American Greed

Friends in low places: These politicians' best pals are their worst enemies

Key Points
  • American history is full of examples of politicians brought down — or at least damaged — by people they thought were their friends.
  • In one of the latest examples, the attorney for a confessed fraudster and sex trafficker says his client is cooperating in a federal investigation into the activities of controversial Rep. Matt Gaetz, R-Fla.
  • Gaetz has confirmed he is under investigation but said it is based on "lies" as part of an alleged extortion plot in which one person has already pleaded guilty.
Friends in low places: These politicians' best pals are their worst enemies
Friends in low places: These politicians' best pals are their worst enemies

Sometimes it's the lust for power. Sometimes it's the lust for wealth. And sometimes it's just lust.

Politics makes strange bedfellows, the old saying goes. History is full of politicians who found themselves in a fight to save their reputations and careers when close friends and associates got into trouble.

In one of the latest examples, controversial Rep. Matt Gaetz, R-Fla., no doubt regrets getting mixed up with Joel Greenberg, a confessed fraudster and sex trafficker. An attorney for Greenberg, the former Seminole County tax collector, says his client is cooperating with federal authorities in an investigation into whether Gaetz, too, was involved in sex trafficking of minors.

The congressman has confirmed the investigation but has said that it is based on "lies" as part of an intricate plot to extort him and his father out of $25 million. A Florida businessman, Stephen Alford, pleaded guilty in November to a single count of wire fraud in connection with the scheme.

"No part of the allegations against me are true, and the people pushing these lies are targets of the ongoing extortion investigation," Gaetz said when the investigation into his conduct became public in March.

U.S. Representative Matt Gaetz (R-FL) looks on during an "America First" rally in Dalton, Georgia, U.S. May 27, 2021.
Dustin Chambers | Reuters

It's not as if Greenberg is a paragon of virtue. In May, he pleaded guilty to a litany of federal charges, admitting that he used his normally obscure local office to commit crimes ranging from sex trafficking involving teenage girls to identity theft, stalking a political opponent, and even carrying out a cryptocurrency scheme using taxpayer funds. For the cryptocurrency plot, Greenberg tried unsuccessfully to recruit one of his employees, network security specialist Brent Tyler.

"He said he would split it down the middle with me, whatever we got," Tyler told CNBC's "American Greed." "I mean, that was a very shocking thing to hear. How would you even put that into words at that point in time when you're being offered something like that and that illegal?"

Gaetz and Greenberg became buddy-buddy around 2018. Gaetz was riding the coattails of then-President Donald Trump, and Greenberg seemed intent on latching on to Gaetz's rise.

Attorney Fritz Scheller and Joel Greenberg appears during a hearing of Greenberg, a former tax collector in Florida's Seminole County who is central to the federal investigation of Republican U.S. Representative Matt Gaetz, at the federal court in Orlando, Florida, U.S. May 17, 2021, in this courtroom sketch.
Steve Bridges | Reuters

The two were frequent companions; Gaetz even donated to Greenberg's campaign for tax collector.

But now the relationship with Greenberg has come back to haunt Gaetz. Federal authorities are investigating whether Gaetz and Greenberg used the internet to search for women they could pay for sex, NBC News reported last March, and whether Gaetz had a sexual relationship with a minor and paid for her to travel with him.

In June, the investigation expanded, looking at whether Gaetz committed obstruction of justice by contacting a potential witness in the sex trafficking case, NBC News reported, citing law enforcement sources.

The congressman has not been charged with wrongdoing, but the judge in Greenberg's case agreed in October to postpone his sentencing until March while Greenberg cooperates with federal prosecutors, according to court filings.

Greenberg's attorney, Fritz Scheller, told reporters in April that Gaetz has reasons to be nervous.

"I'm sure that Matt Gaetz is not feeling very comfortable today, alright?" he said.

No party preference

Sen. Robert Menendez (D-NJ) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building in Washington, DC, September 28, 2021.
Kevin Dietsch | Pool | Reuters

Neither political party has a monopoly on graft or less-than-savory friends.

Sen. Robert Menendez, D-N.J., came within an inch of his political life in 2017 when a federal jury deadlocked on charges that he accepted hundreds of thousands of dollars in bribes and assorted favors from Florida ophthalmologist Salomon Melgen.

Melgen, a frequent Democratic donor, was also a prolific biller of Medicare — the top-billing doctor in the country several years running. Prosecutors said many of the tabs he asked the government to pick up were fraudulent.

Melgen specialized in treatments for age-related macular degeneration, or ARMD, the leading cause of vision loss in the U.S. The condition is not quite as common as Melgen's billing suggested.

Prosecutors said he frequently diagnosed patients with ARMD when they did not have it and that he prescribed unnecessary and expensive treatments. He billed the charges to Medicare, according to prosecutors.

Dr. Salomon Melgen arrives at a federal court to be indicted on corruption charges on April 2, 2015 in Newark, New Jersey.
Getty Images

In 2017, a federal jury in Florida convicted Melgen on 67 felony counts in a scheme to cheat taxpayers out of more than $70 million in Medicare reimbursements. A judge sentenced him to 17 years in prison.

Menendez was not charged in that case, though he acknowledged lobbying federal officials over the Medicare billing rules at the heart of it.

But both Menendez and Melgen were indicted in the influence-peddling case. The two pleaded not guilty, and they stood trial together in 2017.

The 10-week trial ended in a hung jury. The judge declared a mistrial. Prosecutors initially wanted to retry the pair, but after the judge threw out several of the charges due to insufficient evidence, the government dropped the case.

Menendez still serves as New Jersey's senior U.S. senator. He has vowed not to forget the political rivals who eyed his seat as the case progressed.

"I know who you are," he said in 2018.

Melgen served nearly 4 years in prison until Trump commuted his sentence on the last day of his administration. He was released on Jan. 20.

Capitol offense

Jack Abramoff at his home in Silver Spring, MD. Abramoff is a former American lobbyist, businessman, movie producer and writer.
Brooks Kraft | Corbis News | Getty Images

A string of politicians and public officials have regretted making friends with Jack Abramoff. The former super lobbyist has boasted that at one point he essentially owned about one-quarter of Congress.

Those lawmakers included six-term Rep. Bob Ney, R-Ohio. He pleaded guilty in 2006 to two felony counts after admitting he accepted gifts, trips and campaign contributions from Abramoff as part of a wide-ranging conspiracy and one of the most audacious lobbying scandals in congressional history.

Abramoff specialized in lobbying on behalf on Native American tribes, and he spared no expense to curry favor with lawmakers and staffers to get things done. That meant paying for overseas trips, fancy dinners at the D.C. restaurant he owned and luxury seats in the four skyboxes he owned at area sports venues.

Not only was he flat-out bribing public officials, he was bilking the Native American casino interests out of tens of millions of dollars in fees.

Ney was the only member of Congress to go to prison due to the scandal. He was sentenced to 2½ years. But it also derailed the political career of the once-powerful House Majority Leader Tom DeLay, R-Texas.

While DeLay himself was never implicated in the Abramoff scandal, two of his former top staffers pleaded guilty to corruption charges. After being indicted on state corruption charges in Texas — of which he would later be cleared — DeLay resigned from Congress in 2006.

Some two dozen people were convicted or pleaded guilty in the Abramoff scandal, including two former White House staffers in the George W. Bush administration.

After serving four years in prison, Abramoff claimed to be a changed man and a critic of the Washington lobbying apparatus he once dominated. But in 2020, he became the first person charged with violating a law that was changed in response to his earlier activities.

Abramoff admitted he failed to disclose the nature of his activities on behalf of a cryptocurrency company and a marijuana producer, in violation of the federal Lobbying Disclosure Act.

He could face another five years in prison. His sentencing date has not yet been set as he cooperates with prosecutors, according to court filings.

'My damn friends'

American oil industrialist Harry Ford Sinclair (1876 - 1956, right) with former Secretary of the Interior Albert Bacon Fall (1861 - 1944) during their trial in connection with the Teapot Dome oil scandal, circa 1924.
Hulton Archive | Getty Images

Reaching the pinnacle of American politics, the presidency, generally requires making a lot of friends. But most of the 46 men who have held the office have had a friend or two they came to regret.

Richard Nixon had Charles "Bebe" Robozo, the Florida banker and reputed mafia money launderer. Bill Clinton had banker Jim McDougal, his partner on the Whitewater land deal in Arkansas that ultimately led to the 42nd president's impeachment.

But in the presidential "with friends like these" department, few can compare to Albert Bacon Fall. He was a member of the innermost circle of America's 29th president, Warren G. Harding.

Fall was from New Mexico. Nonetheless, he was considered a charter member of the "Ohio Gang," the band of cronies who followed Harding from his home state to Washington. Harding is reported to have complained of the group: "I have no trouble with my enemies. I can take care of my enemies all right. But my damn friends ... they're the ones who keep me walking the floor nights!"

Many threads in Harding's White House carpet likely fell victim to Fall, who was the culprit in the great-granddaddy of Washington scandals, Teapot Dome.

At its heart, Teapot Dome was a garden-variety bribery plot. As Interior secretary, Fall controlled the drilling rights on government-owned oil reserves at Teapot Dome in Wyoming and Elk Hills in California.

Fall ensured that the leases went to a couple of favored oil companies in exchange for gifts and payments that would be worth about $8 million today. He might have gotten away with it were it not for the fact that his standard of living suddenly and inexplicably improved.

There was no evidence that Harding himself was involved in the scheme. The breadth of the graft did not come to light until well after the president's death in 1923. But there is no denying that it all took place on his watch.

In 1929, Albert Bacon Fall became the first U.S. Cabinet member to go to prison. The feat went unmatched until John Mitchell, President Richard Nixon's attorney general, was convicted in the Watergate scandal nearly 50 years later.

Teapot Dome also cemented the role of Congress in policing White House misconduct. The issue has taken on new importance today as multiple Trump aides defy subpoenas seeking their testimony before the House select committee investigating the Jan. 6 insurrection at the U.S. Capitol.

In December, the full House voted to find former White House chief of staff Mark Meadows in contempt of Congress, referring him to the Justice Department for possible prosecution. The DOJ is already prosecuting Trump's former chief strategist Steve Bannon on contempt charges after a similar referral in October.

Back in 1927, the Supreme Court upheld the criminal contempt conviction of Harding's attorney general, Harry Daugherty, who refused to appear before the Senate Judiciary Committee investigating Teapot Dome.

The court said that in order to carry out its legislative functions, Congress has the power to compel individuals to appear, no matter who their friends are.

With friends like Joel Greenberg, Rep. Matt Gaetz probably doesn't need enemies. Follow Greenberg's wild, wide-ranging crime spree on the ALL-NEW season premiere of "American Greed," Wednesday, Jan. 5, at 10 p.m. ET, only on CNBC.