Reps Would Have to Resign From Corporate Boards Under Democrats' Ethics Bill

At least 15 House reps currently sit on the boards of private companies.

Reps Would Have to Resign From Corporate Boards Under Democrats' Ethics Bill
U.S. Rep. Doug LaMalfa (R-Calif.) uses his Blackberry to photograph legislation at the U.S. Capitol.

Republican Doug LaMalfa, who represents California’s First Congressional District, is a member of the House Transportation Subcommittee on Highways and Transit and is the chief sponsor of a bill that would eliminate the 12 percent excise tax on the sale of heavy trucks, tractors, and trailers. According to the findings section of the bill, the tax adds between $12,000 and $22,000 to the cost of a heavy truck, tractor, or trailer.

While he promotes his bill and deals with related issues on the Transportation Committee, LaMalfa is simultaneously CEO of family business LaMalfa Trucking, a position that is uncompensated according to the representative’s financial disclosure.   

As blatantly conflicted as it may seem for LaMalfa to push legislation that would benefit his family business, there is very little stopping House members from using their public offices to further their private business interests. The House ethics rules say that members should not use their positions to make pecuniary gains, but the Ethics manual states that legislation that benefits a whole class or group of businesses—for example, trucking companies—is exempted from the conflict-of-interest restrictions.

Sludge has found through reviewing lawmakers’ outside affiliations and their official actions in Congress that representatives routinely promote legislation that benefits their private companies. About one quarter of representatives hold outside positions. Examples uncovered by Sludge include a rep with dozens of LLCs who sponsored a bill to lower taxes on LLCs (Vern Buchanan) and a mining company officer who authored a bill to allow resource extraction companies to avoid disclosing payments made to foreign governments (Bill Huizenga). Other private companies affiliated with members of Congress are in industries such as agriculture, finance, pharmaceuticals, and media.

Several provisions in House Democrats’ omnibus campaign finance, voting, and ethics policy bill, H.R. 1, seek to limit representatives’ conflicts of interest. 

Under the bill, members would no longer be allowed to serve on the board of directors of for-profit companies. The change would impact at least 15 members of the House, according to Sludge’s review of financial disclosures, but it would not affect the dozens of representatives like LaMalfa who hold positions at companies besides board seats. Corporate board members in the House include Cherry Hill Wine & Spirits director, president, secretary and treasurer Rep. David Trone (D-Md.) and Renzel Boulevard Car Wash director, president, secretary and treasurer Rep. Roger Williams (R-Texas). This prohibition already exists for U.S. senators according to the Senate Code of Official Conduct. 

Government ethics expert Craig Holman of Public Citizen told Sludge contributing reporter Justin Glawe previously that members currently on corporate boards could potentially evade the provision by dissolving their boards and forming LLCs. “H.R. 1 would not apply to most LLCs, and those [members] that it would apply to, I would expect to evade the rule,” Holman said.

Another section of H.R. 1 would add new conflict of interest language, similar to the language in House and Senate rules, to federal statute:

“No Member, officer, or employee of a committee or Member of either House of Congress may knowingly use his or her official position to introduce or aid the progress or passage of legislation, a principal purpose of which is to further only his or her pecuniary interest, only the pecuniary interest of his or her immediate family, or only the pecuniary interest of a limited class of persons or enterprises, when he or she, or his or her immediate family, or enterprises controlled by them, are members of the affected class.”

It’s unclear at this stage what the impact of this provision would be, according to Holman. “The impact entirely depends on the definition of ‘limited class,’ Holman said. “It likely does not mean an industry or even a class of persons. It is impractical, for instance, to ban a lawyer/lawmaker from promoting legislation that would affect the legal profession. But how does one narrow that exemption down to a very limited class of persons?”

H.R. 1 is co-sponsored by all House Democrats except for 16 of them who have so far declined to sign on, and no House Republicans. It is expected to be passed by the House in the coming weeks, but its future in the Senate is less certain. Democrats hold the tiebreaking vote in the Senate for a bare majority, but it takes 60 votes to stop a filibuster or bypass a threatened filibuster under current rules. Republicans are expected to filibuster the bill, which includes provisions like small-dollar campaign finance matching funds and enhancements to voting access.

CORRECTION: This post previously stated that Rep. Neal Dunn is chairman of the board of directors at Summit Bank. Dunn is no longer chairman now that Summit Bank has merged with Bancorp South and ceased existing as a separate entity.

Read more from Sludge:

Members of Congress Profited From COVID Bailout While Small Businesses Were Shut Out

Biden’s Huge Inaugural Donations Would be Banned Under Democrats’ Ethics Bill

Rules Package Closes Witness Conflicts Loophole