Among the billionaire CEOs in attendance was Laurence D. Fink, whose company BlackRock Inc. was in the process of selling equity investments to his host — and would soon be giving him generous political contributions.
In late 2011, Warner — who is running for re-election and is the wealthiest senator and the richest Democrat in Congress — purchased his first shares of a mutual fund managed by BlackRock, a multinational investment firm. His shares in the fund were valued at between $5 million and $25 million as of Dec. 31, 2012, and produces annual dividends of $100,000 to $1 million per year, according to Warner’s most recent financial disclosure report. (The reports are due annually on May 15, but Warner has asked for an extension on filing his 2013 forms.)
A member of both the Committee on Finance and the Committee on Banking, Housing and Urban Affairs, Warner is naturally a top recipient of the finance industry’s contributions. JP Morgan Chase, the Blackstone Group and Columbia Capital are among the 10 biggest donors to his campaign since he joined Congress in 2008. But BlackRock had never figured among them until after Warner bought his shares.
Warner made his first purchases of BlackRock funds in August, October and December of 2011. In July 2012, the firm’s CEO, Laurence D. Fink, gave Warner a $2,500 campaign contribution. Then, between September and October 2013, top executives and the company’s PAC pulled together an aggregate $55,000 for him. Warner, who had never registered on the company’s political giving radar before, has become BlackRock’s top recipient in the 2014 election cycle. Previously, the company had never given as much money to a congressional candidate.
A few weeks ago, the senator received the “Fiscal Hero” medal from Campaign to Fix the Debt, which is backed by several major corporate CEOs, former members of Congress and other prominent individuals who want to cut government spending and deficits. One of these CEOs is BlackRock’s Fink.
David Turner, a spokesman for Warner’s campaign, said in an email that “Senator Warner’s assets are in a trust approved by the ethics committee, and the Senator has no day-to-day involvement with his holdings,” which are “managed by professionals.”
However, Warner does have access to the details of his investment activity, because his assets are not held in a qualified blind trust — an arrangement used by certain high-profile lawmakers, in which they relinquish almost all control and oversight of their holdings.
The blind trust “is a good way for a senator or a member of Congress to even avoid raising suspicions,” said Craig Holman, who lobbies on governmental ethics for the advocacy group Public Citizen.
Curiously, though, many of Warner’s assets are detailed under the subtitle “MRW Blind Trust” on his public financial disclosure reports to the Senate. But he’s never had such an arrangement approved by the Senate Select Committee on Ethics. “It sounds nice to call it a blind trust,” said Robert L. Walker, a former staff director of the committee, “but doesn’t really appear to have meaning” in Warner’s case.
Warner’s spokesman did not respond to questions following up on his initial comment.
Holman said members of Congress should trade only on public stocks to avoid any appearance of a conflict of interest. “But no member of Congress will do that,” he added. “They won’t get much money out of it.”
Though BlackRock is a publicly traded company, Warner did not buy the firm’s shares, but those of a mutual fund product that it manages, BlackRock Equity Dividend Fund.
BlackRock defended its PAC donations to Warner, totaling $10,000. “The Company’s PAC contributions are intended to support individuals that are committed to the issues most important to our clients, including effective regulation and a strong economy,” wrote Brian Beades, a company spokesman, in an email to OpenSecrets Blog.
Stanley Brand, a Washington attorney who specializes in laws that affect government officials, said Warner had not violated any ethics rules. “An investment and then a campaign contribution by the group managing the investment doesn’t amount to anything,” he said.
Brand’s assertion that Warner is legally in the clear appears to be correct. But the complicated relationship highlights how loose the conflict-of-interest restrictions are for members of Congress, said Richard Painter, a law professor who served as chief White House ethics lawyer under former President George W. Bush.
“BlackRock has two relationships with the senator,” he said, and yet Warner could have a hand in crafting “legislation that has a direct and predictable impact on BlackRock … without violating any of the statutes, any of the House, any of the Senate rules.”
The rules for appointed officials are much stricter, he added. A slew of former Goldman Sachs employees who joined the Treasury Department have had to let go of their investments in the company, in case they ever had to make decisions that would affect it. If the same had happened with BlackRock employees, he said, “I’d have to tell them they had to get out of” their holdings in the firm.
Follow Lalita on Twitter at @lalitaclozel