Tuesday, October 5, 2010

FACT CHECK: Hard-Hitting Ad Against Treasurer Candidate Doug Ducey

Andrei Cherny, Democratic candidate for Treasurer, has unveiled a strong attack ad (titled "Above the Law") against Republican opponent Doug Ducey.  According to the campaign, the ad will begin airing on Phoenix TV stations today.  The ad mentions Ducey's late property tax payments and late corporate filings, but the strongest attacks are against the former Cold Stone Creamery owner's record at that ice cream chain.

Former franchisees Ken and Jennifer Gornall are featured, claiming that Ducey is "directly responsible" for franchise failures and that he "basically cheated people out of their life’s investments."  Ms. Gornall puts an exclamation point on it by stating "In my opinion, he’s a crook."

After the announcer touches on the late tax payments and annual reports, he returns to Ducey's record as Cold Stone CEO (1995-2007).  As the voiceover states that he "cost taxpayers millions", the visual shows: "Doug Ducey: Cost Taxpayers $53 Million".  In smaller print, they list the source as the U.S. Small Business Administration.

It ends with a fierce audio and visual, too.  Ms. Gornall says "He's not an ethical man," and the visual claims "Doug Ducey shouldn't be treasurer."

Mr. Cherny has the funds to run this ad many times.  According to his most recent report (Sept. 23), the Cherny campaign had $460,265.64 on hand (compared to $12,862.11 for the Ducey campaign).

The fact check analysis is below the jump.


The ad makes four separate claims:
1) Ducey "basically cheated" franchisees, cheating them out of their "life's investments", and is, "in (her) opinion, he's a crook."
2) Ducey "didn’t pay taxes on his mansion, until running for office."
3) Ducey "failed to file required business reports."
4) Ducey "cost taxpayers $53 million."

1) Ducey was CEO of Cold Stone Creamery during the time when most franchisees came on board.  According to the reports shared by the Cherny campaign - and many other reports - a high percentage of franchisees did default on their U.S. Small Business Administration-guaranteed loans.  And, there are reports that some of the practices of Cold Stone made things more difficult for the franchisees.  The claims are presented as the opinions of one failed franchisee couple;  however, there is not sufficient evidence to support their strong opinions.  Arizona's Politics believes that - especially when tossing around strong words such as "cheated", "life's investments", "CROOK", and "not an ethical man" - stronger evidence should exist (see, "Tom Horne"). 
        GRADE:  "C"
2)  The claim about Ducey's failure to pay property taxes on his home in 2008 and 2009, and that he only paid them this year is correct.  Ducey has accepted full responsibility for the mistake.
         GRADE: "A-"
3)  Cold Stone Creamery (and related companies) did fail to timely file annual reports with the Arizona Corporation Commission for several consecutive years.  For a company of Cold Stone's size, it is not part of his direct responsibility - even though it may reflect on the culture of transparency that he may have established or failed to establish as CEO.  The ad does state that HE failed to file the reports and that "HIS firm faced dissolution" (emphasis added).
         GRADE: "B"
4) This claim is perhaps the strongest one in the ad, and the most troubling.  The Cherny campaign presents the $53 million figure as a hard stat ("Source: US Small Business Administration"), yet the SBA has NOT made such a claim.  Instead, the campaign relies on a CNN report of a report, and does some calculations to come up with the number.  Since most readers will not click on the link, the numbers are:

Number of SBA loans : 774
Total dispersed (sic): $180.9 million
Average loan size: $233,687
Failure rate: 31%
At least four problems arise.  First, I could not come up with $53 million of "cost(ing) taxpayers" from these numbers; the closest was $56.1 million.  Second, you cannot tell what the actual defaulted dollar amount is from these figures - the defaulted ones might be smaller loans in smaller towns, etc.  Third, the SBA does NOT generally accept responsibility for all of the amount lent by the lender.  The taxpayers may only have reimbursed the lender for 75, 80 or 90% of the defaulted amount. (Plus, if the franchisees lost their "life's investments", the lender may actually have recovered some of the defaulted balances - for itself AND the taxpayer.)  Fourth, it is very unreasonable to say that DUCEY CAUSED ALL of the defaults.
            GRADE: "C-"

CONCLUSION:  Overall, the strongest claims in this ad are the ones that are most problematic.  Since they are strongly opinion-based, an ad with only the Gornalls' powerful comments would have received a better grade.  It is wrong for the campaign to add its own claims, let alone to present them as factual.
            OVERALL GRADE:  "C-"

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Unknown said...

Ducey has accepted full responsibility for the mistake.

Ducey doesn't even dispute this how can you possibly justify and A-?

Mitch M. said...

Thanks for the comment, Doug. On surface, it does seem like a "huh", but my thought process was that it was a relatively minor mistake (often happens when loans are refinanced, etc), and that it has been acknowledged (a let's-move-on-factor).

I guess I could have spelled that out more cleanly. Thanks for spurring me to do so. Of course, grading is somewhat subjective and your marks may vary.

So, I'm guessing you had no quibbles with the rest of the article? ;-)

Michael C said...

Thanks for your site it is crazy out there. It seems politics and mud go hand in hand.