Just Foreign Policy & Donovan Slack / Gannett News Service – 2014-02-14 02:05:39
ACTION ALERT: Investigate Rep. Petri for Pentagon Contractor Conflict of Interest
Just Foreign Policy
(February 12, 2014) — Public Citizen has called for the Office of Congressional Ethics to investigate Rep. Tom Petri [R-WI] for advocating for a Pentagon contractor in which Petri owns hundreds of thousands of dollars of stock.
On February 8, Gannett reported that Petri had bought hundreds of thousands of dollars worth of stock in Oshkosh Corp., a military truck manufacturer. He then pressed fellow Members of Congress and Pentagon officials to help the company retain a $3 billion contract and escape Pentagon cuts.
Meanwhile, the value of his investment in Oshkosh grew 28-33%, a gain of between $75,000 and $213,000. (Members of Congress are only required to report these numbers in ranges.) Public Citizen called Petri’s actions an “obvious conflict of interest.”
“This is not just benefiting a major campaign contributor, this is going into his own pocket,” said Craig Holman, senior legislative director for Public Citizen. House ethics rules prohibit members from using their official position for personal gain.
We know that it’s difficult to cut the bloated Pentagon budget because of the huge campaign contributions Members of Congress receive from Pentagon contractors. But this case is more extreme. If we’re going to change the fact that Congress is too cozy with Pentagon contractors to cut the Pentagon budget, this extreme case would be a great place to start.
A mainstream media report that has not been contradicted is sufficient evidence to justify a preliminary investigation.
Urge the Office of Congressional Ethics and Members of the House Ethics Committee to begin investigating Rep. Petri’s Pentagon contractor conflict of interest.
ACTION: Join Public Citizen and Just Foreign Policy in calling for an investigation by clicking on this link.
Robert Naiman, Chelsea Mozen, and Megan Iorio
Just Foreign Policy
Lawmaker Holds Stock in
Defense Contractor He Champions
Donovan Slack, USA TODAY/ Gannett Washington Bureau
WASHINGTON (February 8, 2014) — Congressman Tom Petri has long been an enthusiastic booster in Washington for Oshkosh Corp., a defense contractor in his Wisconsin district, but he not only has a political stake in the company’s success, he has a personal one as well. To the tune of hundreds of thousands of dollars.
Since 2006, he has purchased between $265,000 and $650,000 worth of shares in the company, which makes tactical vehicles for the military, a Gannett Washington Bureau review of financial disclosure reports found.
During the same period, Petri has fired off letters to colleagues on the Hill and officials at the Pentagon advocating for millions of dollars worth of defense funding and a $3 billion truck-manufacturing contract for Oshkosh. In some cases, he told recipients about his stock ownership. In others, he didn’t.
In the end, the value of Petri’s Oshkosh stock has grown by nearly 30% as he championed the company’s interests.
A spokesman for Petri, who declined to be interviewed for this story, said Oshkosh employs thousands of people in his district and the congressman’s advocacy is unrelated to his personal financial stake. The spokesman, Lee Brooks, also said Petri’s staff cleared his actions through the House Ethics Committee.
“He takes ethics and disclosure seriously and goes to great lengths to ensure he is in full compliance,” he said.
But ethics lawyers and scholars say the situation raises questions. House ethics rules prohibit members of Congress from using their official position for personal gain.
The rules can be murky, though, and are interpreted on a case-by-case basis by the House Ethics Committee, which is responsible for enforcing them.
“It seems at least to be bad judgment and at the worst, a serious conflict of interest,” said James Thurber, a former congressional aide and founder and director of the Center for Congressional and Presidential Studies at American University.
Averting a Loss
Petri, a 73-year-old Republican from Fond du Lac, has represented Wisconsin’s 6th congressional district since 1979. The district encompasses a swath of the state along the shore of Lake Michigan between Milwaukee and Green Bay. Petri, a Harvard Law-educated former state legislator, is one of the longest-serving members in Congress.
He is also one of the wealthiest members. At the end of 2012, Petri reported that he and his wife directly owned stock valued at between $9.7 million and $40.6 million. Members of Congress report their holdings in ranges on disclosure reports so pinpointing exact amounts is impossible.
When the stock market crashed in 2008, so did Petri’s portfolio, including his shares in Oshkosh Corp, whose value plummeted by at least 80%. The company’s stock dropped even further after President Obama was elected pledging to end the wars in Iraq and Afghanistan, which threatened to squelch demand for Oshkosh vehicles.
But the company’s outlook brightened considerably in August 2009 when it scored the $3 billion contract from the US Army to produce 23,000 armored trucks and trailers. The company’s competitors, however, raised a stink in Washington.
They protested the decision to the Government Accountability Office, saying Oshkosh Corp.’s bid was unrealistically low. In Congress, lawmakers from Texas — where one of the competitors, BAE Systems, had previously built the trucks — expressed concern and demanded a Pentagon briefing about the selection process.
Petri decided it was time to intervene.
He corralled colleagues in the Wisconsin congressional delegation — all nine of them — to join him in sending a letter to Defense Secretary Robert Gates. In it, they touted Oshkosh’s “proven … capability to deliver quality products on schedule while keeping costs low to the government.”
They also asked Gates not to provide the Texas lawmakers with information about the selection process. “We believe this is both inappropriate and a dangerous precedent that could result in undue interference in the competitive process,” they wrote.
Petri separately tried to fend off an assault on the contract in the House Armed Services Committee, where the Texas lawmakers were trying to tinker with the Oshkosh award in legislation authorizing Defense Department spending. Petri fired off a memo to committee chairman Rep. Buck McKeon, R-Calif., saying Congress should not interfere with the contract.
“I request that no language regarding this procurement be included,” wrote Petri, who added in the last paragraph, “In the interests of full disclosure, I do own some stock in Oshkosh.”
Petri got his wish. There was no language about the Oshkosh contract included in the final legislation. And when the GAO completed its review in December 2009, it found that the Army should complete further evaluation before affirming its selection of Oshkosh Corp. But it did not recommend canceling the contract nor did it conclude that Oshkosh’s price was unrealistic, findings that could have been devastating to Oshkosh.
The day after the GAO report was released, Dec. 15, 2009, Petri doubled down on his investment in Oshkosh Corp., buying another $100,000 to $250,000 worth of the company’s stock.
One week later, on Dec. 22, 2009, he signed a letter to the secretary of the Army, John M. McHugh, urging him not to rebid or delay the Oshkosh award, known in military parlance as the FMTV or Family of Medium Tactical Vehicles contract.
“We urge you to move forward to address the GAO’s recommendations and finalize the FMTV contract with Oshkosh Corporation as soon as possible,” said the letter, which was signed by all 10 members of the Wisconsin delegation.
The Army finalized the contract seven weeks later in February 2010. By then, Oshkosh stock — and hence Petri’s shares — which had been trading at $8 per share in early 2009, had increased to $38 per share.
Blocking the Pentagon Cuts
Petri came to the company’s defense again last year, this time urging House colleagues to block cuts that the Pentagon wanted to make to its FMTV budget. The Department of Defense had asked Congress for permission to “reprogram” $101 million from the FMTV so it could use the money instead for critical, higher-priority needs on the battlefield.
Petri’s was the lead signature on a letter to leaders of the House Armed Services Committee and Defense Appropriations Subcommittee asking them to deny the request.
“We urge the committee to consider the long-term impact of allowing this unique manufacturing capability to atrophy and reject this reprogramming,” said the letter, which was signed by seven other lawmakers as well. He disclosed his Oshkosh stock ownership in a note attached to the letter.
The Armed Services Committee ended up blocking $80 million worth of the FMTV cuts.
As of last week, Oshkosh stock was trading at more than $50 per share. Petri’s stake is worth between $340,000 and $863,000, a gain of between 28% and 33%.
Brooks, Petri’s spokesman, said the congressman has stepped up to help the company other times, but he declined to say how many and whether it was by letter, in person, or by phone.
“They are a major employer in our district so we do work with them a lot,” he said. Oshkosh has 2,800 employees in its defense division in Oshkosh, Wis., and 5,500 statewide.
Oshkosh Corp. also declined to comment for this story.
Brooks said that whenever there has been a potential conflict of interest, Petri’s staff has asked the Ethics Committee for guidance and followed it. He also noted the two times Petri disclosed his personal stake when he is advocating for the company. In one of those disclosures, Petri wrote that it was included “at the suggestion of the House Committee on Ethics.”
Brooks said the 2009 letters to Secretary Gates and the secretary of the Army did not include similar disclosures because the Ethics Committee didn’t tell him to include any.
“They did not say anything about needing a disclosure letter,” he said.
Brooks provided to Gannett an email between Petri’s office and the committee regarding the letter to the Army secretary. “That change is fine — I re-read the whole letter,” an attorney for the committee wrote in response to a revision to the letter.
The email makes no mention of Petri’s stock ownership or whether it needed to be disclosed. Brooks did not provide any other emails from the exchange.
The Ethics Committee would not comment, saying the guidance it provides is confidential.
Some ethics watchdogs say that disclosing his financial interest doesn’t eliminate the conflict of interest and that Petri’s disclosure was not as public as it should have been.
“If you send it to one guy, it’s not really disclosure,” said Peter Schweizer, president of the Government Accountability Institute, a conservative, nonprofit research organization.
And to him, Petri’s conflict is obvious.
“That’s pretty ridiculous. The question is, yeah, you’re advocating for your district but why are you owning stock in this company? The conflict is so clear,” Schweizer said. “And just because it happens to be in your district, how does that make the financial transaction more ethical?”
He and others say that regardless of whether or not Petri’s advocacy passes muster with the committee, his actions show that more needs to be done to rein in congressional trading of stocks.
Some want them to stop trading, period.
“In an ideal world I would require not just a blind trust, I would (go) even further,” said Craig Holman, an advocate with Public Citizen. “That is requiring that members of Congress divest themselves of any stock, other than mutual funds â€¦ so their fortunes would go up and down with the economy and not with any particular company.”
“Ethics Watchdog Urges Investigation of US Rep. Tom Petri,” Donovan Slack, Gannett, Feb. 11, 2014, http://www.postcrescent.com/article/20140211/APC0198/302110385/Ethics-watchdog-urges-investigation-U-S-Rep-Tom-Petri
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