Members of Congress enjoy lax regulations on personal investments
Topeka ? Looking for new lines of attack against his main challenger, U.S. Sen. Pat Roberts launched attacks this week over independent candidate Greg Orman’s financial investments, including one business interest that receives government contracts, and his ties to a former Wall Street executive who has been convicted of insider trading.
The Orman campaign has tried to brush off those attacks, insisting that Orman himself has engaged in no wrongdoing and that the financial records demonstrate a track record of starting businesses and creating jobs.
But the Roberts campaign has refused to answer questions about the senator’s own investments and those of his wife, Franki Roberts, which include stock ownership in numerous companies that directly benefit from government contracts and other programs authorized by Congress.
Questions about what kinds of investments and outside business interests are appropriate for a public official are nothing new. But despite a new law meant to prevent members of Congress from using their office to make personal investment gains, one government watchdog group says more needs to be done to prevent conflicts of interest between legislators and their own personal financial interests.
“It’s particularly ironic also because the executive branch has a much tougher conflict of interest requirement,” said Craig Holman, a government affairs lobbyist for the watchdog group Public Citizen. “People who are appointed to presidential posts, for instance, are required to divest themselves of any stocks that pose a conflict of interest with their appointments, with their official position.”
“And Congress will hold hearings on all these presidential appointments and make sure that these appointees divest themselves of all stocks that pose a conflict of interest,” Holman said. “But then Congress turns around and invests in those same stocks that they oversee. So we have one good conflict of interest standard that applies to the executive branch, but Congress is not willing to impose that same standard on itself.”
Orman, a wealthy Johnson County businessman, filed his personal financial disclosure statement early this week. It showed he owns a vast and diversified portfolio valued between $21 million and $86 million.
Among his more significant holdings is a stake in FRM Associates, a Minneapolis-based real estate company. Orman’s investment is valued between $5 million and $25 million, according to his disclosure report.
The Roberts campaign issued a statement Tuesday noting FRM had received nearly $10 million in lease payments from federal agencies. It also cited a Wichita Eagle story which reported that Rajat Gupta, a former Goldman Sachs director now serving time in federal prison for insider trading, had at one time been an investor in FRM.
Although Orman initially said last week that he had only a “very small, very modest” ongoing investment with Gupta valued at less than $50,000, the Roberts campaign says his financial report shows the relationship is much deeper than that, with mutual investments in a number of different ventures, and it has accused Orman of trying to cover up that relationship.
“Mr. Orman has repeatedly tried to downplay and minimize his close personal and business relationship with jailed Wall Street criminal, Rajat Gupta, but reports of Orman’s numerous dealings with Gupta continue to surface,” Roberts’ campaign manager Corry Bliss said. “It is now clear that Gupta is tied to the bulk of Orman’s fortune.”
Orman was asked by reporters about his ties with Gupta last week. While he did try to downplay the significance of their business ties, he also professed that he and Gupta have been and remain friends.
“I’m one that believes in forgiveness and redemption,” Orman said. “And ultimately I’m not somebody who, when a friend makes a mistake, I just throw them away.”
Roberts’ own financial report shows that he and his wife, Franki, own a more modest portfolio of real estate, stocks, mutual funds and bank deposits valued between $1.6 million and $3.9 million.
Most of the stocks are held in Franki Roberts’ name in brokerage managed accounts or IRAs. The largest investment in those accounts is in Apple Computers, with stocks valued between $250,001 and $500,000.
According to federal records, the company has sold more than $3 million worth of computers and equipment to the federal government in the current fiscal year and has received more than $24 million in federal payments since 2000.
The company also has significant interests in matters that regularly come before Congress and other branches of government, such as patent and trademark protection, Federal Communications Commission regulations and foreign trade relations.
Other investments on Roberts’ report valued at more than $1,000 each include Chevron Corp., Exxon, IBM and Kansas City Southern Railroad, all of which receive significant federal contracts and other payments.
The report also lists stocks valued between $15,000 and $50,000 in Baidu Inc., a Chinese Internet company that has been criticized for censoring pro-democracy content from its search engine results.
When asked how those investments differed from Orman’s investment in FMR, the Roberts campaign would not give a direct response.
“We would love to have a discussion about investments,” campaign manager Bliss said. He then added more blistering criticisms of Orman’s ties to Gupta.
In 2012, Congress addressed one type of improper investment activity with passage of the STOCK Act — Stop Trading on Congressional Knowledge — which was meant to prevent insider trading by members of Congress and their staff who otherwise could make investments using nonpublic information they are privy to by virtue of being in Congress.
“Prior to the STOCK Act, unbelievably, the laws against insider trading did not apply to Congress or staffers,” said Holman of Public Citizen. “And members of Congress were very active in the stock market and disproportionately benefited from it.”
The bill passed both chambers of Congress with overwhelming bipartisan support. Roberts himself voted for the bill. But a year later, by unrecorded voice votes, Congress amended the law by striking a provision that said the financial transaction reports required under the law had to be made available in a searchable, sortable and downloadable format.
“So essentially, they took the teeth out of the law itself,” Holman said. “So whether or not there is insider trading going on with members of Congress, I think they are probably more cautious because they now know they can go to prison for insider trading, but still it’s very difficult to monitor and enforce that law when it comes to members of Congress.
Speaking with reporters last week, Orman said he would consider, but wouldn’t yet commit to placing his assets in a blind trust if he is elected to avoid any potential conflict of interest.
“I haven’t actually thought that issue through,” he said. “I’m going to make sure that I comport myself in the most ethical way, and if putting it in a blind trust is a requirement to do, then I will definitely put it in a blind trust.”
But Holman said even that has limited value because members of Congress have to file yearly disclosure statements about all their assets, so eventually they know exactly how their money is invested.
He said Public Citizen lobbied for a tougher law that would require members of Congress to place their assets in general mutual funds which tend to rise and fall in value with the general state of the economy.
“That would compel them to try to do their best to make sure we all prospered in the economy,” Holman said. “But members of Congress weren’t willing to do that because it doesn’t offer the same rate of return that regular stock investments do.”