WASHINGTON – The battle for Maryland’s 6th Congressional District this fall will pit a millionaire corporate investor against a wealthy landowner — occupations that the new STOCK Act will allow voters to examine more deeply as they decide who will represent them.
Incumbent Republican Rep. Roscoe Bartlett holds more than a dozen properties, most in Maryland, while his rival, Democrat John Delaney, made his millions as owner of an investment banking company and holds his assets in an extensive stock and bond portfolio, according to their financial disclosure statements.
Under the Stop Trading on Congressional Knowledge Act of 2012, Delaney, should he win the election, would be required to disclose any investment transactions within 45 days, with all information put into a searchable online database. Bartlett would be required to list the holder of any mortgages on his properties and any sales or purchases within 45 days.
The STOCK Act, signed into law by President Barack Obama April 4, was designed to stop insider trading by members of Congress and their staff who have access to non-public information they could use to trade stock or buy property for their personal financial benefit.
“We trust them to act as public servants, and if they turn around and use that for their personal benefit — where’s the public benefit?” said Sarah Dufendach, vice president for legislative affairs at Common Cause.
Before the STOCK Act, members of Congress had to file an annual financial disclosure form reporting what stock, funds or property they or their immediate family owned.
“The other rules were vague,” said Dufendach, “and when things are broad it’s easier to scoot out from underneath them.”
The new rules would allow constituents, for example, to determine if a member voting on a location for a military base or a shopping center has benefited from buying or selling property to benefit them financially, Dufendach said.
Bartlett said in a statement, “the STOCK Act will have very little effect upon me.”
The 10-term congressman disclosed seven new properties purchased in 2010 for a total of 14 properties owned by himself or his immediate family, according to his 2010 financial disclosure forms. When Bartlett files his 2011 disclosure forms, he will have to include the terms of any mortgages he might have.
While the 85-year-old Bartlett invests his money in property and precious metals, his challenger has built a large portfolio in stocks and bonds.
Delaney made his money as founder and chairman of CapitalSource, an investment company that also operates banks in California. He is also on the board of directors of Congressional Bank and founded other investment companies in Maryland, including Alliance Partners.
His 22-page 2011 financial disclosure form also highlights his understanding of investments.
He has several trusts with money invested in companies like Bank of America and Microsoft as well as somewhere between $1 million and $5 million, according to the ranges listed on disclosure forms, in Wells Fargo.
Delaney’s companies, CapitalSource and Alliance Partners LLC, are a large part of his portfolio as well as his stock and limited partnership in investment firm J.C. Flowers & Co.
He has said he is campaigning as a businessman, not a politician, and cites his knowledge and experience in the banking industry as one of his largest qualifications for Congress.
But his experience may be a Catch-22 should he be elected. While his knowledge of investments has made him a multimillionaire, it could become a liability once he votes on legislation that could affect those assets.
“I don’t think just having a lot of stock necessarily means they’re going to be more vulnerable to breaking the law,” said Dufendach. “If there’s a huge amount of stock in one company or industry, he better be very careful that he does or doesn’t vote in such a way that it benefits that industry.”
But Delaney has said the investment industry is precisely what he wants to influence through Congress to create jobs. So what can Delaney do to prevent a conflict of interest?
Dufendach said some members of Congress put their money into a blind trust where they are not directly involved in handling their investments. Even so, she said, it is unlikely that Delaney will simply forget he has an interest in CapitalSource and his other companies.
“He’s going to sit down with the experts who do this for a living and he’s going to do what needs to be done,” said Delaney’s campaign manger Justin Schall. “He takes this reform stuff very seriously.”
Delaney, who uses his support of the STOCK Act in his campaign, officially resigned from his position at CapitalSource after he won the Democratic primary in April.
Fortunately for Delaney, the STOCK Act isn’t so broad that if he voted for legislation that helped the entire banking industry he would be criticized for insider trading.
“It has to be more specific,” Dufendach said. It would have to be a trade or specific legislation that creates the appearance that it benefited them directly, not just anyone who owns the same stock.
“When in doubt, (Delaney) will err on the side of full open disclosure,” Schall said. “It’s not about following the letter of the law, it’s about following the spirit of the law and doing what’s right for your constituents and the public.”
“It’s all subject to the smell test,” Dufendach said. “In the end they have to convince their constituents that they acted in a way that” benefited the public.