LBJ and the LBJ Company -- and once that connection was established, the com­pany's financial dealings would become a subject of journalistic inquiry. John­son had arrived in Congress poor, and during his career had ostensibly had no source of income other than his government salary. He had been boasting to friends for years that he was a millionaire. By 1963, he, a man who had never held any job but his government positions -- whose salary had never been more than $35,000 per year -- was not merely a millionaire but a millionaire many times over. That fact had never become known to the press or the public. How would it look if it did?

"Furthermore, once reporters started looking into the LBJ Company, they might look not only into its wealth, but into how that wealth had been accumu­lated, and one area of that accumulation -- the key area -- was particularly vulner­able to journalistic inquiry: precisely the area with which Don Reynolds had been involved. The insurance broker had been forced to buy advertising time that he didn't need on KTBC-TV in return for receiving something from Lyndon Johnson ... what KTBC's general manager, Earl Deathe, called 'trading out.' A stereo was only one of many such items 'traded out.' Deathe was to recall television sets -- large sets, the newest model, enough of them for both the main house and the guest houses Johnson was building on his ranch -- as well as tractors and cars. 'It was a means of get­ting material things without paying for them,' he explains.

"And, Deathe says, there was 'so much of it.' Johnson, he says, 'lived in fear' that such dealings would be exposed; 'he just lived in fear of that -- and I think rightfully so. He had been involved in so much.' ... Johnson had 'traded out' with so many people, he says. What if one of them came forward with a statement to the press? And if Reynolds' statements became public, would others be encouraged to come forward?"