In May 2010, then-Speaker Nancy Pelosi took to a podium in the Capitol to introduce a half-dozen economic experts she had convened for a meeting on how to jump-start the economy. The group had met for several hours with top Democratic leaders, and Pelosi invited them to speak publicly on their perspectives on economic growth.
What Pelosi did not mention is that one of the men in the group was her son's boss and a partner with her husband in more than a half-dozen investments, including one that generated more than $100,000 in income for the Speaker's family last year.
It was the fourth time since 2007 that Pelosi had invited San Francisco investment banker William Hambrecht to be part of an economic policy forum on the Hill and the third time she appeared at a podium with him to speak to reporters. At none of those events did the then-Speaker reveal her financial ties to Hambrecht, and House rules did not require her to do so.
At a time when the connection between a Member of Congress' personal finances and public role has been spotlighted by the proposed STOCK Act — which would prohibit lawmakers from trading on legislative knowledge — the case of Pelosi and her family's investment adviser is a reminder of how few rules exist to govern these relationships.
According to her personal financial disclosure form for 2010, Pelosi's husband, Paul, had holdings in more than a half-dozen companies tied to Hambrecht's investment banking firm WR Hambrecht + Co.
The best-known Hambrecht/Pelosi partnership is the struggling United Football League.
An October 2009 Washington Post story reported that Paul Pelosi had purchased a team in Hambrecht's nascent league for $12 million. The article was published four days before Hambrecht participated in another of Pelosi's economic forums. After that four-hour meeting, Pelosi introduced Hambrecht and several other "leading economists" at a news conference, saying, "They're going to tell you some of their forecasts that they told us about — some of the options that we may have in investments, in tax policy, in budgetary overview, on how we create jobs in the most fiscally sound way," according to a CQ transcript.
Again, Pelosi did not mention her family's investments with Hambrecht.
According to Pelosi's disclosure form, most of the Hambrecht-linked investments produced losses or very little income last year except for one — an investment worth $5 million to $25 million in an investment firm called Matthews International Capital Management. The firm, partly owned by Hambrecht, specializes in Asian investments and earned Paul Pelosi somewhere from $100,000 to $1 million in income last year. Paul Pelosi also maintained a brokerage account with Hambrecht's firm last year worth $500,000 to $1 million.
The Pelosis' son, Paul Pelosi Jr., worked at Hambrecht's company as an investment banker from July 2009 to September 2011, but a source familiar with his employment said, "He did not work on any investments that his family had through the company."
The two families have been friends for many years, and the Hambrechts have donated more than $2 million to Democratic campaigns and causes, according to Federal Election Commission records.
Hambrecht did not respond to requests for comment on this article.
Pelosi's invitation of her family's business partner to participate in occasional economic forums on the Hill does not appear to violate any laws or House rules, and it would not violate the STOCK Act, a bill currently being considered by Congress that would apply to Members and staff.
In August 2009, the Office of Congressional Ethics recommended that the House Ethics Committee investigate Rep. Sam Graves (R-Mo.) for inviting a friend who was invested in biofuels projects with the Congressman's wife to testify on renewable fuels issues before the Small Business Committee.
The OCE concluded "there is substantial reason to believe that an appearance of conflict of interest was created" when Graves invited his friend to testify. But the Ethics Committee dismissed the case on the grounds that "No relevant House Rule or other standard of conduct prohibits creation of an appearance of conflict of interest when selecting witnesses for a committee hearing."
Pelosi never called Hambrecht as a witness at a hearing, nor did she name him to any official task force.
Pelosi spokesman Drew Hammill said, "Bill Hambrecht has been an intellectual resource on both sides of the Capitol. In these meetings, Hambrecht has spoken about the need, in light of the financial crisis, to help keep homeowners in their homes, help small businesses grow and hire, and help small banks gain access to credit — all macroeconomic goals to grow and stabilize our economy and strengthen our competitiveness."
Hammill added, "Mr. Hambrecht never discussed topics relating to any joint investments or sole investments of his in these meetings."
Pelosi has advanced at least one bill that would have been beneficial to an investment her husband has with Hambrecht, but that doesn't appear to violate House rules either.
In May 2007, Hambrecht's firm managed an initial public offering of stock in a company called Clean Energy Fuels Corp., which provides liquid natural gas fueling stations for fleet vehicles. On the first day the stock was sold, Paul Pelosi invested $50,000 to $100,000 in the company, an investment that does not appear to have produced any profit for the family so far.
The company said in its 2010 annual report, "We were disappointed in 2010 when the Nat Gas act, which was structured to help promote natural gas vehicle deployment in the United States, failed to move through Congress. ... The Legislation would be good since it would accelerate the deployment of vehicles, but our business is not dependent on it and we continue to move forward without it."
The NAT GAS (New Alternative Transportation to Give Americans Solutions) Act would provide a series of tax breaks for natural-gas vehicles and require the Energy Department to create new programs to support natural-gas vehicle research and development. The bill is listed on Pelosi's Democratic leader website as part of the party's "Make It in America" agenda, but her office said she does not support the bill.
Hammill said, "Leader Pelosi opposes the larger NAT GAS legislation in its current form because she doesn't believe we need to subsidize natural gas at this level given that it is so plentiful. The legislation is a very large subsidy of up to $9 billion."
In May, Pelosi led other House Democrats in unveiling two energy bills, including one proposed by Rep. David Cicilline (D-R.I.) that incorporated some of the provisions of the NAT GAS Act but was less generous to the natural-gas vehicle industry.
Hammill explained, "In our Make It in America initiative, we included a much smaller portion of the NAT GAS Act — only costing $1.4 billion — to make investments so that we have a tax credit for heavy natural-gas vehicles and heavy hybrid vehicles."
Pelosi's endorsement of the bill, and even a vote in favor of it, would not violate House rules either because the House bars Members from voting only on matters in which they have "a direct personal or pecuniary interest." The Ethics Committee has interpreted that prohibition to apply only when a Member would be the sole beneficiary of a Congressional action, not when the Member would profit as part of a group of beneficiaries. In this case, Pelosi is supporting legislation that would boost all natural-gas vehicle companies, and all investors in those companies, not just her family's investment.
Hammill said Pelosi's support of natural-gas vehicles has nothing to do with her husband's investments.
"This investment was made in 2007, and we reject the idea that Leader Pelosi would act in the Congress upon an investment," Hammill said. "Leader Pelosi has long said that our energy independence is critical to our national security and economic security. ... Obviously, natural gas burns cleaner than other fossil fuels and will be part of our energy mix for the foreseeable future."
The STOCK Act, intended to prevent insider trading by Members of Congress and staff, would apply to stock trades made on the basis of nonpublic information Members have about legislation that would affect the stock price but would not apply to Members advancing legislation that benefits stock they already own.