Rio Tinto & US Toxic Stock SyndromePublished by MAC on 2014-11-03
Source: Huffington Post
Why Iran Ties, Hypocrisy And Conflicts of Interest Are OK In Congress
For a previous MAC article on Rossing Uranium and Iran see: Goldman puts 'for sale' sign on Iran's old uranium supplier
For a previous MAC article on Resolution see: US House of Representatives gives Native territory to Rio Tinto
Toxic Stock Syndrome: Why Iran Ties, Hypocrisy And Conflicts of Interest Are OK In Congress
1 November 2014
WASHINGTON -- Most Americans probably wouldn't guess members of Congress would invest in a company that has any link to Iran. Nor would they likely imagine lawmakers would vote on legislation that could yield personal benefits while assisting that company.
They would be wrong on both counts in the case of the massive mining conglomerate Rio Tinto.
The London-based company is the world's second-largest mineral extractor, with extensive U.S. interests that are often affected by federal law. The company has for a decade been attempting to acquire federally protected land in Arizona to mine copper.
And Rio Tinto features an added complication that is especially relevant for politicians who for years have been clamoring for tougher sanctions on Iran: Among the company's far-flung enterprises is the Rossing uranium mine in Namibia, which is jointly owned by the government in Tehran, which holds a 15.3 percent stake.
A review of lawmakers' recent financial disclosure forms finds that those facts have not made Rio Tinto a toxic stock for members of Congress or their spouses who either own or have recently owned shares of the company. All of them have voted to get tough on Iran, or, if they were in the House at the time, to give Rio Tinto the land in Arizona.
As mining companies go, Rio Tinto may be no worse than its brethren. But the point is not the company. It is what the financial connections between Congress and Rio Tinto reveal about how lawmakers' public jobs and positions can conflict with their private self-interests; how their behavior runs the range from hypocrisy to criminality; and how recent reforms have stopped far short of curbing congressional conflicts of interest.
Rio Tinto's ownership of the the world's third-largest uranium mine with Iran offers an easy flashpoint that shows just how radioactive the stock may be for U.S. politicians.
Consider former Wisconsin Gov. Tommy Thompson (R), who in 2012 had been hammering then-Democratic Rep. Tammy Baldwin in their 2012 Senate race for allegedly coddling Iran.
But in a debate that October, Baldwin pounced, proffering to the audience the news that Thompson owned stock in companies that do business with Iran, including Rio Tinto.
Thompson seemed stunned, and spluttered an indignant answer to the audience that made clear he realized how bad it looked for a fierce Iran critic to own Rio Tinto.
"I didn't know about the fact that my stock broker had purchased two shares, two companies' stock. I sold it. I sold it today," Thompson said, prompting chortles from some in the crowd. "I do not tolerate, I do not agree with anybody doing business with Iran. None whatsoever."
Rio Tinto insists Iran gets no benefit from the mine, and says it removed the two Iranian members from the Rossing board in 2012.
If Thompson had won the Senate race, he would have joined a number of other Iran opponents in Congress who owned the stock.
According to financial disclosure forms, lawmakers who have recently listed or still own between $1,001 and $15,000 worth of Rio Tinto include Rep. Hal Rogers (R-Ky.), Rep. Lois Frankel (D-Fla.), former Majority Leader Eric Cantor (R-Va.), Rep. Brad Schneider (D-Ill.), Rep. Bill Cassidy (R-La.), and Sen. Susan Collins (R-Maine). Cantor, Schneider, Cassidy and Collins hold the stock in spouses' names. Schneider's wife, Collins' husband and Frankel have sold their shares.
Two other members own more extensive holdings. Rep. Dan Benishek (R-Mich.) lists between $15,001 and $50,000. Benishek, who sits on the subcommittee on Energy and Mineral Resources, also has received more than $3,000 in campaign contributions from the mining giant.
The owner of the most Rio Tinto shares is Rep. Richard Hanna (R-N.Y.), who holds between $100,001 and $250,000 worth of the stock, which he bought in late 2012.
Some members acquired the stock before they were elected.
Frankel, the former mayor of West Palm Beach who won her seat in 2012, came into office owning some 400 stocks in a managed IRA. Many of her holdings, it turned out, could be affected by the actions of Congress. As her Foreign Affairs Committee was about to consider sanctions over Vladimir Putin's annexation of Crimea in the spring, Frankel was revealed to own shares in a half-dozen Russian companies. Her response was to sell all six immediately.
That appears to have prompted Frankel in June to unload any stock that may remotely be considered inappropriate, including Rio Tinto.
"Like many Americans, I chose to hand over my retirement planning to an account manager," Frankel said in a statement. "I have a standing instruction to the manager not to invest and to disinvest in companies that conduct business with hostile nations.”
Schneider's shares were similarly purged. "When Brad’s wife found out she had an investment that had any connection to this company, she sold it. The investment was in a separately managed account, similar to a mutual fund," said Staci McCabe, a spokeswoman for Schneider. "Brad has been clear about increasing sanctions on Iran before he ran for Congress, and has been a leader on enacting tougher sanctions."
While trading in the shares of firms with links to Tehran seems a potential political problem, voters may be more concerned about lawmakers whose investments are likely to benefit from specific votes.
In the case of Rio Tinto, there are a number of bills that the firm has spent millions to lobby -- $4 million in the last four years alone, according to the Center For Responsive Politics, a watchdog group. Perhaps the most significant is a measure that would swap thousands of acres of protected federal land in Arizona for property the company owns under a subsidiary called Resolution Copper.
The move would grant Rio Tinto and BHP Billiton, the world's largest mining company, access to rich copper deposits currently off limits in territory that includes sensitive ecosystems, recreational land, and sacred Native American sites.
All the members of Congress who were in office at the time and owned or later bought Rio Tinto stock voted for the proposal, including Cassidy, Rogers, Hanna and Benishek.
None would comment when asked about the stock and their votes. Presumably, none would say their stock portfolio influenced those votes, or vice versa. Nearly every other Republican in the House also voted for the bill.
None of those votes or financial holdings broke any rules. In fact, all of the members mentioned would have had to do considerably more to get into trouble, even if they did benefit personally. And that, it turns out, is relatively common. A Washington Post probe two years ago found dozens of lawmakers who sponsored or co-sponsored legislation that enriched themselves or family members. Likewise, a high-impact episode of "60 Minutes" detailed how members profited from land deals, IPOs and other investments that were boosted either by their legislative activity or knowledge.
None of the cases highlighted in either of those reports led to penalties. Indeed, Congress rarely prevents members from voting on something in which they have an interest.
Congress may have tightened its standards in 2012, when it passed the Stock Act, barring lawmakers from insider trading. But Craig Holman, of Public Citizen, said Congress would be unlikely to ever willingly curb itself.
"One thing that was very sadly missing in the Stock Act was a conflict-of-interest code," Holman said, noting that while Congress doesn't want to bar conflicts for itself, its members make sure other public servants avoid them.
"Members of Congress, in the Senate, when they ratify appointments, will make sure that that appointee divests him or herself of stock that poses a conflict of interest," Holman said. "And then the same members of Congress will go and buy stock in businesses that they oversee."
There are rules against lawmakers doing things to benefit themselves, but the bar is remarkably high for what counts as a violation. A member of Congress would not only have to perform an action that boosts an investment they own, but the action would have to help only that one investment, and the investment would have to be large enough to give a lawmaker or close relative a controlling interest in the underlying property, ethics experts said. Owning $1 million worth of Exxon stock and sponsoring legislation to help oil companies would not be enough. (Members of Congress owned between $34 million and $98 million worth of oil and gas shares, according to the Center for Responsive Politics.
That "60 Minutes" piece highlighted a number of real estate deals, none of which were found to be illegal. One it did not examine involved Rio Tinto.
In that case, the friend and business partner of former Arizona Rep. Rick Renzi ( ) owned a large plot of land in an environmentally sensitive area, some of which the partner acquired from Renzi, and to whom he owed $800,000. Renzi first tried to get Rio Tinto's Resolution Copper to buy the land, saying he would sponsor the land swap that the firm is still seeking, according to court records. Resolution Copper balked at the high price, however. Renzi had to sponsor a different land swap involving a different company that ultimately did purchase the land. It allowed Renzi to recoup his $800,000.
Renzi was convicted on charges that include honest-services fraud and racketeering, and the conviction was upheld by an appeals court Oct. 9.
A striking element of his case was his defense, which sounded a lot like arguments lawmakers make when questioned over contributions or investments that may give the appearance of a conflict of interest. Renzi said he was not shaking down anyone, but trying to broker deals to protect land in Arizona or provide significant economic benefits.
Another element of the case showed just how jealously Congress tries to shield itself. Renzi's lawyers argued -- with a supporting amicus brief from the House Bipartisan Legal Advisory Group -- that the Constitution's Speech or Debate clause barred prosecutors from using testimony from Renzi staffers. The court rejected the claim, but the lawmakers asserted Renzi's discussions about the land legislation should be protected by the clause, which was intended to prevent prosecutions of legislators based on their political views.
"They're looking for they're own privilege, and they want an expansive view of it," said Melanie Sloan, who runs Citizens for Responsibility and Ethics in Washington.
Rob Walker, an elections and government ethics lawyer with the Washington law firm Wiley Rein who has run both the Senate and House ethics committees, said Congress is unlikely to restrict members' investments. But he argued it's in members' interest to do better.
"The primary way in which potential financial conflicts are policed and regulated are through public scrutiny and public evaluation," Walker said. "And that's through review of the members' financial disclosure forms by the public and by the press, and by stories about their investments. Members have to be sensitive not just to whether a particular investment is prohibited under the very liberal conflict-of-interest regime in the House and Senate. They also have to ask if this going to raise some significant appearance issues.
"Sometimes, members' sensitivity on that particular issue has to evolve," Walker said.
Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him