Sen. Barack Obama, D-Ill., faced some probing questions today about his stockholdings. His shares in two stocks in particular have raised some eyebrows in Washington, D.C.
As The New York Times reported on Wednesday, Obama had bought more than $50,000 in stock in Skyterra, a satellite communications business. Among the principal owners of this business were four people who had raised more than $150,000 for Obama. Obama also bought $5,000 in stock in AVI BioPhrama, a biotech company that makes a drug to combat avian flu. Within a couple weeks of that purchase, Obama spoke on the floor of the Senate about the need to increase funding to combat avian flu. He has since sold those stocks.
Obama said he didn't know about any of these perceived potential conflicts. "I had no knowledge of any stockholdings with this account at any time," Obama told reporters.
He then told his story, walking everyone through his thought process. "After I got my [$1.9 million] book contract, I had money to invest," he said. "Most of it went into purchasing a home and mutual funds in my cash account." But he also wanted to invest some money "into something more high-risk that could be held for a while."
So he sought "a recommendation for a stockbroker" from his wealthy investor friend George Haywood, who steered him toward an as-yet-unnamed UBS stockbroker who "could then direct those funds based on a more aggressive strategy than mutual funds."
"[Haywood] is a professional investor, he's a friend of mine," Obama said. "He doesn't appear to have any conflicts, there weren't any issues surrounding his investments in the past. He's been a very successful investor. I thought about going to Warren Buffet and I decided it would be embarrassing with only $100,000 to invest to ask his advice."
Obama said he wanted to set up a blind trust. "I did not want to know what stocks were involved," Obama said. "We were going to initiate a process to set up a blind trust. And he could then direct those funds based on a more aggressive strategy than the normal mutual funds. At no point did I know what stocks were held and at no point did I direct how those stocks were invested."
That is, until one day in the fall of 2005, some months after the creation of the trust, Obama received a prospectus from one of the companies in which he he held stock. "A standard mailer to shareholders of one of the companies, I don't recall which," Obama said.
"I didn't look at the details of it, didn't know what it pertained to, but I had the sense it was something I had a position in since it was addressed to a shareholder," Obama said. "It's at that point that I became concerned that I might not be able to insulate myself from knowledge of my holdings, that this trust instrument wasn't working the way I wanted it to."
"We tried to see if we could re-jigger it but my conclusion was there just wasn't a good way of making this work. And so that was why I liquidated the account, put it in the mutual fund, took a [sic] approximately $15,000 loss."
So the investment in a company principally backed by political contributors was a coincidence?
"I had gotten the recommendation for the broker from one of these donors," Obama said, referring to Haywood. "So it wouldn't be surprising to me that he was recommending stocks similarly to me that he would be recommending to others."