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Archive for Monday, October 9, 2006

Senator fails to disclose stock options from corporate board

October 9, 2006


— For the past five years, Sen. George Allen has failed to tell Congress about stock options he got for his work as a director of a high-tech company. The Virginia Republican also asked the Army to help another business that gave him similar options.

Congressional rules require senators to disclose to the Senate all deferred compensation, such as stock options. The rules also urge senators to avoid taking any official action that could benefit them financially or appear to do so.

Those requirements exist so the public can police lawmakers for possible conflicts of interest, especially involving companies with government business that lawmakers can influence.

Allen's stock options date to the period from January 1998 to January 2001 when Allen was between political jobs and had plunged into the corporate world.

An Associated Press review of Allen's financial dealings from that era found that the senator joined three Virginia high-tech companies he assisted as governor. Allen served on boards of directors for Xybernaut and Commonwealth Biotechnologies and advised a third company called Com-Net Ericsson, all government contractors.

Allen, a potential 2008 presidential candidate, rose to prominence as a conservative from Virginia, serving in the U.S. House and as governor. From 1998 through 2000, he worked as a private lawyer and businessman before joining the Senate in 2001.

He now faces a tough re-election campaign against Democrat Jim Webb.

Only one windfall

In interviews, Allen and his staff sought to play down his corporate dealings, saying they were a good learning experience but did not lead to extraordinary riches - except for a quarter-million-dollar windfall from Com-Net Ericsson stock.

Allen's office said he sold his Xybernaut stock at a loss and has not cashed in his Commonwealth options because they cost more than the stock is now worth. The senator also said he saw no conflict going to work for companies shortly after assisting them as governor.

"I actually got no money out of Xybernaut. I got paid in stock options which were worthless. Commonwealth Biotech asked me to be on their board. Glad to do it. I learned a lot on their board and enjoyed working with 'em, and they seem to be doing all right, I guess," Allen said.

Allen's office said he did not report his Commonwealth options on his past five Senate disclosure reports because their purchase price was higher than the current market value. Allen viewed them as worthless and believed in "good faith" he did not have to report them, aides said.

Allen disclosed the options once - on an amendment to his 2000 ethics report filed three months after the normal filing period ended. He excluded the options from subsequent reports.

When AP showed Allen's lawyer the Senate ethics manual requirement that such options must be reported each year regardless of value, the lawyer said he was unfamiliar with that provision. Allen has now asked the Senate ethics committee for an opinion on whether he should have disclosed them.

Conflicts of interest?

"While we continue to believe that we have disclosed more than is required, we will abide by the formal ruling of the committee," Allen spokesman John Reid said.

The disclosure requirements exist so the public can watch for potential conflicts of interest, and Allen had an obligation to report his Commonwealth stock options to Congress, two ethics experts said.

Reid said he is aware of only one time that Allen's office helped any of his former companies. That came in December 2001 when Allen asked the Army to resolve a lingering issue with Xybernaut. The company asked Allen to intervene, and he urged the Army to give Xybernaut an answer, Reid said.

At the time, Allen still owned options to buy 110,000 shares of Xybernaut stock, which could be affected by any new federal contracts.

The Army answered but did not give Xybernaut what it wanted, and Allen did nothing more, Reid said.

The office declined to release the correspondence, saying constituent letters are confidential.


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