This post was authored by independent journalist Justin Glawe.
When Florida Republican Vern Buchanan introduced a bill in 2017 to lower federal income taxes on limited-liability corporations, he called it the Main Street Fairness Act, saying that small businesses shouldn’t have to “pay a higher tax rate than large corporations.” What he didn’t say is that the bill would save him as much as $7.5 million in taxes on income from his own private companies, most of them LLCs.
Buchanan is the president, director, member, or partner of 29 private companies, according to disclosures reviewed by Sludge. He earned more than $3.6 million from these businesses in 2018—and maybe as much as $20 million. But his day job isn’t any of those positions: it’s United States representative.
Buchanan is far from the only member of Congress to have dual roles in public office and private business. Currently, 92 House members hold positions with 326 private companies, Sludge found by reviewing the most recent annual financial disclosures filed by House representatives. (More than a dozen new members elected in 2018 were associated with more than a dozen companies, although their relationships with those companies remains unclear because they have not yet filed financial disclosures that cover 2019.)
As millions of American struggle to pay bills and put food on the table after months of a shutdown put in place to slow the spread of the coronavirus, the economic gap between citizens and their elected representatives once again came into sharp focus recently. That’s thanks to scores of stock trades made by Senators Richard Burr (R-N.C.) and Kelly Loeffler (R-Ga.) who, after being briefed in January about the threat of the virus, went on a selling spree, dumping stocks in companies that would be hit hard by the economic shutdown.
Burr and Loeffler’s questionable stock trades—for which prosecutors are investigating in the case of Burr, but have dropped the case against Loeffler—present a level of transparency that the companies tied to members of Congress do not. Where Burr, Loeffler and all members of Congress must report individual stock transactions and disclose a broad outline of their financial situations, the private companies with which members are associated are much more opaque. Many members don’t report at all what the companies do or how they make money, presenting an ethical minefield of conflicts of interests not yet fully examined by ethics officials, lawmakers, and good government groups.
It’s not illegal or a blatant violation of House ethics rules for representatives to hold positions in private companies, although government ethics experts told Sludge that these representatives could easily violate House rules on outside income without anyone knowing. House rules prohibit members from earning more than 15 percent of their congressional salaries—$174,000 a year—from sources of “outside earned income.” Key to that prohibition is the word “earned,” said Craig Holman of Public Citizen, a Washington good government group.
“Given the magnitude of the profits, pretty much any amount of personal services […] would probably qualify as earned income. But [Buchanan’s] financial disclosure statement doesn’t tell us whether he is providing any personal services,” Holman said. “It is conceivable that all this is just a passive form of income from investments and holdings, though if that were the case, it would seem Buchanan would just throw all these investments into a blind trust to be managed by someone else.”
Conflicts of interest like Buchanan’s exist across the House, with a quarter of representatives holding positions at private companies. While many of Buchanan’s companies are related to real estate holdings and car dealerships, the companies associated with the other 91 members of Congress cover a wide range of industries, including agriculture, mining, finance, pharmaceuticals, and media, all of which are regulated by Congress and directly affected by its laws.
All of this presents an astounding potential for conflicts of interest with representatives’ duties as public officials, and in fact it is not uncommon for House members to work on advancing legislation that benefitting their businesses.
Rep. Mike Conaway (R-Texas) is a staunch energy and oil man, who has blocked attempts to reduce carbon emissions while pushing to expand drilling. Conaway is also the vice president and president of three oil and gas exploration firms located in Midland, Texas, in the heart of the massive Permian Basin, which in 2019 became the top oil producer in the world. In April, Conaway sponsored legislation that would use $3 billion in taxpayer dollars to purchase crude oil from companies like his own. That same month, Conaway pressed the Interior Department to eliminate royalties for oil companies working on federal land—a boon to the industry that was made official policy in May as part of sprawling efforts by the Trump administration and Republicans in congress to boost the oil industry and punish renewable energy.
Rep. Mac Thornberry (R-Texas), member of two cattle companies, successfully added an amendment to the 2018 Farm Bill to provide more Department of Agriculture beef graders in cattle country, something that cattleman’s associations have been calling for for years.
Rep. Bill Huizenga (R-Mich.) holds the top four positions at a family-run gravel and mining company, of which he owns 50 percent and made as much as $1 million in income from in 2018, according to his financial disclosure.
Like Buchanan, Conaway, and Thornberry, Huizenga has also inserted his personal business interests into legislation he has worked on. In 2017, Huizenga authored a bill to allow resource extraction companies like his own to avoid disclosing payments made to foreign governments, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill later became law. The offices of Huizenga, Buchanan, Conaway and Thornberry did not respond to detailed questions about their companies and related legislation.
