Checchi's Checkered Record

Megamillionaire Al Checchi thinks he piloted Northwest Airlines so well that you should elect him governor. Actually, he sucked in public subsidies, strong-armed unions, reneged on promises -- and still almost flew the firm into the ground.

Only 312 people in the country are richer than Alfred A. Checchi. The rest of us are poorer, according to the latest score card of American wealth published by Forbes magazine, which estimates Checchi's worth at upward of $600 million, give or take a few million. The total depends on how the stock market is faring at any given moment.

Seated at a conference table -- in crisp shirt sleeves, his suit jacket neatly laid on a nearby chair -- the Beverly Hills businessman declines to pin down the figure more precisely. "I don't talk about how much wealth I have," Checchi says, dismissively.

But Checchi's wealth is really all there is to talk about. It is why he can, at age 49, run for governor of California as the latest multimillionaire vanity candidate offering himself for public service. Few people in the state know who Checchi is, and he lacks any discernible political credentials, other than contributing heavily to Democratic campaign coffers. But Checchi is betting that $30 million of his own money will buy enough political operatives and television time to overcome those handicaps by next year's election.

The bulk of Checchi's wealth consists of 11.4 million shares of stock in Northwest Airlines, a $5 billion company and the nation's fourth largest air carrier. Checchi owns more than 10 percent of the Minnesota-based airline, and stepped down as co-chairman of its board earlier this year to pursue his dreams of elective office.

When he announced his Democratic gubernatorial bid in late September, the state's major newspapers almost automatically anointed Checchi a contender. Lt. Gov. Gray Davis, the only other official Democratic candidate so far, is taking Checchi and his war chest seriously. A candidate willing to spend $30 million, give or take, cannot be ignored.

His ability to amass great fortune, in fact, is a major reason Checchi believes voters should take him seriously. He offers it as proof of his intellect and savvy, a testament to skills and judgment honed while scaling to the heights of prosperity.

So it seems odd that Checchi, seated at a conference table during an interview, appears put off by questions about exactly how he came to be so rich. He smooths his unruffled cuffs. His gray-green eyes cast about the room. He slaps the table with varying degrees of vigor.

"I guess the only thing that bothers me is that it's almost like deja vu. I have to relive this again?" he asks. "It's a little vexing."

The story Checchi prefers -- the one being spun out by his campaign staff and duly parroted in both San Francisco dailies -- casts Checchi as a financial prodigy, a masterful businessman who took over troubled Northwest Airlines and guided it to unprecedented profitability. It's a story business types call a "win-win": Checchi gets rich, the stockholders make money, and a company that was in dire straits lives on, winging passengers about the globe.

But that version glosses over some crucial elements of the tale. That Northwest didn't begin to founder, for instance, until after Checchi led a leveraged buyout of the airline, saddling it with more than $3 billion in debt. Or that the airline came within hours of bankruptcy in 1993, and was saved at the last minute only because its unions agreed to eat more than $800 million in salary and benefit cuts.

The sanitized version of the Checchi success story ignores the Minnesota legislators and business leaders who still complain that Northwest shook down their state for hundreds of millions in loans when the airline was going broke, and then reneged on its promises to create 2,000 jobs in return.

No wonder it is a painful period for Checchi to relive. During most of the time he had a direct hand in Northwest's affairs, the company careened from crisis to crisis, posting more than a billion dollars in losses and scrambling to remain solvent.

Critics argue that Northwest's survival was more a product of luck than wisdom, that Checchi and his business associates borrowed their way into trouble and kept on borrowing until the economy picked up enough to carry the airline back into the black. Along the way, critics say, Checchi and company cavalierly risked the survival of a venerable company and the jobs of its tens of thousands of employees. For Checchi to trumpet his business acumen, they say, is akin to a doctor bragging because a patient happened to survive repeated bleedings.

"If the state [of Minnesota] hadn't come up with money, Northwest probably would have declared bankruptcy, and somebody else would be running that company today," says Arthur Rolnick, director of research for the Federal Reserve Bank in Minneapolis.

Checchi counters that Northwest did survive, and is now profitable. He bristles at critics who question his stewardship of the company. "I think you find a lot of people that just resent somebody being financially successful," he says.

Checchi's own financial health, however, is one of the few things that he did not risk at Northwest. An adept financier, Checchi put less than $10 million of his cash into the $3 billion-plus takeover -- less than one-third of 1 percent of the purchase cost -- and recovered his money almost instantly. If the airline had tanked, Checchi and his buddies stood to lose little or none of their own investments. Other people put up the cash. Checchi provided the blue skies.

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