Saturday, October 14, 2006

Money makes the man - How do Congressmen invest their monies?

When Money Speaks, the Truth is Silent ... old Russian proverb.

Mark Kennedy came out swinging at Amy Klobuchar during the State Fair debate over her investments in Big Oil and Pharmaceutical companies. This was just one of many stupid campaign foibles that Kennedy has tried. Yes, Klobuchar does have investments … through her retirement fund … which she does not have any control over how the fund manager invests her (and thousand of others') payroll contributions.

But now, has Federal employees' personal financial disclosure forms online. Lo and behold, upon checking Congressman Kennedy, we find his largest publicly traded asset is a mutual fund – Fidelity Spartan 500 Index. Anybody want to guess the number one asset in that fund? Can you say ExxonMobil ? Based on the fact that 3.21 % of the fund’s assets are in XOM, Kennedy owns somewhere between $3,210 and $6,420 of ExxonMobil. Now, I don’t think that Kennedy would be influenced by such a paltry amount, yet he’s attacking Klobuchar who has less control than he does. Remember, Klobuchar’s monies are in a retirement fund … Kennedy’s is in his personal portfolio. In theory, Kennedy could decide to buy/sell the mutual fund based on the fund’s objectives and portfolio.

It should be recognized that Kennedy’s portfolio is currently entirely invested in mutual funds. Using mutual funds minimizes any potential influence.

However, when I checked Gil Gutknecht’s form, I have some concerns. He does invest directly in companies. His largest holdings are in BellSouth and Fastenal. Both of these companies are Fortune 500 companies.

Fastenal is a Winona based company and one that has seen its share price double in the past five years. Fastenal’s primary business is nuts and bolts and other MRO items. There is probably little direct legislative action that Fastenal’s business would need the influence of a Congressman. Back in the late 90’s Congress enacted legislation when it was concerned about the quality of foreign produced fasteners and required testing laboratories be used. DCAA (government inspectors) pay a lot of attention to nuts and bolts in a manufactured product … stresses impact performance and if the product is used in a space shuttle, Navy ship, etc, lives could be at stake. Based on Fastenal’s standing as an employer in the First District, I would think that they would get pretty easy access to the Congressman, regardless of him being a stockholder. Yet, it does not look good. With an investment of over $30,000, the how, when and why Gutknecht bought the stock should be disclosed.

BellSouth is a name that most would know since it was created by the government break-up of American Telephone and Telegraph Company. With Gutknecht's stock investment value at over $50,000, this IS a concern. Historically, investing in telephone companies was considered a safe investment for retirement, but with today’s everchanging technologies, that is not the same environment. Most troubling is that Gutknecht is the Telecommunications Task Force Co-Chairman. In his June 23, 2006 eline, he trumpeted the House passage of HR 5252 which changes the rules of how the Internet operates and allows telephone companies to charge fees and determine what information is made available. Despite appeals by such groups as Christian Coalition of America and Gun Owners of America, Gutknecht listened to the telecommunications industry and the reaction from the telecommunications industry was quick. BellSouth immediately announced a change in policy to charge user fees, even though the bill had not been passed by the Senate. Reaction from customers was swift and on August 25, it rescinded the user fee charge … but the point is that BellSouth tried, and who knows if the Senate had passed the bill, if they would have rescinded the fee charge.

Additionally, BellSouth Corp through their Political Action Committee gave Gutknecht $1,000 for his 2006 primary campaign. (LOL … for his primary campaign???? … did anyone think that Greg Mikkelson was going to beat Gutknecht???).

When a politician has earned his monies from family businesses or personal involvement, I can understand the reluctance to divest those monies. But a politician should avoid - at all costs - making investments in individual stocks. Senators Bill Frist and George Allen have been in the headlines based on how they have handled Blind Trusts. If I were an elected official, I would only use large mutual funds.

Kennedy’s Personal Disclosure Form

Gutknecht’s Personal Disclosure Form


Anonymous said...

Well, not only does Gutknecht have Fastenal, he gets hefty donations from names who made their money in Fastenal, like Kierlin and Remmick. Gutknecht's base of large individual donors seems quite small, but Fastenal money is one source of those.

Anonymous said...

Excellent work! I will see if some of the better read blogers will pick up on this.

Ollie Ox

N.D. Barrett said...

Don't forget the fact that not only does Gutknecht own Fastenal stock and that Kierlin contributes to Gutknecht and is founder and Chairman of the Board for Fastenal, but he's also been an MN State Senator for District 31 since '99. Talk about easy access!

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