It’s All Legal in the Bizarre World of Congressional Ethics

published 12/27/2004

Orientation week can be a daunting and confusing process for any freshman, particularly for the nine new senators and 38 new House members of the 109th Congress. During the recent orientation week on Capitol Hill, one freshman, Representative-elect Al Green, D-Texas, noted “as a neophyte trying to find his way, you need as many people to direct you as you can.”
Indeed, that education is about to begin in earnest, starting with the ethics book included in their orientation kits. On their face, the ethics rules would seem to bar any self-dealing or profit-taking by members. In reality, they actually legalize conduct that would be viewed as grossly unethical or corrupt in the other government branches. For Green and the other neophytes, therefore, the following are four easy lessons on how to earn millions on a government salary.

Rule No. 1

You can make more in a single stock trade than in a lifetime of public service. Congress has excluded investment income, such as stocks, from ethics limitations on income. The result is that members routinely make killings in the market in areas where they legislate. One study by the University of Memphis found that 75% of randomly selected members had “stock transactions that directly coincided with (their) legislative activity.”

Members have the unique ability to predict or even manipulate stock prices. Another recent study by Alan J. Ziobrowski of Georgia State University and three colleagues showed that U.S. senators beat the market handily by 12 percentage points in their investments — outperforming “corporate insiders” by eight points from 1993 to1998. This may have less to do with their market skills than their knowledge of upcoming bills or regulations benefiting certain companies.

Rule No. 2

“Profit-take” before you legislate. It is better to keep profiteering on a strictly quid pro quo basis: The member gets government contracts or legislative deals for a lobbyist, and the lobbyist delivers windfall investments for the member. Take Sen. Ted Stevens, R-Alaska — the ultimate rags-to-riches story in Congress.

Stevens came to the Senate with modest means, particularly after heavy investment losses in the 1980s. In 1997, he had a Scarlet O’Hara “I’ll never be hungry again” moment. According to a Los Angeles Times investigation, he decided to get “serious about making money” and contacted lobbyists about possible deals.

Real estate developer Jonathan Rubini arranged for Stevens to get into a deal in which he turned $50,000 into as much as $1.5 million — and Stevens was the only investor not liable for any debts, the Times said. In the meantime, he muscled through a $450 million contract for Rubini from the military, despite the view of Air Force officials that Rubini “lacked capacity and adequate funding.”

Of course, one does not actually have to invest to take money from lobbyists. Rep. Jim Moran. D-Va., took an unsecured $25,000 loan from a drug-company lobbyist and then pushed a bill that benefited the company.

Rule No. 3

Your children are your security. One way to reap the benefits of public service is for lobbyists to employ your spouse or children at huge salaries — despite their lack of experience.

Consider Karen Weldon, the 29-year-old daughter of Rep. Curt Weldon, R-Pa. The Pittsburgh Post-Gazette reported that despite her lack of foreign-policy experience, Karen was given a lobbyist contract of a quarter-million dollars from Serbian interests allied with accused war criminal Slobodan Milosevic, as well as a $20,000-a-month contract with a Russian aerospace manufacturer. Rep. Weldon later pushed to get visas for the Serbians and deals for the Russian company.

Chet Lott ran a Domino’s Pizza chain in Kentucky and played polo. Yet he was given a huge salary representing telecommunications and other interests, according to the Times stories. His father, Sen. Trent Lott, R-Miss., was majority leader. The Times also reported Stevens’ wife, Catherine, is paid by a law firm representing business interests to “monitor appropriations issues,” a task made a bit easier by her being married to the chairman of the Appropriations Committee.

Rule No. 4

You can never have too much “education.” While ethics rules prohibit gifts and speaking fees, members routinely accept thousands of dollars in expenses and travel from lobbyists and business associations. These paid vacations are billed as “educational” for members of Congress, and they are clearly eager to learn.

For example, in 2002 Rep. Richard Burr, R-N.C., was “educated” at the expensive Bellagio Hotel in Las Vegas with first-class airplane tickets, an open bar for poolside drinks and other “educational” expenses paid for by the National Association of Broadcasters, according The Washington Post. The trip’s purpose: a public policy conference. Burr later wanted to learn about the nuclear site in Nevada’s Yucca Mountain. Not content to simply visit the Nevada desert, Burr and Rep. John Boehner, R-Ohio, arranged for a lobbyist to “educate” them and their spouses in Barcelona and Seville.

Former representative Tom Bliley, R-Va., then chairman of the Commerce Committee, had a tobacco company send him and his wife on the Concorde to London at a cost of $24,000 and then put them up at the famous Savoy Hotel at $1,000 a night. National Public Radio also said that they were then “educated” at the Wimbledon tennis finals with tickets costing roughly $3,000.

For the new members, it is never too early to create a properly diversified financial plan with a few insider tips, a couple of well-placed stocks, a lobbying job for the unemployable child and maybe a few educational trips for you and your spouse to swank vacation spots.

So, to the Freshman Class of 2005, welcome to Washington, where public service can truly serve the public servant.

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