Barney Frank’s Ties to Bailed-Out Financier Raising Ethics Questions
House Financial Services Committee Chair Barney Frank (D-MA) is just the latest member of Congress facing scrutiny for taking joy rides on a private jet owned by hedge-fund billionaire and federal bailout recipient S. Donald Sussman.
Republicans say that Frank needs to clear up ethical concerns about his flight to the U.S. Virgin Islands on Sussman's $25 million private plane in 2009, and his subsequent vacation at the hedge-fund owner's luxurious Caribbean mansion. Sussman, a major philanthropist to liberal causes, has reportedly raked in $200 million in federal bailout funds for his company Paloma Securities. As head of the House Financial Services Committee, Frank helped push through the Wall Street bailout as well as extensive financial reforms.
According to the Boston Herald, aviation experts said that Frank's flight could have cost as much as $30,000 each way, but Frank reported that the air travel cost was just $1,500 in financial disclosure forms. The Massachusetts lawmaker reported no other expenses from the vacation.
Frank said that his connection with Sussman never influenced any of his political decisions. "I've never talked with [Sussman] about any favorable treatment," Frank told the Portland Press Herald. "I voted to raise his taxes. That's one of the most backwards things I've ever heard. I've taken the anti-hedge position."
The House Ethics Committee said that it cleared the vacation, granting "unusual" permission for the trip because Frank's partner Jim Ready is close friends with Sussman.
But Republicans say that Frank has not answered all of their ethical concerns. "If there's nothing to hide, Chairman Frank should be forthright with his constituents and immediately address why accepting a paid jet to the Caribbean from Sussman is not a blatant conflict of interest," said Republican National Committee spokesman Parish Braden told the Boston Herald.
Frank is just the most recent House member to catch heat for his ties to Sussman. Sussman's fiancé, Rep. Chellie Pingree (D-ME), has also come under heavy criticism for allegedly taking rides to campaign events on the hedge-fund owner's plane in September.
Maine GOP filed an ethics complaint against Pingree, claiming that the trip appeared to be in violation of the Federal Election Campaign Finance Act of 1971, which bars lawmakers from traveling to campaign events on non-commercial private aircraft. However, the House ethics committee cleared Pingree of wrongdoing after the congresswoman pointed out a loophole in the rules that allows politicians to travel on non-commercial planes that are owned by family members.
In addition to Sussman's philanthropy to liberal causes, the billionaire's use of tax havens has also been scrutinized by Republicans. In 2000, the hedge-fund owner set up a company and established full-time residency in the U.S. Virgin Islands, in order to reduce the amount of income tax that he pays. While Sussman now claims primary residency in Maine, financial documents from September indicate that he may still be receiving U.S. Virgin Islands tax breaks.
Frank and Pingree have both been critics of tax havens, even while they have accepted gifts and contributions from Sussman.
Last May, Pingree pushed legislation that she promised would "crack down on tax loopholes that allow hedge-fund managers to avoid paying income tax on much of their salaries." In 2002, the congresswoman made her opposition to tax havens a key element of her unsuccessful senate run against Sen. Susan Collins (R-ME).
Maine GOP spokesman Lance Dutson said Pingree's criticism of tax dodging was at odds with some of her recent actions.
"When [Pingree] takes the floor and demands that hedge fund managers should stop taking tax loopholes while benefiting from it herself, that's hypocrisy," he said.
But Pingree said her record on tax issues speaks for itself. "My positions couldn't be more clear and they haven't changed a bit," she said, lamenting that "each of my last three opponents has tried to make Donald an issue, and suggested my relationship with him will somehow influence my vote. Nothing could be further from the truth."
Alana Goodman is NLPC's Capitol Hill Reporter.