Publicly funded Iron Range board is deep into DFL politics, policy

EVELETH, Minn. – Workers in a call center on Minnesota's Iron Range don headsets each day knowing their employer's core business: Get Democrats elected.

For years, prominent Democratic candidates and political groups have used the obscure center tucked among hills and pines to canvass and raise money from small donors. DFL organizations, state and national, have paid the phone bank's current and former owners about $80 million over the last decade, campaign records show.

The call center relocated to Eveleth in 2006 thanks in part to a $625,000 loan from a unique state agency called the Iron Range Resources and Rehabilitation Board (IRRRB). It doles out about $40 million each year, much of it from a tax on taconite, in the name of bolstering and diversifying the Range economy.

In its first incarnation, the call center on the Range failed to meet job targets, but the IRRRB gave the company, Meyer Associates, more time to repay the loan. It shut down anyway last year. The IRRRB let Meyer's owner walk away and wrote off the $250,000 Meyer owed, records show.

Then a former Meyer executive reopened the phone bank under the name of his new company. The deal allowed him to pay $50,000 for equipment that had been purchased with $500,000 in IRRRB money. The largest political client for the call center remained the same: a group called Dollars for Democrats.

Officials at the IRRRB say jobs, not politics, are behind its dealings with the two firms.

"There's still 100 people working there," said former state Rep. Tom Rukavina, a DFLer who served on the IRRRB board for years and once hired Meyer to make calls for his own campaign. "That to me is a success story. Any time I went in that office people clapped and thanked me that they had a job."

Few Republicans know about Meyer or its links to the Democratic Party and the IRRRB. When told about it, they say it confirms their view of the IRRRB as a DFL slush fund.

"I think it's outrageous that you've got a public entity giving public taxpayer dollars to a political fundraising company that just works with one party," said state Rep. Jim Knoblach, Republican chairman of the House Ways and Means Committee. "I actually can't believe that the IRRRB would be so shameless as to do this."

The call center's death and resurrection come at a crucial moment for the IRRRB. In December, a month after Republicans won control of the Minnesota House, the agency voted to spin off up to $100 million from its key trust fund into a private nonprofit corporation — safe from lawmakers who might take the money for other purposes.

Since the Legislature created it in 1941, the IRRRB has worked to blunt the high unemployment that has plagued the region with the decline of the timber and mining industries.

From its headquarters on Highway 53 south of Eveleth, the IRRRB dispenses grants and loans to local communities and all manner of organizations, from Mesabi Nugget to Friends of Sax-Zim Bog. The loan to Meyer Associates is among the $315 million the IRRRB has poured into the region in the past decade. A 1977 law requires the spending to be inside the Taconite Assistance Area — 13,000 square miles stretching from the Canadian border across the Cuyuna, Mesabi and Vermilion iron ranges to Lake Superior and down to Grand Rapids.

Sometimes the assistance has paid off well. Delta Air Lines employs 400 people at its Chisholm call center that it's expanding with the help of a $6 million IRRRB loan.

Magnetation, a Grand Rapids start-up that reclaims leftover iron ore, got a $13 million loan in December to finish construction of a new plant. It still employs more than 300 people on the Range despite laying off up to 40 workers last week when it idled a plant due to plunging taconite prices.

The IRRRB has been faulted for financing mining or for backing projects that don't create jobs but curry DFL support. It has zero to show for the $9.5 million it loaned to Excelsior Energy in the early 2000s to build a gasified coal power plant. The plant never materialized; the loans have been extended.

Nine of 91 business loans the IRRRB has made since 2005 — about $1 million out of $109 million — have gone bad, according to a Star Tribune review of agency data. That's a very low loss rate, economic development pros say.

A spokesman for Gov. Mark Dayton called the failure of the Meyer Associates loan an "anomaly" that shouldn't be used to "impugn the operations of the IRRRB."

State law requires the IRRRB board to consist primarily of lawmakers whose districts cover at least part of the taconite area. As a result, the IRRRB board has leaned DFL even though its governor-appointed commissioner has frequently been Republican.

The area's Democratic political tilt was a selling point when a telemarketing firm was looking to relocate a call center.

Meyer Associates was founded in St. Cloud by DFLer Larry Meyer in 1976 and leagues of St. Cloud State University students filled Meyer's chairs over the years. Meyer did calling for commercial clients such as the Wall Street Journal, but commercial contracts never generated more than half its sales and shrank to 8 to 12 percent in the 2000s.

Its core was always Democratic fundraising, said Jerry Samargia, a former Meyer executive and onetime head of the state's DFL Party.

Meyer also created and managed Dollars for Democrats, the small-donor fundraising call program for state Democratic parties, Samargia said in an interview.

Samargia worked for Meyer from 2003 to 2008. He directed its political sales and developed Meyer's nonfundraising political work, such as polling and modeling voting patterns.

Around 2006, Meyer wanted to move its Brainerd call center and figured it would have "a much more Democratic-leaning workforce" on the Range, said Samargia, who was born in the Range town of Gilbert but now lives in St. Paul.

In June 2006, the IRRRB gave the telemarketer two loans — $125,000 was forgivable if Meyer met certain lease and jobs targets. The second was $500,000 for equipment, also partially forgivable if job targets were met. The equipment was the loan collateral.

Questions about using public money to aid a DFL player were never a topic of discussion, people on all sides said.

At the time the IRRRB commissioner was Sandy Layman, a Republican appointed by Republican Gov. Tim Pawlenty. Samargia said he was "actually fairly surprised" Pawlenty's administration signed off on the deal.

Layman "knew that at that point 70 percent of our business was Democratic calling," he said. "We weren't hiding what we did."

In e-mails to the Star Tribune, Layman said she couldn't clearly recall the project, but said a customer list would have been part of business plan review. The company "met due diligence tests and several levels of review," she wrote. Layman declined to be more specific.

Said Rukavina: "I think Sandy might have brought it up privately to me once, that these people call for Democrats, and I said 'So what?' "

"Sandy was about jobs," said the IRRRB's Sjoberg. He said an advisory committee of local bankers and others recommended the loan. "Politics played no role in it," he said.

Call centers were viewed as a good way to diversify the economy. In addition to Delta Air Lines, Blue Cross Blue Shield and DeCare Dental have call centers on the Range.

"We didn't care if they called for someone's teeth or called for someone's wallet," Rukavina said. "All I care about were the wages were decent. I would have given money to the Communist Party if they brought 100 jobs."

The IRRRB's February 2006 board packet describing Meyer contains only generic references to its political business, characterizing it as a past focus. The terms Democratic and DFL don't appear.

Two citizen members on the IRRRB board at the time said they had no idea Meyer was into DFL politics.

"If there was, there would have been discussions," said one of them, Bill Henning, a former economic developer for Ely who voted for the Meyer project.

Meyer made a home in Progress Park, a secluded business that the IRRRB helped build, carved out of the pines and rock around Eveleth. The telemarketer would play a notable role in Obama's breakthrough 2008 campaign.

Bonnie Vergoth, 59, of Embarrass, was making calls for about $12 an hour and recalled the excitement. There were big posters of Obama in the office with local Democratic pols streaming through. There was unlimited overtime, and lots of free sloppy Joes, hamburgers and sundaes.

"We were raising money for him [Obama] daily … hundreds, thousands," Vergoth said. The pressure to bring in that money could be intense.

Debbie Lovett, making $11 an hour working the phones, was the Communications Workers of America union rep at Meyer. Callers could not deviate from the script for the D4D, as Dollars for Democrats was known, that required three requests for money on each call, she said.

"Always starting at $100 and down from there," Lovett said. "If you didn't do three asks, you got written up."

Both Rukavina and Sen. Tom Bakk hired Meyer for their 2010 campaigns while serving on the IRRRB board.

But Meyer was struggling with a fast-changing world.

Cellphones were replacing land lines, fundraising was shifting online, and troves of data available on people meant fewer calls were necessary.

Samargia left Meyer at the end of 2008, co-founding New Partners consulting in Washington, D.C. New Partners sent telemarketing work to Meyer, Samargia said.

Still, Meyer did not meet the target of 70 jobs in 2013, which should have triggered loan payments in 2014.

Sjoberg said the IRRRB was "negotiating with them on some sort of repayment arrangement," and then-owner Gary Owen called on March 31, 2014, saying a vendor was cutting Meyer off.

Meyer abruptly shut down its three call centers, throwing 200 people out of work. About half worked in Eveleth.

The closure left Meyer's biggest political client, Dollars for Democrats, in a bind. The group asked him to pick up the program, Samargia said.

Based on a consultant's recommendation, the IRRRB valued the gear left in the Eveleth call center — the loan collateral — at $50,000, Sjoberg said, and New Partners paid that sum in cash. The IRRRB gave New Partners no other help, he said.

As Samargia sees it, he helped the IRRRB "get out from underneath a bunch of equipment they ended up owning."

Last year, on April 16, then-IRRRB Commissioner Tony Sertich announced that New Partners was restarting the call center.

The rehired Meyer workers are happy to have their jobs back.

During a recent smoke break in the cold outside the call center's back door, Jack Sperry, 44, of Eveleth, shrugged off the IRRRB loans to Meyer.

"The Democrats would be helping the Democrats," Sperry said before heading back in. "The Republicans are helping the Republicans."

Jennifer Bjorhus • 612-673-4683