House Has Some Blind Trusts, Too
The idea behind having politicians put their assets into blind trusts is to avoid conflicts of interest, not to create them. But the controversy over a recent stock sale by the blind trust of Senate Majority Leader Bill Frist (R-Tenn.) has led to a closer examination of other lawmakers’ blind trusts in both chambers of Congress.
Members in the House and Senate are bound by the same law: the Ethics in Government Act, which clearly sets forth the guidelines that officials in any branch of government must follow to establish a qualified blind trust.
The Senate Ethics Committee oversees and interprets the law for its body, while in the House, the Committee on Standards of Official Conduct handles that duty.
Ethics experts say that because the two chambers separately oversee and interpret the law, it’s possible that the House and Senate may have taken different approaches when applying the law to individual Members’ cases.
Brett Kappel, an ethics lawyer at Vorys, Sater, Seymour and Pease, said the Ethics in Government Act provides for blind trusts and spells out what government officials must disclose in their public statements.
The point of a blind trust, Kappel said, is to “prevent conflicts of interests. You’ll no longer know what companies you’re invested in.”
In general, Senate disclosure forms contain more information about the total assets of blind trusts. House Members are able to simply check a box saying they have a blind trust, but often don’t provide any further information about the amount of their holdings.
In either chamber, blind trusts must be administered by an independent trustee, and the communications between the trustee and the Member is strictly limited. In order for a trust to be a qualified blind trust, either the House or Senate committees must approve it. Members with blind trusts are able to receive quarterly reports of the overall value of their holdings.
House and Senate ethics staffers declined to comment for this story. However, a review of House and Senate financial disclosure forms shows that most Members opt not to put their assets in a qualified blind trust. The ones that do say it’s to avoid the appearance of conflicts, as well as the convenience of not having to itemize their family’s assets.
Rep. Phil English (R-Pa.), for instance, set up a blind trust in 2002 to manage the $100,000 he netted from the sale of his late mother’s estate, said his chief of staff, Bob Holste.
“He’s on the Ways and Means Committee, so he wanted to be above reproach,” Holste said. He added that English has no knowledge of how the money is invested and simply receives periodic statements on its performance.
English is considering moving some of his relatively minor stock market investments into the trust, though Holste said the move would be unrelated to the recent scrutiny lawmakers’ investments have attracted.
“It’s frankly more convenient,” he said. “The holdings are not very big, and they create a pile of paperwork.”
Rep. Joe Barton (R-Texas) was considering moving his investments in energy companies into a blind trust after he was given the gavel of the Energy and Commerce Committee last year.
“He is looking into how to put it together,” a Barton spokeswoman told Roll Call at the time.
More than a year later, Barton’s personal financial statements show he still has personal control over his investments in several companies, including Reliant Energy and SBC, both of which have business before his panel.
The arrangement is perfectly legal, and not without precedent. For example, Rep. Richard Pombo (R-Calif.), chairman of the Resources Committee, owns a half-million-dollar ranch. But some Congressional watchdogs call it unseemly.
“The chairman of the Energy and Commerce Committee has enormous influence over matters that affect money, ultimately,” said Frank O’Donnell, a Barton critic and president of Clean Air Watch. “It’s unfortunate if there’s an appearance a chairman of a committee is going to materially benefit by actions he takes.”
Karen Modlin, Barton’s spokeswoman, said the chairman “invests more in groceries than stocks, so most of his returns are consumed around the dinner table.”
“His handful of investments don’t change much, and he ultimately decided that reporting them in public for everybody to see was better than tucking them into a blind trust,” she said. “The chairman is hardly opposed to capitalism and profit, but it should be evident that great wealth has not found him.”
One of Barton’s predecessors, then-Commerce Chairman Tom Bliley (R-Va.), was compelled to create a blind trust for his investments in the mid-1990s after he encountered media criticism for potential conflicts of interest.
Bliley said he initially pushed back against the pressure, asking reporters, “What would you have us do with our money — bury it in the backyard?” He relented when his chief of staff advised him to set up the trust, and he called it “the best decision I ever made.”
“My broker did much more with my investments than I ever could,” said Bliley, who’s now a lobbyist with Collier Shannon Scott. Indeed, after establishing his trust, Bliley said he approached then-Speaker Newt Gingrich (R-Ga.) about allowing all Members of Congress to establish blind trusts, without penalties, upon taking office.
“He said it was a nice idea, but nothing ever came of it,” Bliley said.
Ethics experts are divided on the value of blind trusts. Ken Gross, a lawyer at Skadden Arps Slate Meagher & Flom who has advised government officials on their financial holdings, said he generally advises against them.
“What value they do have is largely political,” he said. “But each person’s situation has to be reviewed. I much prefer diversified index funds.”
One Senator reports holding a blind trust yet also, paradoxically, discloses the holdings of that trust in great detail.
Sen. Lincoln Chafee (R-R.I.) cited in his 2004 financial disclosure report an “SD Chafee Blind Trust” that his spokesman said contains holdings belonging to Chafee’s wife, Stephanie. Its value was estimated at more than $1,000,000. The Senator’s detailed list of the trust’s holdings includes investments in bonds and a variety of companies such as Yum! Brands, Bristol Myers Squibb and AT&T.
Steve Hourahan, Chafee’s press secretary, said the Chafees set up the trust in 1991 — long before he ran for the Senate.
“He goes the extra step to spell” out the investments, Hourahan said. But, he added, despite the fact that the holdings are disclosed, Chafee “has no contact and no decision-making with the trust. He signs the disclosure form and does not know what’s in it.”
Several ethics experts said it was perplexing that Chafee’s office would disclose all the holdings of a blind trust, since the point of the trust is to keep the holdings unknown.
Other Senators reportedly keeping assets in blind trusts include Barbara Boxer (D-Calif.), Sam Brownback (R-Kan.), Hillary Rodham Clinton (D-N.Y.), Mark Dayton (D-Minn.), Mike Enzi (R-Wyo.), Dianne Feinstein (D-Calif.), Edward Kennedy (D-Mass.), Herb Kohl (D-Wis.), Frank Lautenberg (D-N.J.), John McCain (R-Ariz.), Jay Rockefeller (D-W.Va.), and Ted Stevens (R-Alaska).
In his current disclosure form, Rep. James Clyburn (D-S.C.) checked the box to indicate a blind trust, but through a spokeswoman he did not say whether he actually holds a blind trust. He “checked the box to allow his wife and children to have the privacy to which they are entitled,” said his press secretary, Lindy Birch.
Rep. Robert Andrews (D-N.J.) also indicates a blind trust on his disclosure form, but he does not hold such a trust. His aunt, who died two decades ago, left behind a trust to her companion. For now, Andrews receives no benefit from that trust. But when his aunt’s one-time companion dies, Andrews and a cousin will split the remainder of what’s left in the trust. He said he thinks the value is currently about $50,000.
Reps. Tammy Baldwin (D-Wis.), John Duncan (R-Tenn.), Rahm Emanuel (D-Ill.), Eddie Bernice Johnson (D-Texas), Patrick Kennedy (D-R.I.) and Dave Camp (R-Mich.) have set up blind trusts, according to their financial disclosure forms.
Their offices did not return calls for comment.