It’s a perfect late summer day at Huntley Hall, the stately manor of Northern Virginia developer John T. "Til" Hazel. Tuxedoed waiters breeze past offering chablis and Bloody Marys as guests buzz about the coming election. Here in Fauquier County is the cream of Virginia’s business community, people with hefty net worths whose enterprises shape the state’s economic future. Normally, these folk would be rock-ribbed Republicans. They espouse a pro-business philosophy and fiscal conservatism typically associated with the GOP.

Rendering by Marina Galuszka and A.E. Gorham Photo by Joe Mahoney

Except for one thing. They are here at Hazel’s hilltop home to back the gubernatorial run of a Democrat, not a Republican. Their man is Mark Warner, a tall, square-jawed entrepreneur and self-made millionaire, who has been active in Democratic politics for more than a decade but has never held office. Warner is here on Hazel’s veranda, nodding attentively, smiling his horsy grin, beaming over his obvious inroads to the business elite. Conversation bounces from the high-tech downturn, to teacher’s salaries, to clogged highways to the budget impasse and revenue woes of outgoing GOP Gov. Jim Gilmore.

Warner is at home here — a major player not just in politics, but among the movers and shakers who have guided Virginia’s transformation in the past decade from relative backwater to high tech powerhouse. There are plenty of Republicans at Hazel’s soiree, including former GOP gubernatorial candidate Earle Williams and Judy Peachee Ford, who worked in the Reagan White House but now heads "Virginians for Warner," which is sponsoring the event. After a buffet brunch of quiche and salads under a massive backyard tent, Linwood Holton, GOP governor in the early 1970s, introduces Warner. Surveying the crowd, he quips, "I could’ve thought this was the Republican campaign committee."

Rendering by Marina Galuszka and A.E. Gorham Photo by Joe Mahoney

Absent is former Attorney General Mark L. Earley, who is running for governor on the Republican ticket. While Warner spent his fast-track career setting up venture capital funds for fledgling high tech start-ups, Earley has followed the traditional, public service route — state senator for 10 years and then attorney general under Gilmore. He seemed destined to become the third member of the populist, conservative troika including former Gov. and now-U.S. Sen. George Allen and Gov. Gilmore, whose political success early in his administration propelled him to head the Republican National Committee.

Yet, there is something odd about this picture. Warner and Earley seem to have traded places unintentionally. Earley, a former Democrat sympathetic to labor and environmental issues, is the most moderate Republican to run for governor in more than a decade. And Warner’s pro-business stances seem to out-Republican the Republicans. No major differences between the candidates on economic or business issues have surfaced so far — with the exception of the car-tax cut and resulting budget impasse. The issue has emerged as the major dividing line in the race. Even then, Warner has adopted a position of fiscal conservatism, a priority of Republicans as much, if not more than, the Democrats. With tax cuts eating into revenue growth, popular spending priorities are being put on hold. The sputtering economy isn’t helping. The commonwealth may be losing its reputation for financial rectitude. Some Warner supporters speculate that Wall Street financial houses, such as Moodys, may do the unthinkable and cut the Old Dominion’s enviable AAA bond rating.

Other differences tend to be in tonalities and style. Earley points out that Warner has never been in public office and holds left-wing ideals at odds with voters. Warner did manage the successful 1989 gubernatorial campaign of Doug Wilder, the first black ever elected governor in this country who once held distinctly liberal views. But today, Warner exudes noteworthy GOP values, such as self-reliance, trust in the private sector and entrepreneurship.

The two Marks square off: (Warner (left) and Earley Photo courtesy Richmond Times-Dispatch

Earley should be a shoo-in following eight years of strong GOP governors. Instead, he is drawing painful comparisons to Al Gore. His loss would be a serious setback nationally for the Republicans, who face governors’ races only in one other state, New Jersey, and mayors’ races in Los Angeles and New York. Losing those three might be inevitable for the GOP. But to lose a steadfast GOP stronghold such as Virginia, which produced the current head of the party, would be unthinkable and could have severe repercussions for Gilmore personally and for Republicans in general.

Short of funds and behind Warner in ad spending, Earley is striking hard at the gut conservatism of many Virginia voters in a tactic that seems at odds with his middle-of-the-road demeanor. The Republican Party launched tough attack ad mailings and radio spots in conservative areas that try to paint the Warner team as closet liberals who back homosexual marriages and oppose the death penalty. Even so, in mid September, Earley was 11 points behind in the polls. "He’s [Earley’s] in the worst of both worlds," says University of Virginia political scientist Larry Sabato. "He’s lost a big segment of the business community that’s normally Republican. But he hasn’t built up enough among the general electorate to counter-balance it. He’s lost labor, he’s lost state workers, he’s lost minorities." Sabato, however, is loath to call the election. "Anything can happen," he says.

One irony is that many of Earley’s problems are not of his making. His difficulties with business, for example, trace back not to him but to his mentor, Gilmore. The governor defied many Republican legislators who wanted to slow down abolishing the car tax because the weakened economy had sapped state revenues. The resulting budget impasse created big political opportunity for Warner. To balance the budget, Gilmore has delayed funding pay raises for teachers, state policemen and other state workers. Now, there are suggestions that the state’s $45 billion biennial budget might be $500 million short. Impacted are two areas held sacred by Virginia’s business community — roads and colleges — that are deemed essential if the state is to keep its economic good times rolling.

Even though Earley takes such issues seriously — his campaign plan would pump $1.8 billion into transportation — at the moment many business executives see Warner as more pro-active on issues that matter. "I don’t think the issue is that Mark Warner comes out of a business environment," says Phillip Odeen, executive vice president of conglomerate TRW’s Washington office. "The thing that attracts a lot of people to him is he seems to have a more focused approach on what it takes to keep the economic boom coming to this state." Odeen heads the Virginia Business Council, a nonpartisan group that pushes issues important to business. Odeen says his group met with Gilmore on such matters as highway congestion in Northern Virginia, but didn’t get very far.

Thus, an inexplicable, almost cosmic, chain of events is giving the Democrats a boost in an increasingly conservative state that has shunned them for more than a decade. "In Virginia politics, everything has to be aligned to imagine a Democrat winning statewide," says Stephen Farnsworth, assistant professor of political science at Mary Washington College in Fredericksburg. "You need the perfect storm. And the Republicans seem to have done a lot of things that Mark Warner would have wanted — a contested nomination, a legislative train wreck and frozen pay for state workers, who vote in large numbers. These are circumstances that do not favor Republicans this time."

Not all in the business community back Warner. Analyst Sabato figures that at least half of the state’s prominent business executives are still in Earley’s camp. Robert Martinez, a Norfolk Southern Corp. vice president who served as Allen’s transportation secretary, hangs tough with the Republican candidate. "I think Earley’s been very clear from the business angle in his support for free enterprise and low taxes," says Martinez. "I think that it’s going to be good for the business climate in Virginia. I think it’s natural that Warner would have some business support, but I don’t think he’s got the same grounding in market principles that Mark Earley has."

Warner’s overwhelming support among rich technology executives and financiers has contributed to his war chest, allowing him to run television ads all summer long that Earley could not afford to respond to. The names of business executives who have contributed $50,000 or more to Mark Warner reads like a who’s who of the Virginia corporate community. There’s Steve Case, Barry Schuler and Ted Leonsis of AOL-Time Warner, MicroStrategy kingpin Michael J. Saylor and fellow North Virginia venture capital mavens Eric F. Billings, Russell W. Ramsey and Emmanuel J. Friedman. All represent money that might otherwise have gone to Earley. Warner, whose net worth is estimated at $200 million, likewise can fund plenty of campaign ads himself. He is spending at least $750,000 of his own money on the campaign. Earley can turn to Gilmore and the RNC for funds, but sources say that squabbling between the camps over strategy has hurt the flow of campaign money.

Until the Sept. 11 attacks, President George W. Bush and Vice President Dick Cheney had planned Earley fundraisers, while Earley is hoarding his funds for a late-campaign ad blitz. "I think it’s going to be an extraordinarily close election," says John C. Watkins, a Republican state senator from Chesterfield County who backs Earley. "Mark has probably showed a lot of restraint in terms of his financial commitment to date, but I think he’s wise from the standpoint that he’s saved a lot of his resources for the last 60 days when most of the voting public focuses on the election." But a late campaign ad deluge may not be enough. "I’m for Warner simply because of name recognition," says Carol Harrison as she pats a friend’s dog and waits for her son’s school bus in the southwestern Virginia town of Richlands. "I know who Warner is, I see his ads, I know what he stands for. I don’t know the other guy, and I usually vote a split ticket. Ask 50 folks to name the attorney general and they wouldn’t know."

Happenstance, indeed, may be the undoing of Mark Earley, who is generally regarded as a caring, principled man of strong beliefs and mostly middle-of-the-road views. "He’s strongly conservative on abortion, but he’s a moderate on everything else," says Sabato. In fact, earlier in his career, Earley was something of an anomaly, a Republican who supported labor and was sensitive to the environment and the issues of minorities. Born in Norfolk in 1954, he grew up in Chesapeake. His father worked at the Norfolk Naval Shipyard and was staunchly pro-union, according to Daniel LeBlanc, president of the state AFL-CIO, who has known Earley for years and helped him campaign for the state Senate in 1987. "He came from a real labor area," says LeBlanc. "He grew up and went to school with the man who is now the head of the state building trades." After graduating from the College of William and Mary in 1976, Earley spent two years at a university in the Philippines and worked as a Christian missionary. Indeed, many members of Virginia’s Filipino community say they back Earley. "There’s a large Filipino community down in Tidewater and they’re going for Earley. He’s supported legislation that recognized their contributions to the U.S. in World War II," says Felix Garcia, a Filipino-American investor in Richmond.

After law school at William and Mary, Earley spent part of his legal career handing workman’s compensation issues, says LeBlanc. In the Senate, he proved sensitive to issues of the average working man. Environmentalists praise him for taking time to understand their concerns, although he didn’t always vote their way. "He would listen to us very politely, then vote the wrong way, I recall. But he would listen to you," one environmental activist says.

Earley’s turn to the right came after redistricting took away many blue collars voters from his constituency. By the 1990s, the state Republican Party had become strongly influenced by the Christian right and such powerful, Virginia-based television evangelists as Pat Robertson and Jerry Falwell. The state GOP took more interest in conservative social issues, such as abortion and toughening sentences for criminals. Earley tacked appropriately and in 1997 became Gilmore’s attorney general in a staunchly conservative administration.

Warner, meanwhile, was busy in Democratic politics and building high-tech companies through Columbia Capital, his Alexandria-based venture capital company. The 46-year-old Connecticut native attended George Washington University and Harvard Law. Warner cut his teeth in his early 30s as an U.S. Senate aide where he learned of the U.S. government plans to sell radio spectrum for cellular telephones. Armed with such intelligence, Warner got rich by acting as a broker for individuals who had won lotteries for radio spectrum. Many had won radio rights in disparate markets and Warner arranged swaps to put together workable ones. One business partner says Warner won his fortune not by being a technical genius, but by shrewdly manipulating market opportunities in new and little-understood technologies. As his former venture capital partner James B. Murray Jr, writes in his recent book, "Wireless Nation, The Frenzied Launch of the Cellular Revolution," at one auction Warner held six markets for cell phone spectrum, "garnering more than $800,000 in fees for himself - a spectacular windfall for someone who just months earlier had spent nights sleeping on the floors of friends’ apartments or in the back seat of his 1965 Buick Special."

Later, Warner caught the venture capital wave for other new technologies, including the Internet and telecommunications infrastructure. Catching the right market trends helped Warner amass a fortune worth $200 million. Some of his venture capital investments helped propel Virginia into a hotbed of Internet activity in the mid to late 1990s. Last year, for instance, Virginia had become fifth among 50 states in the creation of high tech jobs.

Not all of Warner’s ventures have succeeded. A number of ventures disintegrated, such as Richmond’s Homebytes, which tried to sell homes online, and Experient Technologies, a distance-learning company. But others are still in business. Hampton Roads-based Envest, a Warner–backed venture fund, invested in medical technology companies and others. Southwest One, a $5 million fund founded in 1998 and the first of Warner’s downstate venture funds, has invested about two-thirds of its funds, mostly in companies with ties to Virginia Tech’s research cluster. Warner’s other venture capital funds are moving more slowly mostly due to the sluggish economy. Southside Raising has more than $7 million but only invested about a third. A fifth fund, Shenandoah Capital Ventures, was formed in January but so far hasn’t invested anything.

Just as Earley’s past shows he may not be as hard-line as he is being presented, Warner may not be anything like a typical Democrat on basic issues such as the environment and labor. Some state environmental regulators say privately that they are wary that Warner’s pro-business stance may lead to lax protection of Virginia’s ecosystems. High tech industries are hardly friendly to unions, and some in the labor movement are concerned. Even so, Warner has garnered endorsements from the Virginia Education Association and some environmental groups. The AFL-CIO backs Warner, too. LeBlanc says that both candidates visited the state AFL-CIO offices last spring. "It was a lively debate after Earley and Warner left the room," he says. "The membership unanimously came down in the side of Warner. What separated it about Earley was the people he runs with — Gilmore, the RNC. We are scared to death of the national Republican platform on workers."

Unable to pry traditional Democratic constituencies from Warner, Earley is playing to the conservative values of undecided voters. Even though some GOP stalwarts, such as State Senator Watkins, find Earley’s recent hard-line fliers attacking Warner distasteful — "It turns people off to the process," Watkins says — analyst Sabato says they are necessary given the nature of Virginia voters. And, Earley could out-politic Warner on issues with which he has little experience, such as law enforcement. On Sept. 6, for example, Earley stood outside a downtown Richmond nightclub that he help shut down as attorney general after allegations of drug and alcohol abuse. There, he pitched a mandatory one-year minimum jail sentence for anyone caught selling drugs near a school. Attacking Warner, he noted that he co-sponsored a bill to abolish parole in Virginia several years ago while Warner publicly opposed it.

What remains to be seen, however, is just how far playing on the conservative emotions of Virginia voters will go. Voting for tax cuts and tighter parole has played well for the GOP for nearly a decade. Yet, if the public indicates it is tired of such ploys, that could presage a major turn in Old Dominion politics.

Many of the turncoat Republican business executives wish for such a change. They are less concerned with social issues than fiscal and economic ones, such as making sure that there is enough state money for universities to turn out workers with skills the high-tech sector needs. Ever since George Allen, says developer Hazel, the GOP mantra has been "tax refunds, cut taxes, cut taxes. That is Gilmore’s legacy." Hazel, who has backed Republican candidates for two decades, says Gilmore "had a free lunch" and "no one questioned it." Now, says Hazel, the car tax debacle has created a $500 to $600 million shortfall affecting state payments to public schools and funding for overcrowded highways.

Another theme among Republican business people who back Warner is their resentment at the Christian right highjacking the GOP. "We’re going to take back the party from these people," says Hazel. Over the years, Joan Girone, a former GOP activist and member of the Chesterfield County Board of Supervisors who joined Virginians for Warner, has become increasingly disillusioned with a party she says has moved away from the mainstream. The final straw for her, she says, was the inability of Gov. Gilmore and the Republican-controlled General Assembly to pass a budget last spring. "I didn’t leave the party, the Republicans left me."

Of course, it is entirely possible that by saving up for an October blitz, Earley could pull off a tight win. Earley backers note that both Allen and Gilmore were behind their Democratic challengers at the mid-September stages of their elections and still won. Some say that the issues that resonate with Virginia voters really haven’t changed. "The GOP’s push to cut government spending is still popular with voters," says Fred Malek, founder of Thayer Capital, a private equity firm based in Washington ""It also reflects the core values of the Republican Party, and I believe that trend is going to continue."

And, as Sabato notes, a Warner win won’t automatically mean a flow of state funding towards education and roads, and the business community might feel shortchanged. "They will be disappointed if they elect Warner. When it comes to money, we’re in a trough. He won’t get a tax increase through. Not with this Assembly."

Even so, a Warner win would be a sea change for Old Dominion politics. It could show, as analyst Farnsworth says, that the GOP has run its course. If it has and Warner wins, Sabato predicts a GOP witchhunt for the guilty "sort of like ‘Who Lost China’." A lot is at stake as Earley and Warner trade places.

With reporting from Paula C. Squires

Return to Virginia Business - October 2001