Potomac Entrepreneur Considers Senate Bid

Potomac Entrepreneur Considers Senate Bid

Rales could spend $5 million — mostly his own money — seeking Dem. nomination.

Josh Rales is facing long odds.

The 47-year-old Potomac businessman is considering a run for U.S. Senate next year, when Sen. Paul Sarbanes will retire. He has never held an elected office.

If he runs, he will square off for the Democratic nomination with two political veterans — U.S. Rep Ben Cardin (D-3rd) and former Congressman and NAACP head Kweisi Mfume — both of whom have statewide name-recognition. Rales has none.

He’ll have roughly one year to travel the state and convince voters that a wealthy real estate investor is equipped to tackle issues like welfare and affordable health care. He’ll have to overcome the stigma of hailing from Montgomery County among rural voters in western and southern Maryland.

None of this bothers Rales. He talks about his prospective candidacy with a mixture of humility and tenacity. He’s used to long odds.

“I’m an entrepreneur — so this is a startup business,” Rales said.

AS A REAL ESTATE investor, Rales made millions turning around run-down and mismanaged apartment buildings in working class neighborhood in the Washington and Atlanta areas, through his company — Rales Family Investments or RFI.

The investments were lucrative, but Rales says that the work also served a social purpose that investing in luxury apartments does not. Many of the areas where Rales invested were places other companies wouldn’t touch — evidence, Rales said, of the outsider’s vision he would bring to the Senate.

“I want to elevate this process,” Rales said. He chose the Senate because six-year terms provide the time to work meaningfully on problems without constantly raising money for the next election.

“You have time to think about these problems and you have time to go out and sell people on what you believe are the solutions. … That’s kind of where my business background comes in. I’m thinking in terms of how do we solve problems — that’s the only way that I’ve been able to make a living,” Rales said.

RALES EXPECTS to make a decision by the end of the summer on whether he will run. He is already working closely with a prospective campaign manager, Robin Rorapaugh, who has run statewide campaigns in Florida and Texas. He has met with political literati like James Carville and author Tom Friedman.

“I’m really looking to see if there’s a strategy that I think gives me a reasonable shot,” he said. “I’m not on a Don Quixote type of mission here.”

A run would mean spending millions on a primarily self-funded campaign. Rales said on WTOP Radio’s “Politics Program with Mark Plotkin” that he is virtually certain to spend $5 million if he runs, and could spend much more. It would also mean long weeks on the road, apart from his 11- and 14-year-old children.

Fiscally conservative and socially liberal, he does not stumble talking about his support for stem-cell research and gay rights or his belief that the pending financial crisis posed by Medicare dwarfs the Social Security worries President Bush has tried to address in his second term.

“Josh is a very, very serious policy thinker,” said School Board member Steve Abrams, a prominent Republican and friend of Rales. “If people can get to know him, he can be quite formidable.”

Abrams said he wasn’t qualified to assess Rales’ odds in a Democratic primary, but added, “Anyone who underestimates Josh does so at their own peril.”

Steve Dorick, currently a construction manager at Fairfax County, Va., development company Gates Hudson, worked closely with Rales for 17 years at Rales’ own company. Dorick said Rales could definitely be competitive.

“The way I would characterize him is very out front, lets everyone know what’s going on to a fault … It’s tough to make money period, but to make it ethically and honestly is that much more of a challenge and I know from experience that that was the way that we did things,” Dorick said. “If he should decide to do it, I know he will get some very high-quality people and he’ll work on it very conscientiously … I don’t think he thinks he’s missing anything by not having held some lower-level offices.”

Rales projects a sense of idealism and a deep frustration with America’s current leadership.

“One of my feelings today is the people who are running this country are milking it. They’re not nurturing it, they’re not trying to build it up for the future, they’re milking it. They’re milking it for their personal needs,” he said. “I don’t want to milk the system. I want to plant an olive tree.”

The country’s founders meant for the political establishment to be stirred every few decades and that the Washington culture of special interests and persistent incumbencies have stalled the needed infusion of new blood, Rales says.

Virginia Gov. Mark Warner (D), who ran unsuccessfully for U.S. Senate in 1996, then won his race for governor in 2001, is a role model, Rales says. Under Warner, Virginia became the only state to earn all As in Governing Magazine’s Government Performance Project, which rates states’ management practices.

Warner is also a wealthy, self-made entrepreneur who had never held office before. Now there is speculation that Warner, limited to a single term as governor by Virginia’s constitution, is now eyeing a run for president in 2008.

So if Warner can shake things up, why not Rales?

There is the problem of party loyalty.

Rales said he was a lifelong Democrat until the mid-1990s, around the time of the then House Speaker Newt Gingrich’s Contract with America. Rales was socially liberal but saw a better fit in Republicans’ promises of debt reduction.

In 1995, he was invited to a dinner where he sat next to then U.S. Rep Connie Morella (R-8th). “I thought, ‘She’s not a bad model. She believes in self-responsibility and it’s important to have that fiscal discipline. She’s liberal on the social issues like me, but she’s a Republican.’ And I thought, ‘Maybe this is a better fit for me,’” Rales said.

He switched parties and supported Bush in 2000, anticipating debt reduction, caution taking part in nation-building abroad and “compassionate conservatism.”

“Then the beginning of my disillusionment started, Rales said. Bush instituted “reckless tax cuts” and betrayed the country by entering Iraq on false pretenses, Rales said. Compassionate conservatism morphed into a shift further to the right, with the banning of most stem cell research and efforts to prohibit civil unions between same-sex partners.

“This goes against everything I believe in. What I’ve discovered is that the Republicans are more interested in power,” Rales said.

In 2002, Maryland Republican Party Chair John Kane, a Potomac resident, courted Rales to run against Sen. Barbara Mikulski. Rales declined, saying he considered Mikulski to be an incomparable advocate for Maryland and that running against her would be foolish.

Rales switched back to the Democratic Party in August, 2004, and said he supported John Kerry in last year’s election. But he had already donated the legal maximum of $2,000 to George Bush and $500 to Republican House candidate Chuck Floyd, who opposed U.S. Rep. Chris Van Hollen (D-8th), according to the Center for Responsive Politics, which tracks political contributions.

Rales knows he faces an uphill battle convincing Democrats that his 10-year foray into the Republican party was a mistake. But he is ready, with both a practical and a philosophical response.

The practical response goes like this: Democrats are in the minority in both houses of Congress, with the fewest seats since World War II. The only way to get back into the majority is to bring voters into the party and — a small number of independents aside — there is only one place those voters can come from.

“What I think I can do is take us to the sensible center as they say and be a problem solver and bring in a whole bunch of people that are frustrated and show them how the Democratic is the party that will solve a lot of the problems that they want to see solved,” Rales said.

But deeper than that is the philosophical response, which is simply that Rales’ values haven’t changed and that being able to change one’s mind about what party best serves those values is Democratic.

“Philosophically, Josh is no different now as a Democrat than he was as a Republican,” Abrams said. “What moved Josh from Republican to Democrat was his perception that the Republicans weren’t being as true to budget reduction as he thought was appropriate. I’m not sure I agree with that but I respect his belief.”

State Democratic Party Chairman Terry Lierman said that he has only met Rales briefly. “I’m always glad to have someone come back into the fold,” Lierman said. “I think one of the beauties of the Democratic Party is that we have a very large tent. We think that competition is healthy for everybody, and whoever the Democratic nominee is for the U.S. Senate, we will be running a very vigorous campaign to defeat the right-wing policies of Lt. Gov. Michael Steele.”

And though Rales now has harsh words for the Republican Party, he is also quick to criticize the Democrats for squandering the opportunity presented the Republicans’ failures by relying on a “just say no” policy rather than answering with innovative solutions.

He called talk of importing prescription drugs from Canada “grandstanding,” saying that the real solution is for the U.S. government, as the single largest customer in the world for drug companies, to negotiate better prices and force the companies to raise prices elsewhere to make up research and development costs.

Similarly, he criticized Maryland’s so-called Wal-Mart Bill, which would have required Maryland companies with 10,000 or more employees to spend the equivalent of 8 percent of their payrolls on health care benefits or to pay the difference to the state’s Medicaid fund.

“If the legislature truly wanted to help the uninsured, they wouldn’t have limited it to companies with over 10,000 employees,” Rales said. “They wanted to reduce Wal-Mart’s competitive advantage. I don’t think their heart was with the people that are uninsured. Their heart was with the special interests that represent Safeway and Giant.”

RALES BELIEVES that his message as an independent Democrat will resonate with voters. He has no illusions about the challenges a run would pose, or even about his chances of winning.

This isn’t a mid-life crisis, Rales said. It’s a serious effort to prop up the country that has given him so much.

If he loses, so be it.

“Any way you shake it this isn’t an even odds proposition. I’m violating a lot of rules that I would apply to my own business strategies,” Rales said. “But there’s a lot of psychic income associated with this that you don’t get in the business world.”



Aaron Rales doesn’t ask for help on most of his homework assignments, but he does come to his father to talk about history.

Josh Rales is an avid historian, who frequently punctuates conversation with invocations of Thomas Jefferson and John Adams. In a 90-minute interview, he quoted former presidents 10 times, along with the likes of Albert Einstein and Robert Kennedy.

Steve Dorick, a co-worker of 17 years at Rales’ real estate investment firm recalled a meeting of property managers at which Abraham Lincoln came up.

“Between Josh and one of the other real estate managers they were able to identify every member of Lincoln’s cabinet and what their orientation was,” Dorick said.

Rales points to history when he talks about his outside chances as a potential Senate candidate.

“There may be a perception out there that I’m some vanity candidate that just wants to buy my way into office,” Rales said. “I am a full-fledged lover of my country and I love history. When our founders created this country they had no experience in revolutions, they had no experience in building a nation. When George Washington led the continental army he was 43 years old. He had never led an army before. Thomas Jefferson, when he wrote the Declaration of Independence, was 33.”

And history is also his justification. He recalled describing to Aaron the scene on the beaches of Normandy on D-Day. Soldiers drowned before making it to shore, and those who did make it faced a massive cliff and a torrent of German bullets. Some of those soldiers were just a few years older than Aaron, 14, Rales reminded him.

“How can you want to protect something that you don’t even know anything about?” Rales said.

Rales believes he could win the Senate seat. But if he gets his message across and voters choose one of his opponents, that’s OK, Rales said.

“John Adams wrote to his wife Abigail Adams at height of Revolutionary War when there were a lot of doubts, an answer to a question she had, which was ‘Can we win this?’ And he said ‘I don’t know. I can’t guarantee success. But what I can guarantee is that we’ll deserve it,’” Rales said. “What I want to do at a minimum is be deserving of this.”