-Caveat Lector- [Those fricking pricks! --MS] <http://interactive.wsj.com> June 15, 2001 ------------------------------------------------------------------------ Politics & Policy More Lawmakers Used Access to IPOs To Make Quick Profits, Filings Show By TOM HAMBURGER and KATE KELLY Staff Reporters of THE WALL STREET JOURNAL WASHINGTON -- Several senators and House members last year took advantage of the tail end of the stock market's boom in initial public offerings, making quick and lucrative profits that average investors can't get. Congressional offices in the House and Senate on Thursday released annual financial disclosure forms, which include lawmakers' IPO investments. In past years, these investments have prompted controversy, because the stocks frequently rise quickly above their offering prices. Underwriters and brokerage houses restrict access to IPOs, doling them out to large investment companies, big investors and other favored clients, including celebrities and prominent individuals. Some 452 companies went public in 2000, raising a record $80.6 billion, despite the market plunge during the latter part of 2000. By comparison, 547 IPOs in 1999 raised much less, $68.8 billion. In past years, only a handful of congressional members reported flipping IPOs -- quickly selling shares soon after the offering occurs. An initial analysis this year suggests a different story, though it is difficult to conclude exactly how many lawmakers profited from IPOs, because members aren't required to disclose which of their stocks are IPOs. So spotting them requires matching purchase dates on members' disclosure forms with publicly available IPO listings. Aides to all congressional IPO investors interviewed Thursday denied they received favored treatment. Several legislators are major investors who might have received access to lucrative stocks even if they weren't elected officials. Democratic Sen. Barbara Boxer of California and her husband, for example, have numerous investments and frequently buy and trade stocks, including five IPOs last year that produced profits that appear to be in the thousands. (Members are required to report the asset values and profits in broad ranges only.) Among the IPOs was Avenue A Inc., a Seattle-based online marketing consultant. Sen. Boxer reported buying between $2,002 and $30,000 of the stock on its opening day, Feb. 28, when the offering price was $24. She sold shares of the stock the next day; the stock closed that day at $72 a share. Not all of her IPOs yielded gains. She held Sonus Networks Inc. stock for one day; that stock closed at 27% below its opening price on its second day. "All of her investments were handled by a family investment adviser" who doesn't consult the senator when trading stocks, said David Sandretti, a Boxer spokesman. Sen. Boxer's San Francisco-based investment adviser, Gail Seneca, said her firm distributes IPOs equitably among its clients, and that the senator received no special treatment. GOP Sen. Judd Gregg of New Hampshire reported buying and selling between $1,001 and $15,000 of stock in Palm Pilot maker Palm Inc. on March 2. The offering price was $38, and the closing price that day was $95.06 -- a 150% increase. A spokesman said "a negligible amount" of the stock was offered to him by his regular broker at Morgan Stanley, one of the firms that oversaw the Palm IPO. "He received a call from his regular broker just as the broker called many of his other customers," the spokesman said. California Republican Rep. Howard McKeon purchased less than $1,000 of stock in Avanex Corp., a Fremont, Calif., producer of fiber-optic equipment. "He had given instructions to his broker ... to purchase an IPO" when a good one came along, said his chief of staff, Bob Cochran. The offering price was $36 on Feb. 3. When he sold it less than a week later, its closing price had risen 383% to $174. Mr. Cochran said the congressman received no special treatment. Rep. Robin Hayes (R., N.C.) invested a total of between $2,002 and $30,000 in two of last year's hottest IPOs: the U.S. debut of Chinese telecommunications company China Unicom Ltd., which was the year's sixth-biggest deal in capital raised; and the Japanese Internet services provider, Crayfish Co. Both deals were underwritten by Morgan Stanley, Rep. Hayes's broker. China Unicom's stock price rose a respectable 23% between its opening in June and when the congressman sold several weeks later. But his one-day purchase and sale of Crayfish was much more lucrative. The stock rose a huge 414% in its first day of trading. An aide said Rep. Hayes's broker made the buy and sell decisions on both without calling him. "He gave broad instructions to his broker to get involved in the tech market and gave him the discretion to make things happen," said Hayes aide Andrew Duke. ------------------------------------------------------------------------ Capitol Capital A sampling of members of Congress who reported buying and quickly selling stocks around the time of their initial public offerings during 2000. Member Stock Date Public Offering Price Date Sold Closing Price % Change Sen. Judd Gregg (R., N.H.) Palm 3/1 $38.00 3/2 $95.06 150% Sen. Thad Cochran (R., Miss.) AT&T Wireless 4/26 $29.50 5/2 $32.25 9% Sen. Jeff Bingaman (D., Ariz.) Avanex 2/3 $36.00 2/4 $172.00 378% Sen. Barbara Boxer (D., Calif.) Avenue A 2/28 $24.00 2/29 $72.00 200% Oplink Communications 10/3 $18.00 10/4 $33.63 87% Sonus Networks 5/24 $23.00 5/25 $16.83 27% Interwave Comm. Int'l 1/28 $13.00 1/28 $36.88 184% Rep. Robin Hayes (R., N.C.) China Unicom 6/16 $19.99 7/11 $24.63 23% Crayfish 3/6 $24.50 3/8 $126.00 414% Rep. Howard P. McKeon (R., Calif.) Avanex 2/3 $36.00 2/9 $174.00 383% Note: In some cases, transactions are attributed to the senator's spouse. Source: Annual Financial Disclosure Reports ------------------------------------------------------------------------ Some politicians criticized in the past for taking advantage of such favors vowed to avoid such investments, including former Democratic House Speaker Tom Foley. Securities firms' practice of parceling them out to favored clients of all stripes has come under scrutiny in recent months by several regulatory authorities, including the Securities and Exchange Commission and the National Association of Securities Dealers. In Washington, some ethics lawyers advise members of Congress to eschew the IPOs, unless the member is the sort of deep-pocketed investor who typically would be given access to them. "Most members of Congress are not trading at a level of privileged investors that would normally have access to IPOs," said Stanley Brand, a former top House lawyer who now represents members in ethics scrapes. "It's fine to get in on IPOs so long as the member is receiving the same treatment a similar investor would receive. But if it can be construed as an extra benefit because you are a public official, then I say, 'Don't do it.' " An initial reading of this year's financial disclosures included little else likely to cause controversy, because congressional outside-income and gift rules have been tightened considerably in recent years. Several members reported receiving royalties from books. Sen. Arlen Spector (R., Pa.) reported that his autobiography, "A Passion for Truth," garnered $21,250 in royalty payments last year. Sen. Hillary Rodham Clinton (D., N.Y.) reported $8,534 from her book "It Takes a Village," which she said she donated to charity. Sen. John McCain (R., Ariz.) sold film rights to his book "Faith of My Fathers" to USA films for $20,000. Meantime, the book yielded him royalties of nearly $500,000, which he said he donated to charity. Georgia Democratic Sen. Zell Miller reported a brief stint in the private sector after his term as governor of the state ended in 1999. He made $90,000 as a corporate director of two firms (Georgia Power and Kollmann USA Inc.) and $56,250 as a liaison to the nation's governors for Philip Morris Cos., the tobacco company. ======================================================= Kadosh, Kadosh, Kadosh, YHVH, TZEVAOT FROM THE DESK OF: *Michael Spitzer* <[EMAIL PROTECTED]> The Best Way To Destroy Enemies Is To Change Them To Friends ======================================================= <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. 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