Whistleblower Peter Schweizer rocked Washington with allegations of insider trading, self-dealing and conflicts of interest that are illegal in the private sector but legal for members of Congress.
After Schweizer appeared in a 60 MINUTES exposé his new book Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, And Cronyism That Would Send the Rest of Us To Prison, hit the nonfiction bestseller lists.
As this goes to print, both the House and Senate have been furiously working on bills to address this topic – before public outrage boils over. President Obama vowed in his January 2012 State of the Union address: “send me a bill that bans insider trading by members of Congress; I will sign it tomorrow.”
It’s unlikely any of this would have come to light had Schweizer not exposed our politicians in his book. But is the right-leaning Schweizer just a Washington insider himself – compromised by his own political connections, specifically to Sarah Palin?
Rock Cellar Magazine interviewed Peter Schweizer by phone while he was in Washington attending Congressional hearings.
RCM: What is the main thesis of Throw Them All Out?
Peter Schweizer: That there is a “Permanent Political Class” in Washington, and by that I mean people from both political parties who have found all sorts of legal means to enrich themselves. “Public service” – I’ll put that in quotation marks – has become a profit center for too many people.
RCM: Why are you in Washington now? Have you yourself joined the Permanent Political Class?
PS: [Laughs] If you can’t beat ’em, join ’em, right?
Hearings are taking place in the Senate and in the House dealing with the issue of insider trading in Congress and the so-called “Stock Act.” That would make it a crime for members of Congress and their staff to engage in insider training on the stock market.
I’m not testifying; I’ve been contacted by the committees, but I’ve been told that I’m in their words “politically toxic,” because I actually name names, and some of the people I name are actually on the committees holding the hearings. So I’m here just to make sure we move the ball in the right direction, which is towards reform. The Stock Act is a move in that right direction, but I think there’s a lot more that needs to be done.
RCM: You should’ve told them that “Some of the people I name are on your committee!” Isn’t this right up your alley?
PS: Yeah, it’s a little bit like if somebody’s called for jury duty for a burglary and there are a couple of people on the jury who have been charged and found guilty of burglary. It’s kind of ironic; only in Washington would this happen.
Jon Stewart & Peter Schweizer support the “No Shit Sherlock” Act
RCM: What methodology did you use in your book, which is very dense, with facts, figures and graphs?
PS: It certainly wasn’t comprehensive; we couldn’t look at every 535 members of the Senate and the House. What we tried to do was look at leadership in both parties, people on important committees and what we did simply was begin by looking at their financial transactions, if they were aggressive stock pickers or engaged in highly lucrative land deals.
Then we looked at what their committee assignments were and where they might have access to specialized information and where they would have put earmarks for the land deals. Really, what we were doing was employing the same method that the Securities and Exchange Commission would look at if it were to investigate insider trading.
RCM: What kind of information were you able to access, public records, etc.?
PS: It’s a combination of things. One, is we looked at the legislative calendar, which meant when the committees were considering certain pieces of legislation. For example, in 2009, we looked at the healthcare reform issue and looked at who was trading stock on both sides of that debate. Then we compared the timing of those trades with things that were coming up. And we saw that by and large a lot of political figures had a great ability to “anticipate” [laughs] what was going to happen in the market.
The other thing we made use of when we could was memoirs or things written by public officials. For example, [former Treasury Secretary] Hank Paulson wrote a memoir about the 2008 financial crisis — it gives specific dates, specific times and specific people that were in meetings. And that was very helpful, particularly when you compared those to some of the trades Spencer Bachus and other people made.
RCM: Give us specific examples from your book, starting with John Kerry, Massachusetts’ longtime senator.
PS: In Kerry’s case, obviously he and particularly his wife [Teresa Heinz] have lots of assets. What I found was related to two particular time periods when there were a lot of efforts to deal with healthcare matters – that his and his wife’s investment funds very aggressively traded stocks in healthcare. So in 2003, for example, there was a debate over a prescription drug benefit for Medicare, which would be a huge boon to pharmaceutical manufacturers. It was nip and tuck as to whether that would pass, what form it would take. Kerry certainly didn’t agree with every provision in the final bill, but he certainly knew what the progress was.
That year, their [John Kerry/Teresa Heinz] funds made 111 stock transactions of Big Pharma, and 103 of those, I believe, were purchases. So they were very bullish on Pharma, and if you look at the capital gains the following year, you see they did very, very well, that their capital gains were up to $2 million.
There you had an instance that’s sort of equivalent to an athlete on a sports team being able to bet on a game in which they’re playing. Kerry [a member of the Health Subcommittee of the Senate Finance Committee] was involved in that legislation, played an important role in it, and yet the investment funds he benefits from were actively and aggressively making bets in that exact sector.
Then in 2009 you saw a similar pattern over the healthcare reform debate, or so-called “Obamacare.” Kerry played an integral role in the passage of that legislation and again, his and his wife’s investment funds were actively and aggressively picking the right winners and dumping the right losers with good timing.
RCM: Tell us about Democratic Congresswoman Nancy Pelosi?
PS: In the case of Nancy Pelosi, it’s important for people to recognize that there’s sort of a legal form of bribery. If you walk into a congressman’s office with a shoebox and you give them money for a favor, that’s bribery, and you’re going to jail.
But if you go into the same congressman’s office and offer them access to Initial Public Offerings or IPO shares of stock that can net them ten times that amount, $100,000 in a single day, that’s completely legal.
What you had in the case of Pelosi when she was Speaker of the House is that [in 2008] she and her husband received access to 5,000 shares of preferred IPO stock in Visa, the credit card company. They were able to buy it at $44 a share; the day it went public it went past $66 a share and it quickly went up to $90 a share. So, they basically doubled their money, which means they made hundreds of thousands of dollars. And she was Speaker of the House, the most powerful figure on Capitol Hill at that time.
This was at a time – again, the timing is interesting – when there was credit card legislation that Visa was very concerned about. Visa makes its money from so-called “merchant fees” or “swipe fees” – every time you use your Visa card at the restaurant, the restaurant pays 3 percent for the privilege of using it. And those pieces of legislation came out of the committee, but [Pelosi] never scheduled a vote on the House floor, and that actually continued for two years!
So what you see, I think, is atrocious for a political figure from any party – to be accepting IPO stock from corporations that have legislation pending before Congress.
RCM: In the spirit of bi-partisanship, tell us about the former Speaker of the House from across the aisle, Dennis Hastert. Who appears to have parlayed land deals into a personal fortune?
PS: Actually, the case you’re talking about with Hastert is even more dramatic than the Pelosi one, because it’s so stunning in its timing. He’s Speaker of the House, he purchases farmland in rural Illinois. Then several months later he puts in an earmark to build the Prairie Parkway for $207 million. When that becomes announced..
..suddenly that land is not out in the middle of nowhere anymore, and [Speaker Dennis Hastert] is able to turn around in about a year and sell it for more than twice he paid for it! It’s a clear example of using taxpayer money to enrich yourself.
And the stunning thing about this – I think the same thing about the stock trades – is not that it goes on, but that it’s completely legal, and that the ethics committees have said it’s ethical.
There are people from both political parties [who] have used earmarks like Hastert has done – maybe not in quite as dramatic a fashion – but the ethics committees basically say that as long as they can demonstrate that at least one other person benefits from the earmark other than themselves, then it’s okay for them to profit from enhanced property values that come about from the earmarks. I just think that’s an atrociously low standard that would not fly anywhere else in the U.S. – except in Washington.
RCM: In Throw Them All Out you didn’t use the style often seen in newspapers, where next to a politician’s name inside of a parentheses is the letter “D” or “R.” Why didn’t you identify by party each of the politicians you write about?
PS: Yes, there’s a very particular reason: Because I don’t want the book to be seen as ammunition that can be used against the other side. At the end of the day, this is not about a problem with one political party or a certain set of political figures. This is a problem with a system that is compromised. Whether you’re a Republican or Democrat, there are people on both sides taking advantage of this.
I’ve been very encouraged; before the book came out Speaker Pelosi attacked me, saying, “This is a right-wing hit job.” And I am a political conservative, but I think if anybody looks at the book they can certainly see that I take both sides to task.
It’s a function of human nature; if you give people in power the opportunity to legally use their position to enrich themselves, they’re going to do it. And it doesn’t matter whether they have a “D” or “R” after their names.
This is a problem with the system, not with certain quote unquote “evil people.”
RCM: Let’s discuss three of the candidates for president, starting with Barack Obama.
PS: In the green energy field you have an example: Whenever you give a politician in Washington – regardless of party – the opportunity to hand out literally tens of billions of dollars, and it could be in the name of a good or bad cause or whatever… but when you give them that ability and there’s not really much oversight they’re going to end up giving money to their friends. And that’s what’s happened in the green energy program…
Solyndra is the now bankrupt solar company; the chief investor was George Kaiser, who was an Obama bundler and financier. I found at least another dozen bundlers who got similar loans, and ten members of [candidate Obama’s] finance committee who got similar loans.
So you find that the bulk of the money that they’ve given out in loans and grants are connected to people who were financing the Obama campaign.
And what’s unusual about that is the Department of Energy says that less than 10 percent of the people who applied for these loans and grants actually got them. So just statistically that’s very concerning.
But on top of that I had the impression – I’m certain other people do – these programs were basically overseen by scientists, engineers, people who understood alternative energy.
The reality is these loans and grants were approved ultimately by political appointees, including two men mentioned in the book, who were part of Obama’s finance operation in 2008. And they literally went from the campaign raising money to working for the Department of Energy!
And lo and behold, many of those individuals that gave contributions ended up getting loans – that is, our taxpayer money – back. I say this not to particularly single out Obama – you give any politician the opportunity to pass out a large amount of money they’re going to try and figure out a way to get it to people who helped them. I just think unfortunately that’s how the system works.
RCM: Herman Cain was the president and CEO of the Washington-based National Restaurant Association, the restaurant industry’s trade association. Did he function as a Washington lobbyist?
PS: I don’t know if he was technically registered as a lobbyist, but yeah, his job was to get legislation that benefits the Restaurant Association. Some people have to legally register as a lobbyist; I don’t know if he had to do that. But there’s no question that he was advocating or lobbying, however you want to put it, on behalf of the restaurant industry. Absolutely.
RCM: Newt Gingrich has quite an operation headquartered on K Street. What do you make of the recent revelations about his receiving money from Fannie Mae and Freddie Mac?
PS: He’s being paid money to consult with a government-backed entity and he’s trying to help them navigate and maximize their interests. And these are two, in my mind, disastrous entities.
Fannie and Freddie Mac have been a disaster and were huge components of the financial crisis that we faced. And Fannie and Freddie, to insulate itself from criticism started signing up lots of contracts with lots of different people from both parties to fight that political war. Part of that was money given to Newt Gingrich.
RCM: Around 1994 Gingrich made a deal with HarperCollins for $4.5 million to write a book at a time when its owner, Rupert Murdoch, had Fox Broadcasting legislation pending before Congress. Gingrich was Speaker of the House and met with Murdoch during this time period. What do you make of this?
PS: Any time you have commercial relationships between political figures and corporations it’s troublesome. I think that goes in the case of this book. My recollection is that he ended up not taking the advance because of criticism.
RCM: You’re right. He settled for a $1 advance and royalties, and went on to make $1.2 million in book royalties.
PS: That to me is a little less troublesome than the initial $4.5 million he got public criticism for. But look, it’s a problem any time a political figure is engaged in a relationship with commercial entities where they can make money. Newt Gingrich with the book deal was concerning; I think Hillary Clinton with hers – she got a nice sweetheart deal as well, like a month before she became senator.
It’s highly troublesome, because what we have to worry about is politicians are like everyone else. There are good ones out there that are not as much interested in self-enrichment; they really do believe in public service.
But human nature being what it is, you give them a chance to make money and leverage their professional position, they’re going to use it. So we need to be very leery of it and we need to have greater requirements and restrictions on their ability to do so.
RCM: What is your working relationship with Sarah Palin now?
PS: I’m a foreign policy advisor to her political action committee.
RCM: How long has that existed and what does it mean; do you receive a retainer?
PS: Well, I have a financial relationship that began in the spring, where I’m paid so I advise on foreign policy matters.
RCM: What do you make of her as a person?
PS: She’s terrific, she’s terrific. I think she’s got instincts – I honestly don’t talk about that relationship because it’s not a – I’m an advisor. And so, if there’s a question about foreign policy that she has or an issue comes up, I advise her on it. So I would really rather not talk about that relationship because it’s really not, I think, relative to this subject.
RCM: In her [Nov. 18, 2011] Wall Street Journal op-ed. she cites you in her second sentence.
RCM: Which was rather well written. Honestly, how much of a hand did you have in writing that op-ed?
PS: Zero, zero. I have a – when it comes to this book and any other things that I’m involved in there’s a strict line. I do not discuss those things at all. I discuss foreign policy matters with her; that’s it.
RCM: She says in it: “The grass-roots movements of the right and the left should embrace this [reform].”
RCM: It’s seems as though the Occupy movement’s criticisms could also have come from some of the Tea Party activists.
PS: I think there is a lot of crossover between the Tea Party and Occupy Wall Street on a couple of levels. That’s not to say that there aren’t differences and disagreements.
But I do think that in the country in general, there’s enormous frustration and an accurate perception and a sense of injustice that there is an insiders’ game, when it comes to making money and power in the U.S. And it’s become increasingly so, because the private sector and the government sector have become increasingly intertwined.
RCM: Palin writes: “How do politicians who arrive in Washington, D.C. as men and women of modest means leave as millionaires? How do they miraculously accumulate wealth at a rate faster than the rest of us?”
Isn’t Palin “Exhibit A” of this? She appears to have resigned as Alaska governor to pursue lucrative business deals, including a reality TV show and a book deal with HarperCollins.
PS: No, that’s not related at all to what I’m talking about. I’m talking about people when they are in power themselves leverage that position to profit from it. So I would characterize it as very different. I’m not going to do, and will not do an interview on Gov. Palin. So, if that’s what you want to talk about we’re going to have to uh –
RCM: No, we can move on. You’d mentioned Henry Paulson; do you find it to be a conflict that he had been CEO of Goldman Sachs, and as Treasury Secretary he bailed them out – but he didn’t bailout Goldman’s competitors, Lehman Brothers?
PS: Yes – why is it that some firms got bailed out and why others didn’t? That’s part of the problem; it has become politicized. And it’s part of the reason why I think the whole phenomenon of government bailouts in the private sector is enormously troublesome. Because it ends up being made for political reasons, not for economic reasons.
RCM: Do you have anything to say about Robert Rubin?
PS: I think Robert Rubin is an example of somebody who has moved seamlessly between the private sector and the public sector, and has used those relationships and his access to government power to enrich himself and Citigroup. He’s not alone in that by any means.
RCM: What solutions to these crony capitalism problems do you propose?
PS: Number 1 – We need to have almost immediate disclosure of Congressional stock transactions, within 48 hours. We need to know if they’re debating healthcare reform, whether people on either side are trading pharmaceutical stock or buying health insurance company stock. The American people deserve to know that.
Second of all, all assets should be put into a blind trust. Many assume our politicians do that already; in Congress, it’s very rare.
Third thing: We need to recognize that these so-called gifted IPOs are basically an indirect form of bribery. We need to just ban them; members of Congress should not be allowed to receive special access IPOs.
I also believe – whether you’re talking about green energy or anything else – we need to get the government out of the business of handing out guaranteed loans and grants. Again, it becomes a politicized process. We hope it would resemble the National Institutes of Health, where you’ve got peer reviewed panels and decisions seem be made more on the basis of scientific merit. But we’re foolhardy to think so.
If we do that it will help clean up the system and make it that government service and access to power becomes less a tool to enrich oneself.
RCM: You write : “It would take a revolution in the mindset and the rules of the game in Washington to put a stop to it.” Do you believe they’d relinquish power non-violently?
PS: They won’t relinquish power; they’ll change the system if they’re going to lose their jobs. That’s what they want; they want to keep their seats, they want to win reelection.
I’m encouraged; before my book and the 60 Minutes episode came out, there were only 6 co-sponsors for the Stock Act. Now, there are 140, and they’re holding hearings in the House and Senate.
What this shows me is that when people get angry and contact their elected officials on these subjects they will respond. But we’ve got to keep their feet to the fire.
I believe that the American political system is about self-governance, so if we want this to change, we’re going to have to bring about the change. That’s going to come from a zero tolerance policy. I titled the book Throw Them All Out because I believe that.
RCM: How did the 60 Minutes piece come about and how has it affected you?
PS: Six months ago, my publisher sent the manuscript to 60 Minutes producers and they were very intrigued about it. They obviously went about doing their own reporting on it to confirm – they had to look up the stock trades themselves and do all of that.
It was tremendously fair, I found them very fair, very straightforward, very open and it was a tremendous help to the book and to bringing this center stage to the debate in Washington.
BE A MUCKRAKER! YOU HAVE THE RIGHT, AND THE POWER!
Peter Schweizer tells us how we can fight the power ourselves:
“I’m encouraging readers and people everywhere: find out this information on your member of Congress. It takes time but it’s not that difficult.”
Step 1: Go to the website called opensecrets.org. (It’s not a website I run, so I have no incentive.)
There, they have under “Personal Finances” PDF files of the financial disclosures that members have to file every year. You can look up your Congressman, see how much money they have, see if they trade lots of stock or engage in lots of land deals, because they have to list their transactions and assets. If you notice they do trade lots of stock, then look and see what committees they’re on.
What you’ll find is that sometimes somebody who is, say, on the Senate Armed Services Committee, is trading stock in defense companies. That’s very curious, and that’s where the biggest potential abuse will happen: when you’re assigned to a committee and you’re trading stock in the area where you have a committee assignment.
Step 2: If you find that, then go back and find as much information as you can on what was going on legislatively at the time. For example, the Senate Armed Services Committee: Is there somebody who was helping to write the defense bill and approving which defense contractors were going to win or lose [appropriations] that was at the same time buying stock in companies that ended up being the winners? It’s a timing question.
[Step 3:] Once you have those results, if you find something curious, contact your elected official. Tell them you’re watching, that you’re paying attention and to explain why they’re doing this. Why, if they’re involved in healthcare legislation, are they buying or selling pharmaceutical stocks or health insurance companies at the same time?
ABOUT PETER SCHWEIZER:
The Vermont-born Schweizer is currently the William J. Casey Fellow at Stanford University’s Hoover Institution, a conservative think tank. Schweizer edits Andrew Breitbart’s Bigpeace.com and his previous books include Reagan’s War.
In addition to serving Pres. George W. Bush as a consultant, Schweizer is a paid foreign policy advisor for SarahPAC.
ABOUT THROW THEM ALL OUT:
Almost 50 percent of Congress, or 250 members, are millionaires who belong to America’s richest 1 percent. Schweizer exposes how these senators and representatives play by different rules from the rest of us. With a plague upon both your houses sensibility, Schweizer reveals how this crony capitalism is not limited to either political party, but is indeed systemic.
In our Fight The Power category Rock Cellar Magazine celebrates the willingness of individuals to effect change. We want to hear from people and groups who are fighting entrenched bureaucracies, careless corporations, and ridiculous laws in the name of the common good. Whistle-blowers and muckrakers are welcomed. If you know of any such stories that need to be told – contact editors (at) rockcellarmagazine (dot) com. Thanks for reading!
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