Obama stock buys linked to donors

He bought more than $50,000 in stocks shortly after his election to U.S. Senate

March 07, 2007|By New York Times News Service

Less than two months after ascending to the U.S. Senate, Barack Obama bought more than $50,000 worth of stock in two speculative companies whose major investors included some of his biggest political donors.

One of the companies was a biotech concern that was starting to develop a drug to treat avian flu. In March 2005, two weeks after buying about $5,000 of its shares, Obama took the lead in a legislative push for more federal spending to battle the disease.

The most recent financial disclosure form for Obama, an Illinois Democrat, also shows that he bought more than $50,000 in stock in a satellite communications business whose principal backers include four friends and donors who had raised more than $150,000 for his political committees.

A spokesman for Obama, who is seeking his party's presidential nomination in 2008, said yesterday that the senator did not know that he had invested in either company until fall 2005, when he learned of it and decided to sell the stocks. He sold them at a net loss of $13,000.

The spokesman, Bill Burton, said Obama's broker bought the stocks without consulting the senator, under the terms of a blind trust that was being set up for the senator at that time but was not finalized until several months after the investments were made.

"He went about this process to avoid an actual or apparent conflict of interest, and he had no knowledge of the stocks he owned," Burton said. "And when he realized that he didn't have the level of blindness that he expected, he moved to terminate the trust."

Obama has made ethics a signature issue, and his quest for the presidency has benefited from the perception that he is unlike politicians who blend public and private interests. There is no evidence that any of his actions ended up benefiting either company during the roughly eight months that he owned the stocks.

Even so, the stock purchases raise questions about how he could unwittingly invest in two relatively obscure companies, whose backers happened to include generous contributors to his political committees. Among those donors was Jared Abbruzzese, a New York businessman now at the center of an FBI inquiry into public corruption in Albany, N.Y., who also contributed to Swift Boat Veterans for Truth, a group that sought to undermine John Kerry's Democratic presidential campaign in 2004.

Obama has already had to contend with a controversy that arose out of his reliance on a major campaign contributor in Chicago to help him in a personal financial transaction. In that earlier case, he acknowledged last year that it had been a mistake to involve the contributor, a developer who has since been indicted in an unrelated political scandal, in transactions related to the purchase of a new home by Obama and his wife.

Senate ethics rules do not prohibit lawmakers from owning stocks - even in companies that do business with the federal government or could benefit from legislation they advance - and other members of Congress have investments in government contractors. The rules say only that lawmakers should not take legislative actions whose primary purpose is to benefit themselves.

Obama's sale of his shares in the two companies ended what appears to have been a brief foray into highly speculative investing that stood out amid an otherwise conservative portfolio of mutual funds and cash accounts, a review of his Senate disclosure statements shows. He earned $2,000 on the biotech company AVI BioPharma and lost $15,000 on the satellite communications concern Skyterra, according to Burton.

Burton said the trust was different from qualified blind trusts that other senators commonly used because it was intended to allow him greater flexibility to address any allegations of conflicts that might arise from its assets. He said Obama had decided to sell the stocks after receiving a communication that made him concerned about how the trust was set up.

The investments came at a time when Obama was enjoying sudden financial success, after his victory at the polls in November 2004. He had signed a $1.9 million book deal, and his ethics disclosure reports show that he received $1.2 million of book money in 2005. His wife, Michelle, a hospital vice president in Chicago, received a promotion that March, nearly tripling her salary to $317,000, and they bought a $1.6 million house in June. The house sat on a large property that was subdivided to make it more affordable, and one of Obama's political donors bought the adjacent lot.

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