This Bud's for John

John McCain's family

By John Dougherty and Amy Silverman

Published: March 2, 2000

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  John McCain, doing one of his Nixon impressions.

By now, anyone who follows American presidential politics -- heck, anyone who owns a television set -- knows Arizona Senator John McCain's family story. His best-selling memoir, Faith of My Fathers, chronicles the lives of the senator's father and grandfather, distinguished admirals. The book takes readers up through John McCain's own military service, including his five and a half years as a prisoner of war in Vietnam. But Faith of My Fathers ends there, a few years short of John McCain's marriage to Cindy Lou Hensley and the advent of his political career.

Faith is only half the family story.

The rest could be called "Cash of My Father-in-Law," a tale of how beer baron James Willis Hensley's money and influence provided a complement to McCain's charisma and compelling personal story and launched him to a seat in Congress -- and perhaps to the White House.

Most Americans know Cindy Hensley McCain as the smiling blonde at John McCain's side. But what they don't know is that Cindy is John's meal ticket; the seed money for McCain's first congressional race came from her father's beer business -- today one of the largest Anheuser-Busch distributorships in the country.

Both McCain and Hensley declined to be interviewed for this column. But the public record provides a glimpse into Hensley's history and how McCain has benefited from it -- and how Hensley, in turn, benefits from McCain's powerful post as chairman of the Senate Commerce Committee, where the champion of reform in the tobacco and campaign finance areas has virtually turned his back on another subject in need of attention: alcohol regulation.

The story of Hensley's start in the liquor business is not the stuff of presidential campaign commercials, although it might well make a best seller. The family saga swirls with bygone accounts of illicit booze, gambling, horse racing, deceit and crime. James Hensley embarked on his road to riches as a bootlegger.

In 1945, James Hensley returned home to Arizona from the war, and joined his older brother, Eugene, in the liquor business. The brothers partnered with a powerful Phoenix businessman named Kemper Marley who had cornered a large share of Arizona's wholesale liquor business after Prohibition was lifted in 1933.

During and after World War II, the sale of whiskey was tightly regulated by the federal government. Demand for whiskey was high, particularly on the black market, where prices were more than double the regulated market price.

But the Hensleys figured out a way around the rules. According to a federal indictment that led to a 1948 trial, between April 1945 and January 1947 the Hensley brothers made approximately 1,284 false entries in documents related to the sale of thousands of cases of liquor by their two companies, United Sales Company of Phoenix and United Distributors of Tucson.

James and Eugene Hensley were convicted in U.S. District Court on federal charges of conspiracy, "with the intent and design to hide and conceal from the United States of America, the names and addresses of the person or persons to whom the said distilled spirits were sent, and the prices obtained from the sale thereof."

Besides the conspiracy findings, James was convicted on seven counts of filing false liquor records, and Eugene was convicted on 23 counts of filing false statements. Eugene was sentenced to one year in prison, and James to six months. Neither brother testified during the trial. The men were fined $2,000 each; United Sales and United Distributors were also convicted and fined $2,000 apiece.

In 1953, James Hensley once again found himself charged with federal liquor crimes. This time, the government alleged that Hensley and other officers of United Liquor Company and United Liquor Supply Company falsified records to reduce the company's tax bill. But on the opening day of trial, the judge dismissed all charges against Hensley and other individuals. The case continued against the two companies, which were ultimately acquitted.

In the early 1950s, James Hensley joined his brother Eugene in the purchase of Ruidoso Racing Association in south central New Mexico. The venture proved to be more trouble for the Hensley brothers, who became embroiled in a controversy with the New Mexico Racing Commission over hidden ownership.

According to the Albuquerque Journal, the Hensleys misled the racing commission by concealing the fact that a notorious Phoenix bookie -- Clareance "Teak" Baldwin -- held a one-third ownership in the race track. The commission asked the New Mexico State Police to investigate; the probe linked Baldwin to the Hensley's old liquor partner, Kemper Marley. A report from the 1953 probe noted that Marley financed Phoenix gambling operations and that Marley owned "a wire service formerly operated in connection with bookmaking of the Al Capone gang."

James Hensley sold his interest in the race track in 1955, soon after Baldwin's hidden ownership came to light. He returned to Phoenix, where he launched a Budweiser distributorship, a franchise reportedly bestowed upon him by Marley. Marley was never indicted in the 1948 federal liquor-law-violation case that led to the Hensleys' convictions, nor the 1953 case -- despite Marley's controlling financial role in the liquor distribution businesses.

James Hensley's conviction didn't deter the state of Arizona from granting him a wholesale liquor license in the mid-1950s. In subsequent years, the Arizona Department of Liquor Licenses and Control turned a blind eye to repeated liquor-law violations at the company. State liquor regulators did nothing when James Hensley failed to disclose his federal felony conviction on a sworn 1988 disclosure statement to the department and the City of Phoenix.

Hensley also needed a federal liquor license to operate his beer distributorship. Federal officials could not explain how Hensley -- convicted of federal liquor violations -- would have been able to get the "basic permit" required for liquor wholesalers. Such permits can remain in effect for many decades. It is extremely unlikely that a person with a similar conviction today would get a federal liquor license, according to the Bureau of Alcohol, Tobacco and Firearms.

Today, Phoenix-based Hensley & Company, the nation's fifth-largest beer wholesaler, is a privately held business that 79-year-old James Hensley still controls. Now one of the wealthiest men in Arizona, Hensley built the Budweiser distributorship into at least a $200 million-a-year business, with annual sales of about 20 million cases of beer.

James Hensley controls nearly all of the voting stock, and most of the rest of the closely held shares in the firm are placed in trusts for his grandchildren or owned by his daughter, 45-year-old Cindy Hensley McCain, wife of U.S. Senator and presidential hopeful John McCain.

In the late 1970s, John McCain was at a crossroads, both personally and professionally. His marriage to his first wife, Carol, was falling apart; the two were in the midst of a number of trial separations. And McCain, who would never fully recover from injuries he sustained in Vietnam, finally accepted the fact that he would never fly again. He liked his job as the Navy's liaison to the U.S. Senate, but it had done more to whet his appetite for politics than satisfy his career goals.

Then he met beer heiress Cindy Lou Hensley, an event that transformed his life. She was 25, he was 42.

McCain retired from the Navy in 1980, got divorced, and married Cindy Hensley. Although Hensley wealth has helped propel McCain's political career, the senator doesn't have direct access to the Hensley fortune because of an agreement the couple signed before their marriage.

Still, Hensley's power and money have been instrumental in McCain's political success. At its peak, McCain's pay as a naval captain was about $45,000. His first job in Arizona was as a public affairs agent for Hensley & Company. He was paid $50,000 in 1982 to travel the state, touting the company's wares. But he was promoting himself as much as he was Budweiser beer. A better job description might have been "candidate."

That same year, Cindy drew more than $700,000 in salary and bonuses from Hensley-related enterprises as her husband campaigned for the U.S. House of Representatives. The Hensleys loaned John's campaign more than $160,000, about a third of what he raised in the hotly contested race.

McCain was considered an outsider to many rank-and-file Republicans in the conservative First District, which had been left open by retiring House Minority Leader John Rhodes. McCain benefited not only from Hensley money, but also from his father-in-law's friendship with Darrow Duke Tully, the publisher of the largest daily newspaper in the state. Tully was enamored with McCain's military record and gave McCain copious free space on the editorial pages of the defunct Phoenix Gazette and an entrée to the power structure in Phoenix.

McCain won the Republican primary and coasted to victory in the 1982 general election. McCain rose to power the old-fashioned way -- by tapping into wealth, rubbing elbows with the powerful, and manipulating a fawning and gullible press. Ironically, a centerpiece in McCain's remarkable and sudden rise to national prominence is his promise of campaign-finance reform.

Yet McCain has relied heavily on the financial contributions from big corporate donors -- with the liquor and beer industry near the top of the list. McCain won -- one could say bought -- his first election to the House of Representatives in 1982 with lavish sums of Hensley beer money.

James Hensley wasn't just giving McCain money just because he was his son-in-law. In a rare 1988 interview, James Hensley gave a glimpse of his political savvy.

"The neo-prohibitionists are real active about trying to dry us up all the time," he told the Phoenix Business Journal. "They're a constant battle. They're going after us in different ways now than they did in those days, trying to ban advertising, things like that ... We're legislatively involved very heavily ... It's a way of life to protect our industry."

Since 1982, Hensley & Company employees have donated almost $200,000 to federal political candidates and campaigns.

McCain himself has received more than $60,000 from James Hensley and his employees -- and tens of thousands more from other beer-related interests.

Today, McCain is ranked the 26th wealthiest member of Congress by Roll Call magazine. There are 535 members in the House and Senate.

John McCain benefits from James Hensley's money.

James Hensley benefits from John McCain's political power.

While McCain blasts his colleagues for falling prey to the influences of campaign contributions, the senator's record reveals his quiet support for the business that launched and has helped maintain his career.

John McCain hasn't always been a champion of change. He voted against campaign finance reform repeatedly in the 1980s. Until recently, he took money from tobacco companies. He was a member of the Keating Five, senators accused of improper actions on behalf of wealthy contributor Charles H Keating and the focus of the most extensive Senate Ethics Committee hearings in 100 years.

But all of that is ancient history for much of the American electorate. Today McCain is reaping the benefits of his recent maverick act, as scores of Democrats and Independents across the country vote for him in GOP primaries.

But there is one area where it is unlikely that John McCain will ever emerge as a champion of reform: alcohol.

When he was elected to Congress, McCain swore he'd recuse himself on all votes related to the alcohol industry, given his father-in-law's and wife's business. And he has. But such votes are relatively insignificant when compared to other powers endowed on a senator -- particularly a senior senator who chairs an influential committee.

Particularly if the senator is John McCain, the committee is the powerful Senate Commerce Committee, and the issue is alcohol.

The Senate Commerce Committee has a number of alcohol-related issues in its purview, including the labeling of alcoholic beverages and the regulation of alcohol advertising. But you wouldn't know it from looking at the committee's agenda since McCain took its reins three years ago.

John McCain's influence regarding alcohol-related legislation comes from his inaction, rather than action. As a committee chairman, McCain has the unilateral power to kill a bill simply by refusing to put it on a committee agenda or schedule hearings.

And since McCain was elected chairman of the committee in January 1997, that's exactly what has happened.

George Hacker, director of the Alcohol Policies Project of the Center for Science in the Public Interest, says it's very hard to get alcohol-related legislation heard in Congress, and more difficult since McCain took the helm of the Senate Commerce Committee. "Having someone with no interest and who really refuses to take an interest in alcohol is a serious problem in the Commerce Committee," Hacker says.

But does mere indifference actually benefit the liquor industry?

"Well, sure," Hacker replies. "If the chairman has a problem dealing with these issues, he'll go on to something else."

In fact, three alcohol-related bills have been assigned to McCain's committee since he became chairman, and none has been taken up. All three were sponsored by Senator Strom Thurmond, a South Carolina Republican. All deal with alcoholic beverage labeling and are vociferously opposed by alcohol interests.

And then there's the matter of the alcohol advertising hearings the Senate Commerce Committee was set to hold in early 1997. Scheduled in late 1996, before McCain became chairman, they were rescheduled, put off, and, in the end, never held.

Last month, Anheuser-Busch announced it would once again serve as the primary sponsor of the four official presidential debates to be held this fall -- the last one in St. Louis, the company's hometown. The cost of the St. Louis debate, $550,000, was released, but the total amount Anheuser-Busch will spend to sponsor the events was not made available.

Unless George W. Bush delivers a powerful counterpunch to McCain's swelling bandwagon, John McCain will be standing on the Republican party podium at debates paid for by the King of Beers.

At his side will be Cindy.

Beer baron James Willis Hensley will probably be back home in Phoenix.

This article can be found at:

http://www.houston-press.com/2000-03-02/news/this-bud-s-for-john/full