Bernard L. Schwartz

Bernard L. Schwartz (December 13, 1925 to March 12, 2024) was a Brooklyn-born investor who took over the ailing Loral Corporation in 1972, sold the bulk of it to Lockheed Martin in 1996, and served as a trustee of the New School.¹

Loral Corporation, 1972 to 1996

Schwartz was born in Brooklyn, graduated in finance from City College of New York, and joined a Wall Street accounting firm whose clients included Admiral Plastics, run by his brother Harold. That work led to Saul P. Steinberg of Leasco Data Processing Equipment Corporation, and Schwartz proposed that Leasco acquire Reliance Insurance, which it did in 1968, taking the Reliance name. As president of the Reliance Group he proposed a takeover of Chemical Bank, which Chemical's management resisted and Reliance abandoned. After four years with Reliance he joined Loral.¹

The obituary says that Loral, a maker of electronic weapons, countermeasures and communications systems, was on the brink of bankruptcy when its two founders retired in 1972, and on the verge of going out of business and having its stock delisted when Schwartz acquired it, investing $2 million in the company. It says he had no experience of doing business with the Pentagon, remained chairman and chief executive for 34 years, and recorded 96 straight quarters in which profits surpassed those of the comparable period the year before.¹ The Cox Committee describes Loral Space & Communications as the parent company of Loral and reports that a group including it acquired Ford Aerospace in 1990, renaming the business Space Systems/Loral.²

Schwartz sold the bulk of the company to Lockheed Martin in 1996, when, the obituary says, it had grown in value to $13 billion. The obituary says that when Loral was sold he distributed more than $18 million of his own funds to some 40 people whose jobs were in jeopardy.¹ A May 1, 1997 profile in Mother Jones by Dave Eisenstadt reported that Schwartz was "reportedly pocketing close to $27 million in personal stock gains" from the defense sale, that he had given "a whopping $217,000 since 1993" to the Democratic Leadership Council, that the administration had "actually considered Schwartz as a candidate for the defense post" the previous fall, and that he celebrated his 71st birthday in December 1996 with an "intimate White House dinner with the president."³

On July 15, 2003, Old Loral and certain of its subsidiaries filed for Chapter 11 protection. Schwartz retired from all of his officer and director positions effective March 1, 2006, and Michael B. Targoff became chief executive on the same date.⁴

Export licensing and the Ron Brown meetings, 1993 to 1995

The Cox Committee reported that Schwartz, chairman and chief executive of Loral Space & Communications, Ltd., the parent of Loral, met directly on at least four occasions after 1993 with Ron Brown, then Secretary of Commerce, and accompanied him on a 1994 trade mission to China.⁵ The committee describes C. Michael Armstrong, the former chairman and chief executive of GM Hughes Electronics, as chairman of President Clinton's Export Council since 1993. On October 6, 1995, Armstrong, Schwartz and Daniel Tellep of Lockheed Martin sent a letter to the President stating: "Continuing to license export of these technologies under the more stringent and cumbersome Munitions List places American companies at a distinct disadvantage in global markets." The committee wrote of the transfer of export licensing authority from the State Department to the Commerce Department that "The changes they advocated were ultimately adopted."⁵⁶

On June 9, 1995, Space Systems/Loral and the China Aerospace Corporation signed a Memorandum of Agreement on long-term cooperation, signed by Robert E. Berry for Space Systems/Loral and Zhang Xin-Xia for the Chinese side. The committee's chronology describes it as a ten-year joint technology development program, and its text describes a 1995 agreement under which Loral offered the PRC direct broadcast satellites, regional mobile satellite services systems and the joint development of an advanced high capacity communications satellite.⁷ The State Department's draft charging letter states that Loral Space & Communications and Space Systems/Loral each had agreements with the China Aerospace Corporation providing for long-term cooperation, under which Loral intended to procure up to ten launch vehicles for its Globalstar satellites.⁸

The committee counted five satellite projects for which Loral and Hughes obtained waivers or licenses between 1993 and January 3, 1999.⁵ A sidebar in the report states that "Even while under criminal investigation for these transfers, Loral obtained Presidential waivers for another launch in the PRC."⁹

The 1996 Long March failure

On February 15, 1996, a Long March 3B rocket carrying the Loral-built Intelsat 708 satellite failed after liftoff from Xichang in the People's Republic of China.¹⁰ One passage of the Cox Report, giving the failure determination announced by China Great Wall Industry Corporation on September 10, 1996, refers to the February 11, 1996 Long March 3B crash.¹¹ The State Department's draft charging letter gives February 15, 1996.⁸

The Chinese side then invited Wah Lim, Loral's senior vice president and general manager of engineering and manufacturing, to chair an Independent Review Committee. The committee met at Loral's offices in Palo Alto, California, on April 22 to 24, 1996.¹² On May 23, 1996, Loral engaged the Washington law firm Feith & Zell, which on June 17, 1996 submitted a disclosure on Loral's behalf to the State Department.¹²

The Cox Committee wrote that "In 1996, Loral and Hughes showed the PRC how to improve the design and reliability of the guidance system used in the PRC's newest Long March rocket." It also wrote that "Loral and Hughes acted without the legally required license, although both corporations knew that a license was required."¹³

The committee quoted a 1997 Defense Department assessment that Loral and Hughes "committed a serious export control violation by virtue of having performed a defense service without a license."¹⁴ A May 16, 1997 entry in the committee's chronology records a Defense Technology Security Administration recommendation for referral to the Justice Department for criminal prosecution.¹⁴ The interagency review team assessed in July 1998 that the true failure mode "may have been discovered more quickly by the PRC as a result of the Independent Review Committee's report."¹⁵

The Chinasat-8 waiver, February 1998

Congress imposed the requirement for a presidential "national interest" determination in 1989. Between 1989 and the beginning of 1998 twelve such determinations were made for launches of commercial communications satellites on PRC rockets. President George H. W. Bush made three, and President Bill Clinton made nine, including determinations dated June 23, July 9, November 19 and November 23, 1996.¹⁶ The most recent, dated February 18, 1998, applied to the Loral-built Chinasat-8 satellite.¹⁶

The New York Times reported on June 1, 1998 that Loral's waiver application for Chinasat-8 was submitted in May 1997, the month in which the Pentagon completed its assessment of the Independent Review Committee, and that the Justice Department began its investigation after that assessment. It reported that the first draft of the Presidential memorandum, dated January 13, 1998, recommended action by January 20 because of "severe contractual penalties which Loral will incur if it cannot begin technical discussions with the Chinese by next week," and that a Loral letter in White House files stated that a delay would cost the company at least $6 million and could cost it a $20 million project.¹⁷

A January 1998 draft National Security Council memorandum referred to the ongoing review of PRC transfers to Iran of C-802 anti-ship cruise missiles, a point also listed in a State Department memorandum to the NSC. The reference was deleted from the memorandum that was ultimately sent to the President.¹⁸ A decision memorandum for the President dated February 12, 1998, from Samuel Berger, the national security adviser, Larry Stein and Daniel Tarullo, argued: "We believe that the advantages of this project outweigh the risk, and that we can effectively rebut criticism of the waiver."¹⁷¹⁹ The Times reported that on February 13 White House counsel Charles Ruff wrote that "the Department had every opportunity to weigh in against the waiver at the highest levels and elected not to do so," and that Justice Department officials said Ruff, in his discussion with Robert Litt, asked only about the impact of the waiver on a possible prosecution. The notes of the National Security Council deputy counsel Newell Highsmith on a conversation with Ruff read: "Issue is not [underlined twice] impact on DOJ litig(ation)," and, "but whether bilateral U.S.-China concerns and economic factors outweigh risk of political embarrassment."¹⁷

A transmittal memorandum dated February 18, 1998 from Phil Caplan stated that Ruff "notes that there have been extensive discussions with Justice on this matter," and that "The Department [of Justice] realizes the potential adverse impact on a potential criminal prosecution but has chosen not to oppose the waiver."²⁰ The same memorandum continued: "Therefore, in balancing national security and criminal justice interests, Chuck agrees that the balance, under these special circumstances, is properly struck by granting the waiver."²¹ In a December 1998 interview with the committee, Litt, a Justice Department official, recalled that "Certainly the Department was put on notice that there was a waiver application," and said that "I didn't believe that we were being asked for our views on whether or not the waiver should be granted as a matter of policy."²² The Commerce Department approved the Chinasat-8 license application on March 23, 1998.²² The State Department's draft charging letter records that two technical assistance agreements for the Chinasat-8 launch were approved on February 20, 1998.⁸

On April 13, 1998, the New York Times reported that the President had approved the waiver despite an ongoing Justice Department criminal investigation of Loral's alleged earlier unauthorized transfer of missile guidance technology to China. The White House released related documents on May 22, 1998.²³ A June 1, 1998 article by Jeff Gerth and John M. Broder reported that Justice Department prosecutors "warned that allowing the deal could jeopardize possible prosecution of the company for an earlier unauthorized technology transfer to Beijing." The article said the February decision "was treated as an urgent matter not because of its importance to the national security, but because the company was facing heavy fines for delay," and that Clinton approved the waiver six days after the February 12 memorandum.¹⁷ The article also reported that Loral's June 1996 disclosure to the State Department included "an admission that it allowed the Chinese to see its lengthy review of the rocket mishap without prior Federal approval."¹⁷

Loral's statement of May 18, 1998 said that Schwartz "was not personally involved in any aspect of this matter." The Times, reporting the statement, described him as "one of the largest individual Democratic Party donors in the last few years."²⁴ The statement also said: "No political favors or benefits of any kind were requested or extended, directly or indirectly, by any means whatever."²⁵

Representative Henry Waxman, in a statement placed in the Congressional Record in October 2000, wrote that a February 13, 1998 letter to Berger urging a swift decision on the waiver was written by Loral vice president Thomas B. Ross, citing a New York Times article of May 24, 1998.²⁶ The same statement recalls that in May 1998 Representative Curt Weldon spoke on the House floor about the allegations, describing a "Scandal that is unfolding that I think will dwarf every scandal that we have seen talked about on this floor in the past 6 years" and saying that "This scandal involves potential treason."²⁶

Campaign contributions

The obituary says that Schwartz was outraged by the war in Vietnam and by the 1970 Kent State killings, considered moving his family to France, and decided instead to remain and work for the Democratic Party, becoming "a top campaign donor."¹

Itemized Federal Election Commission receipts for the contributor name "SCHWARTZ, BERNARD L" (and, on four entries, "SCHWARTZ, BERNARD," three of them with the employer given as Loral Corporation) list the following contributions to the Democratic National Committee's non-federal accounts. In 1995: $25,000 on April 24, $75,000 on June 30 and $100,000 on November 28. In 1996: $100,000 on June 10, with the employer given as Loral Corp.; $70,000 on October 18 to the non-federal unincorporated association account; and $6,000 on December 20. In 1997: $100,000 on June 27 and $50,000 on December 23. In 1998: $30,000 on January 21; $25,000 on March 2; $100,000 on April 22; $250,000 on August 11; $50,000 on October 26, with the employer given as Loral Corporation; and $100,000 on November 6 to the party's non-federal corporate account.²⁷

The same index lists non-federal receipts by the Democratic Senatorial Campaign Committee of $40,500 in 1995, $115,000 in 1996 and $110,000 in 1997, and by the Democratic Congressional Campaign Committee of $20,000 in 1996, $56,000 in 1997 and $100,000 in 1998. The itemized non-federal rows for 1995 through 1998 add to $1,522,500.²⁷

Descriptions of his place in Democratic giving vary by source. The Cox Committee gives the New York Times as its source for calling him "the largest individual donor to the Democratic Party in 1997."²³ The Congressional Research Service wrote that Loral's chief executive "was reported as the largest personal donor to the Democratic National Committee for the 1996 election."²⁸ In its May 1997 ranking of donors, Mother Jones listed him first, with "$661,000 total contributions."³ In its November 1998 ranking Mother Jones listed Bernard L. and Irene Schwartz third, with $555,000, and wrote that he "has given Democrats $1.4 million since 1991."²⁹ The Times described Loral as "headed by the Democratic Party's largest campaign contributor" and reported that Schwartz "donated $100,000 to the Democratic Party four weeks before the waiver application was approved in early July 1996 by Clinton."¹⁷ An Associated Press account of January 10, 2002 stated that he "donated nearly $1 million to Democrats from 1995 to 1998."³⁰ Senator Arlen Specter stated on May 2, 2000 that Schwartz had donated $1.5 million to the Democratic National Committee.²⁵

The obituary says that Schwartz "later counted Bill and Hillary Clinton among his well-placed friends."¹

Justice Department review of the donations

In May 1998 the Justice Department began a preliminary inquiry into whether political donations influenced the approval of satellite exports to China.²⁵

Waxman quotes Lee Radek, chief of the Justice Department's public integrity section, as writing in August 1998 that "there is not a scintilla of evidence or information that the President was corruptly influenced by Bernard Schwartz," and quotes Charles LaBella, then head of the department's campaign finance task force, writing on August 12, 1998 that "The Review shares the view expressed in the Interim Report that this was a matter which likely did not merit any investigation."²⁶ At a Senate Judiciary Subcommittee hearing on May 2, 2000, Specter referred to LaBella's memorandum to Attorney General Janet Reno of the summer of 1998, which was reported to recommend that she appoint an independent prosecutor because the allegations of political favors involved the President; Reno denied the recommendations.²⁵ An article by William C. Rempel and Alan C. Miller in the Los Angeles Times of May 23, 2000 reported that Specter had suggested the sealed memorandum sought an independent counsel for the Loral matter, and that the memorandum and related documents obtained by the Times showed that by the summer of 1998 the task force had effectively excused Schwartz and Loral from the campaign finance investigation. A former task force investigator told the Times: "There was never a whiff of a scent of a case against him."²⁶

On March 16, 2000, U.S. Ambassador Joseph Prueher hosted a dinner in Beijing for representatives of Loral, Lockheed Martin, Hughes, the China Aerospace Corporation and ChinaSat, and the embassy denied that an export license for ChinaSat 8 was discussed. On July 17, 2000 the Defense Security Service issued an award for "outstanding security performance and practices" to Loral and 49 other companies, then rescinded Loral's after realizing it remained under investigation. In the summer of 2001 the Bush administration was reported to be negotiating civil settlements with Loral and Hughes rather than criminal charges.²⁵

Congressional inquiries

The Senate Committee on Governmental Affairs, chaired by Fred Thompson, issued its report S. Rept. 105-167 in six volumes, ordered printed on March 10, 1998. The table of contents of the first volume lists a chapter titled "Johnny Chung and the White House 'Subway.'"³¹

The House Committee on Government Reform and Oversight, chaired by Dan Burton, issued an interim report on November 5, 1998. Its section on Chung states that "Chung's bank accounts and his record of contributions to the DNC tend to corroborate the account first published by the New York Times," and that Chung "received three wire transfers from Hong Kong totaling $290,000" in July and August 1996.³² The Cox Committee's report, H. Rept. 105-851, was issued in classified form on January 3, 1999 and declassified in part on May 25, 1999.⁵

Johnny Chung and Chinagate

Johnny Chung, a Democratic fundraiser, disclosed during plea negotiations that he had met Liu Chaoying and General Ji Shengde during a trip to Hong Kong in the summer of 1996. According to Chung, he received $300,000 from Liu and Ji as a result of the meeting. The Cox Committee wrote that the FBI confirmed the deposit into Chung's account, and concluded that the payment was an attempt to better position Liu in the United States.³³

Liu was a vice-president of China Aerospace International Holdings, which the committee described as the Hong Kong subsidiary of China Aerospace Corporation, the organization that manages the PRC's missile and space industry. The committee also reported that China Aerospace Corporation is a substantial shareholder in the Apstar and APMT projects, which import U.S. satellites to the PRC for launch by China Great Wall Industry Corporation.³³

On December 14, 1998, Judge Manuel Real of the U.S. District Court in Los Angeles sentenced Chung to five years of probation and 3,000 hours of community service. Chung had admitted in March 1998 to an illegal $20,000 contribution to the 1996 Clinton-Gore campaign and an illegal $8,000 contribution to the campaign of Senator John Kerry, and to fraudulently obtaining a loan for his California home; that he had funneled contributions through straw donors; prosecutors recommended probation because he cooperated with their two-year investigation; and Real expressed skepticism at a letter from the Democratic National Committee claiming that Chung had concealed the source of the contributions from party officials.³⁴

The 2002 consent agreement

The State Department's draft charging letter to Eric J. Zahler, president and chief operating officer of Loral Space & Communications, signed by William Lowell, director of the Office of Defense Trade Controls, states that Space Systems/Loral violated the Arms Export Control Act and the International Traffic in Arms Regulations in connection with its conduct after the February 1996 failed launch carrying Intelsat 708, and that "Sixty-four (64) violations are alleged at this time." Charges 1 to 5 concern Space Systems/Loral's attendance at a failure briefing in Beijing on April 10 to 12, 1996, the charter of the Independent Review Committee, a further Beijing briefing on April 15 to 16 and the first committee meeting in Palo Alto, each without a Defense Department monitor or a license; charges 6 to 29 concern the 24 areas for further technical investigation delineated at that meeting; charges 30 to 61 concern the written summary faxed to China Great Wall on April 25, the second committee meeting in Beijing from April 30 to May 1, the faxed draft of the preliminary committee report on May 7, the final report on May 10, a copy faxed on May 13 to an insurance industry representative in Beijing, and an evaluation of the Long March 3B stage separation system. Charge 62 concerns the October 5, 1995 license application for the Apstar IIR satellite, and charges 63 and 64 concern the May 5 and May 16, 1997 submissions of technical assistance agreements for Chinasat 8, each alleged to have omitted the technical interchanges already held with Chinese authorities. The letter states that civil penalties may not exceed $500,000 per violation.⁸

On January 9, 2002, the Department of State's Bureau of Political-Military Affairs, acting through its Office of Defense Trade Controls, and Space Systems/Loral entered a consent agreement under the Arms Export Control Act and the International Traffic in Arms Regulations. The agreement refers to a draft charging letter alleging that Space Systems/Loral violated Section 38 of the Act and Section 127 of the regulations.³⁵

The agreement sets a civil penalty of $20,000,000 (twenty million dollars), "comprised of" $2,200,000 payable to the State Department within 10 days of the signing of the Order and $11,800,000 payable in installments of $1,685,714 on each of the first seven anniversaries. A further $6,000,000 is assessed, but its payment is suspended on condition that the company apply it over seven years to remedial compliance measures.³⁵ Space Systems/Loral and Loral "neither admit nor deny the allegations in the draft Charging Letter."³⁵

The agreement states that decisions on export licenses for the CHINASAT-8 and APSTAR V spacecraft would be made "without reference to the Department's previously expressed concerns regarding SS/L's reliability."³⁵ Loral's Form 8-K for the period reported that the Justice Department had "terminated its investigation of SS/L relating to this matter."³⁶ Schwartz said in Loral's announcement of January 9, 2002 that the matter "grew out of the activities of an Independent Review Committee (IRC) set up to inform the insurance industry about the causes of a 1996 Chinese rocket failure" and that a copy of the committee's preliminary report "was mistakenly sent to the Chinese by a Loral employee."³⁷ The U.S. Customs Service announced on January 10, 2002 that its investigation, begun in May 1996, had resulted in the $20 million fine, which it called the largest paid by an American company under the Arms Export Control Act.³⁸ The obituary says that federal authorities had charged the company with "64 counts of violating rules governing the transfer of sensitive technologies."¹

Gifts to the New School for Social Research

On November 9, 2001, the New School announced a gift of $1.1 million from Schwartz, then chairman and chief executive of Loral Space & Communications, to create the Bernard L. Schwartz Lecture Series and Project in Markets, Equality and Democracy. The four-year project was based at the Graduate Faculty's Center for Economic Policy Analysis.³⁹

On October 21, 2004, the school announced that Schwartz, Peggy Brim Bewkes, Eileen Naughton and Richard Reiss Jr. had joined its Board of Trustees on September 1, 2004, and that Philip Scaturro was chairman of the board. The release lists Schwartz as chairman of K & F Industries and a member of the board of First Data Corporation, and as a trustee of NYU Hospitals Center, Thirteen-WNET, Baruch College and the Democratic Leadership Council. It describes him as a member of the advisory council of the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University, where he had established a chair in political economy, and says he "established fellowship programs at the Council on Foreign Relations and The New America Foundation."⁴⁰

On November 4, 2004, the school announced a $10 million grant from the Starr Foundation, which the release calls "the largest foundation gift in the University's history," to establish the India China Institute, led by Provost Arjun Appadurai and Graduate Faculty dean Benjamin Lee. The same release announced a $3.7 million gift from Schwartz to establish the Bernard Schwartz Center for Economic Policy Analysis and endow the Irene and Bernard L. Schwartz Professor of Economics and Policy. The release says the center was established in September 2004 and that it continues to sponsor the Irene and Bernard Schwartz Lecture. Kerrey's quoted remarks attribute the $3.7 million to the Bernard and Irene Schwartz Foundation.⁴¹

Other gifts

On March 20, 2002, the Council on Foreign Relations announced that Bennett Freeman had been named the first Bernard L. Schwartz Fellow in Business and Foreign Policy, a post housed in the council's new Maurice R. Greenberg Center for Geoeconomic Studies. The release states: "This fellowship is funded by Bernard L. Schwartz, Chairman and CEO of Loral Space & Communications Ltd."⁴²

The New America Foundation's memorial page says Schwartz served on its board from 2004 to 2010 and was a supporter of its Fellows Program. The page credits 40 Bernard L. Schwartz New America Fellows with six New York Times bestsellers.⁴³

On August 4, 2005, the Brookings Institution announced that Schwartz had established the Bernard L. Schwartz Chair in International Economics.⁴⁴

In July 2006 Schwartz was identified as a donor to an alliance of nearly a hundred wealthy donors that had directed more than $50 million in nine months to liberal think tanks and advocacy groups; he said the group offers partners "an array of opportunities that have passed their smell test."³⁰

Later life

The 2014 memoir took its title from the motto Schwartz used to end disputes. He would listen to opposing views, make up his mind, and tell anyone who persisted to "just say yes."¹ He married Irene Zanderer, whom he had met at City College of New York; they were married for 63 years, until her death in 2014. He married Denise Jansen in 2018. In 2006 he founded BLS Investments, a private investment firm. He died at his home in Manhattan on March 12, 2024, aged 98.¹

Federal Election Commission records list itemized contributions under the name Bernard L. Schwartz with the employer BLS Investments in 2023 and 2024, including $100,000 on September 21, 2023 to the Harris Victory Fund, and $25,000 on February 6, 2024 each to the Harris Victory Fund and to the Democratic National Committee.⁴⁵