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Meet the Texas billionaire who backed Philly soda tax — and now is funding attack ads in N.J. Senate race

A Texas billionaire who has poured millions of dollars into education change across the Philadelphia region and helped fund the defense of the city's controversial soda tax is now bankrolling another cause: helping Democrat Bob Menendez keep his U.S. Senate seat.

John Arnold, a Texas billionaire and former hedge fund executive, testifies in Washington in 2009.  He is bankrolling a super PAC that is running ads in the New Jersey Senate race.
John Arnold, a Texas billionaire and former hedge fund executive, testifies in Washington in 2009. He is bankrolling a super PAC that is running ads in the New Jersey Senate race.Read moreJ. Scott Applewhite / ASSOCIATED PRESS

A Texas billionaire who has poured millions of dollars into education issues across the Philadelphia region and helped fund the defense of the city's controversial soda tax is now bankrolling another cause: helping New Jersey Democrat Bob Menendez keep his U.S. Senate seat.

Newly disclosed campaign finance records show John Arnold — a former hedge fund executive turned philanthropist – as the driving force behind a multimillion-dollar ad campaign against Menendez's opponent, Republican Bob Hugin.

The ads, airing in Philadelphia and New York markets, rip Hugin for raising drug prices for cancer patients while he was chief executive of the pharmaceutical giant Celgene Corp.

"He was the CEO of the drug company that doubled the price on us — while he made $100 million," a cancer survivor featured in the ad says. "Now he wants to be your senator. But I'll always know him as the guy who made a killing off cancer patients like me."

Through Friday, the super PAC responsible for the anti-Hugin ads had bought $1.9 million worth of airtime and online advertising, records show.

Menendez isn't mentioned in the ads. Still, they could give a much-needed lift to the incumbent Democrat, who survived a federal corruption trial last year but was politically weakened by the allegations. They also offer a glimpse of the role of outside spending in congressional races, something likely to draw even more scrutiny as the country moves toward a midterm election seen by some as the most pivotal in a generation.

Arnold, of Houston, isn't a household name at either end of the political spectrum. Since retiring in 2012 at age 38, the onetime trader at the now-defunct energy company Enron has supported progressives, such as Barack Obama, but also angered traditional Democratic constituencies, such as public workers, with his support for changing government retirement plans and promotion of charter schools.

Arnold left Enron when it went under in 2001; he wasn't accused of wrongdoing in connection with the company's infamous collapse.

"I've now been called the 'next Koch brother' by the far-left press and the 'next George Soros' by the far right," he wrote on Twitter in March. "I'm an equal-opportunity special-interest pot stirrer."

Much of the pot has been stirred through Action Now Initiative, the Houston-based nonprofit that Arnold and his wife, Laura, founded in 2011. Records show that Action Now, registered with the IRS as a "social welfare organization," has passed $3.1 million to Patients for Affordable Drugs Action, the super PAC that produced the ads against Hugin.

In addition, the Arnolds run a foundation that has awarded nearly $1 billion in grants since 2011. It funds research to inform the public about obesity, charter schools, pension reform, and criminal justice issues, according to tax filings.

Attempts to reach the Arnolds were unsuccessful.

Despite their Texas roots, they are no strangers to causes in the Philadelphia area. Their foundation has contributed millions of dollars toward education reform and charter schools in Camden and Philadelphia, records show.

Researchers at the Arnold Foundation also developed the risk-assessment tool used by New Jersey courts after the state overhauled its cash-bail system. The changes took effect in 2017.

Among the Arnolds' most recent initiatives was providing funding to advance and defend Mayor Kenney's tax on soda and other sweetened beverages. In 2016, tax filings show, Action Now Initiative gave $400,000 to Philadelphians for a Fair Future, a nonprofit that promotes the soda tax and lobbied for its passage.

And the Arnold Foundation donated $500,000 to Philadelphia to help pay for legal fees defending the tax in court against a lawsuit filed by the American Beverage Association. At the time, the city described the unsolicited donation as an important "counterbalance" to the beverage industry's "intimidation." The city spent $1.7 million on outside counsel legal fees, according to the Law Department. The Pennsylvania Supreme Court upheld the tax this month.

Now, the Arnolds, who have been funding research on drug prices for a few years, are going after Big Pharma in the political arena, arguing that the industry has stifled efforts to change the drug-pricing system through lobbying and political contributions.

The super PAC spending money in the New Jersey Senate race was founded by David Mitchell, a cancer survivor and patient advocate. Diagnosed in 2010 with an incurable but treatable cancer called multiple myeloma, Mitchell took the drug Revlimid for 5½ years. He accused Celgene, the drugmaker led by Hugin, of jacking up prices and blocking a generic version of the drug from coming to market.

"Bob Hugin is a bad actor," Mitchell said. "He is a classic Big Pharma CEO."

He pointed to the release in May by the Food and Drug Administration of a list of drug manufacturers, including Celgene, that it suggested had delayed generic competition.

Mitchell, who suffered a relapse in 2014, founded an advocacy organization aimed at lowering drug costs. And this year he launched the super PAC — which he says will support candidates of both parties — to get results at the ballot.

The Arnolds offered the funding, he said.

Sam Mar, CEO of Action Now Initiative, said the group wants to "shine a light on the issue of skyrocketing prescription drug prices."

"Despite broad, bipartisan consensus that drug prices are out of control, our politicians have repeatedly failed to deliver meaningful reform," Mar said in an email, adding that Patients for Affordable Drugs Action "holds our representatives accountable and lifts up those who are champions for affordable drug prices, regardless of political party."

So far, the money is being used only on negative ads against Hugin, a Marine Corps veteran who retired as executive chairman of Celgene in January after 19 years at the company. He was CEO from 2010 to 2016.

Menendez's seat is seen as relatively safe — Garden State voters haven't elected a Republican to the Senate in 46 years — but the race shows signs of being one of his toughest. A little-known challenger got nearly 40 percent of the vote in June's Democratic primary, and Hugin has already spent millions of his own money on campaign ads. The Republican has been pounding on the ethics allegations that almost derailed Menendez's political career.

Menendez had $6.4 million in his campaign account as of June 30, while Hugin had $8.1 million. The Republican has largely self-funded his campaign, and the race is likely to cost tens of millions of dollars.

Many pundits predict that the GOP will be able to hold on to its slim majority in the Senate, but as November approaches, more outside money is likely to flow into the tightest races. Integrity N.J., a super PAC founded by allies of former Republican Gov. Chris Christie, says it will support Hugin and "shine a bright light on shamelessly corrupt Bob Menendez." The group has raised $2.1 million.

The ad paid for by Mitchell's super PAC shows the cancer survivor, Pam Holt, holding what she says is the "drug that keeps me alive."

"The price to make one capsule: less than a dollar," Holt tells the camera. "The price the drug company charges: more than $600. Why? Ask Bob Hugin."

Mar said the Arnolds do not personally know either candidate in the New Jersey Senate race.

Hugin campaign spokesperson Megan Piwowar said Hugin and Celgene "discovered medicines that have revolutionized the fight against deadly blood cancers and have saved and extended lives for hundreds of thousands of patients."

An ad released by the Hugin campaign this month shows a father describing how "Bob and Celgene stepped in" to help his son, who had been diagnosed with a cancerous brain tumor.

The Republican's campaign also noted that Menendez has received substantial campaign support from the pharmaceutical and health products industry — $927,615 over his quarter-century in Congress, according to the Center for Responsive Politics. That includes donations from Celgene – and Hugin himself.

A spokesperson for the Menendez campaign declined to comment on outside political spending.

Piwowar, citing the corruption case, said Menendez had abused his power to help his friend and donor Salomon Melgen, a South Florida eye doctor who was sentenced in February to 17 years in prison for Medicare fraud. That sentence was handed down in a separate case that didn't involve Menendez.

In the bribery case, prosecutors had accused the senator of accepting scores of gifts from Melgen in exchange for advancing the doctor's personal and financial interests. The trial ended in a hung jury last year, and prosecutors later dropped the case.

Menendez pronounced himself vindicated. His campaign has portrayed Hugin as a "greedy drug company CEO" and ally of President Trump, who is unpopular in New Jersey.

Staff writer Laura McCrystal contributed to this article.