14. Congress Invested in Defense Contracts

Source:

Opensecrets, April 3, 2008
Title: “Strategic Assets”
Author: Lindsay Renick Mayer

Student Researchers: Leora Johnson and Michael Seramin

Faculty Evaluator:

Peter Phillips PhD, Sonoma State University

The nonpartisan Center for Responsive Politics has calculated that more than 151 members of Congress have up to $195 million invested in major defense contractors that are earning profits from the US military occupations in Iraq and Afghanistan.

When General David Petraeus, the top US military officer in Iraq, went to Capitol Hill to brief Congress in April of 2008, he was addressing lawmakers who had a lot more than just a political stake in the Iraq occupation. Along with their colleagues in the House and Senate, the politicians who got a status report from the general and the US ambassador to Iraq had millions of dollars of their own money invested in companies doing business with the Department of Defense (DoD).

In 2006, the investment portfolios of 151 current members—more than a quarter of Congress—had between $78.7 million and $195.5 million invested in companies that received major defense contracts (over $5 million). The portfolios include holdings in companies paid billions of dollars each month to support America’s military. These companies provided almost everything the military uses, from aircraft and weapons to medical supplies and soft drinks.

Lawmakers with the most money invested in companies with DoD contracts include Sen. John Kerry (D-Mass), with up to $38,209,020; Rep. Rodney Frelinghuysen (R-NJ), with $49,140,000; Rep. Robin Hayes (R-NC), with $37,105,000; Rep. James Sensenbrenner Jr. (R-Wis), with $7,612,653; Rep. Jane Harman (D-Calif), with $6,260,000; Rep. Fred Upton (R-Mich), with $8,360,000; Sen. Jay Rockefeller (D-WVa), with $2,000,002; Rep. Tom Petri (R-Wis), with $5,800,000; Rep. Kenny Ewell Marchant (R-Texas), with $1,163,231; and Rep. John Carter (R-Texas), with up to $5,000,000.

Forty-seven members of Congress (or 9 percent of all members of the House and Senate) in 2006 were invested in companies that are primarily in the defense sector. The average share price of these corporations today is nearly twice what it was in 2004. Lawmakers’ investments in these contracting firms yielded them between $15.8 million and $62 million in income between 2004 and 2006, through dividends, capital gains, royalties and interest, the Center found.

Companies with congressional investors received more than $275.6 billion from the government in 2006. The minimum value of Congress members’ personal investments in defense contracting firms increased 5 percent from 2004 to 2006, but because lawmakers are only required to report their assets in broad ranges, the value of these investments could have risen as much as 160 percent—or even dropped 51 percent.

Senator John Kerry (D-Mass.) and House Representative James Sensenbrenner (R-Wis.), two of Congress’s wealthiest members, were among the lawmakers who earned the most from their investments in defense contractors between 2004 and 2006, with Sensenbrenner making at least $3.2 million and Kerry reaping at least $2.6 million. The Senate Foreign Relations and Armed Services committees both have members who are major investors in Defense companies. Chairs of other defense-related committees are similarly invested. Sen. Joe Lieberman (I-Conn.), chairman of the Senate Homeland Security and Governmental Affairs Committee, had at least $51,000 invested in defense companies in 2006. Rep. Howard Berman (D-Calif.), who heads the House Foreign Affairs Committee, had at least $30,000 invested in defense companies.

As the military operations in Iraq and Afghanistan have expanded and transformed, so too has the need for goods and services that extend beyond helicopters, armored vehicles and guns. Giant corporations outside of the defense sector, such as Pepsico, IBM, Microsoft and Johnson & Johnson, have received defense contracts and are all popular investments for both members of Congress and the general public.

A spokesman for Sensenbrenner, who has supported the administration’s policy in Iraq, said the congressman’s stocks were left to him by his grandparents and are managed almost entirely by his investment advisors. Kerry, who has been particularly outspoken against the Bush administration’s strategy and policies in Iraq, is a beneficiary of family trusts, which he doesn’t control, the senator’s spokesman said.

Update by Lindsay Renick Mayer

When we sat down to write this story, we had in mind a few of the obvious war contractors: Boeing, Lockheed Martin, General Dynamics, and so on. But when we finished, we had a story about the fact that nearly every lawmaker was invested in war contractors because the scope of the war had grown to the point that otherwise unlikely suspects, such as Pepsi and Johnson & Johnson, were involved. This meant that not only was it difficult for lawmakers to avoid having such investments, it was equally hard for any member of the public with a diverse blue-chip portfolio to steer clear of them.

Members of the public, however, weren’t making decisions about defense legislation that could affect the value of those investments. Lawmakers continue to do so, of course, and continue to hold on to these investments. In 2007, their defense-related assets were worth between $5.3 million and $11.1 million. (Because lawmakers report the value of their investments in ranges, it’s impossible to calculate their exact worth.) The 2008 personal financial disclosure reports are also now available on OpenSecrets.org at http://www.opensecrets.org/pfds/search_cid.php.

Lawmakers aren’t just benefiting from the defense sector personally, but also politically. In the first three months of 2009, the defense sector gave nearly $2 million to candidates, party committees and political action committees, with 57 percent of that going to Democrats. In the 2008 election cycle, the sector gave $23.5 million. Rep. John Murtha (D-Penn.), House Defense Appropriations Subcommittee chairman, has collected more money from the sector than any other lawmaker since 1989 at $2.6 million. Murtha has gotten some heat—and a lot of attention—this year for his connections to now-defunct lobbying firm PMA Group, which the FBI is investigating for allegedly violating campaign finance laws. The firm’s clients were primarily defense companies that sought earmarks from Murtha’s subcommittee.

Should President Obama stick to his timeline to start bringing troops home from Iraq, it will be interesting to watch as lawmakers decide whether to continue investing in war contractors, especially if their need (and, therefore, lucrative DoD contracts) diminishes over the coming years.

We’ve been pleased that the mainstream press has been interested in covering lawmakers’ personal finances, in addition to their various financial connections to the defense industry. The press—including the Wall Street Journal, Washington Post, New York Times, prominent bloggers, and other watchdogs—frequently pulls data from OpenSecrets.org and cites our reports, including this one. It’s important that the public understands the full relationship between lawmakers and the companies affected by their legislative votes. Only then can members of the public determine whether decisions are being made based on the merits or the money.

To read more about how lobbying, personal finances, and influence peddling are shaping legislation, keep up with CRP’s blog at http://www.opensecrets.org/news/.

And to do some investigating yourself, dive into our personal financial disclosure database: http://www.opensecrets.org/pfds/index.php.