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While private equity groups are hollowing out the country’s institutions, J.D. Vance and other lawmakers tasked with regulating the industry now have millions of largely undisclosed investments in private equity. Also: The Lever’s chart-topping investigative podcast series Master Plan was just named a finalist in two categories of the prestigious Signal Awards: Best News & Politics Series and Best Writing. Help us win by voting below. 👇 Then, spread the word: Forward this email to encourage others to vote! Rock the boat.
Lawmakers Are Hiding Their Private Equity Millions
By Katya Schwenk
[View in browser] As political battles loom over whether to crack down on Wall Street’s tax breaks and predatory behavior, the wealthiest members of Congress from both parties — including Republican vice presidential candidate J.D. Vance — now have tens of millions of dollars collectively invested in private equity funds. The quantity and scope of these private equity investments are growing, even as some of these same lawmakers launch bipartisan probes into the industry and Democrats warn the funds “threaten U.S. health care and block Americans from economic success.” In many cases, these lawmakers — several of whom have recently received hefty private-equity political donations — don’t have to disclose much about these investments. The secrecy makes it difficult to discern whether these financial dealings could pose a conflict of interest. According to a review of recent congressional financial disclosures by The Lever, 10 United States senators and 16 representatives together have more than $150 million invested in private equity, an opaque, predatory industry that critics warn is pillaging everything from health care to housing to Minor League Baseball. Private equity firms invest in companies that aren’t publicly traded on the stock market, which limits transparency around the acquisitions. Because these disclosures list only an estimated range of value for each reported asset (with some parameters as broad as “between $1 million and $5 million”), this figure is almost certainly a significant undercount.
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Some of these same lawmakers are in turn beneficiaries of the private equity industry’s current spending spree in the lead-up to the November elections. Threatened by the willingness of some members of Congress — such as Sens. Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.) — to take on the industry, and with a high-stakes tax fight looming, the industry has poured more than $150 million into the 2024 elections, according to data compiled by OpenSecrets, outpacing its campaign spending in the 2020 cycle by $20 million. But with few limits on how much money lawmakers can stow in clandestine private equity funds — and little transparency around when that cash could prove a conflict of interest — many Congress members already have financial ties to the industry. The top private equity investor in Congress is Sen. Rick Scott (R-Fla.), the multimillionaire former governor of Florida, who reported at least $68.2 million in private equity holdings in his 2023 disclosure forms, which he filed last month. Scott is followed by Sen. Richard Blumenthal (D-Conn.), the former Connecticut attorney general, who reported at least $17.8 million in private equity assets; Rep. Suzan DelBene (D-Wash.), a former Microsoft executive who’s invested $13.2 million; and Sen. Mark Warner (D-Va.), a former venture capitalist with $13 million sunk in the industry, according to The Lever’s analysis. Vance reported at least $100,000 in private equity funds, largely from his stake in two investment funds: Rise of the Rest Seed Fund, and Narya, the venture firm that Vance cofounded. As The Lever reported in 2022, the Ohio senator, who’s been heavily backed by venture capitalist Peter Thiel, has taken advantage of a tax loophole that enriches private equity executives in reporting his income from these investments. In total, 13 lawmakers reported investments of $500,000 or more in private equity funds, The Lever found, and an additional 13 lawmakers reported some amount of money held in private equity. The total number of lawmakers investing in private equity is growing, up from 22 in 2021, according to Mother Jones. (These investment figures include jointly owned assets and assets reported under the names of lawmakers’ spouses, per disclosure guidelines.) Some of those lawmakers, despite their own investments, have publicly targeted or condemned the industry. Blumenthal, the second-biggest private equity investor in Congress, co-sponsored a recent bill that would crack down on private equity acquisitions in health care. Sen. Tina Smith (D-Minn.) also co-sponsored the bill, despite reporting investments valued between $150,000 and $350,000 in private equity funds last year. Blumenthal’s $17.8 million in private equity is reported as owned by his wife, Cynthia Malkin, whose family owns the Empire State Building. In a statement to The Lever, his office wrote, “Senator Blumenthal’s wife is one of multiple beneficiaries of several family investment funds. The funds’ financial advisers make investment decisions entirely independently of her; she doesn’t direct transactions or the purchase or sale of assets.” The spokesperson added that the senator “supports a ban on Members of Congress holding individual stocks, is a co-sponsor of the ETHICS Act, voted in favor of the STOCK Act, and supports more stringent measures to further eliminate conflicts of interest.” Smith’s office declined to comment on her own private equity investments. On the other side of the aisle, Scott — despite holding tens of millions of dollars in private equity — last November co-sponsored legislation to mandate disclosure from private equity firms that were investing in “foreign adversaries” including Russia and China, warning that these countries were benefiting from “a complete lack of transparency allowing them to hide and fund bad behavior.” Ethics experts say that the expanding well of cash that lawmakers are investing in private equity is a transparency concern. Weak federal ethics requirements that mandate when lawmakers must disclose the underlying assets of their private equity investments means such funds can conceal conflicts of interest from the public, several experts told The Lever. “There’s very little to no transparency into some of these funds,” said Virginia Canter, chief ethics counsel for Citizens for Responsibility and Ethics in Washington, a watchdog group focusing on government ethics. And a lack of transparency, Canter said, “means there’s no accountability.” A spokesperson for DelBene declined to comment; the other six members of Congress named in this story did not reply to questions from The Lever about their investments. Private Equity On The BallotAs private equity firms have infiltrated ever more aspects of American life, buying up newspapers, nursing homes, bowling alleys, and mobile home communities, the industry has also consolidated power and influence in Washington — and this election cycle, it is exercising that influence more than ever. The industry’s main lobbying arm, the American Investment Council, has ramped up its political spending significantly over the last several years. In 2024, the group’s political action committee has reported record-breaking levels of campaign spending, according to OpenSecrets. The group has donated $800,000 to candidates and campaign groups so far this election season and has spent another $1.4 million lobbying lawmakers in Washington in just the first six months of 2024. Individual Wall Street firms are spending many more millions on the election overall. Blackstone, the world’s largest private equity firm, has spent $19 million on the 2024 election, the largest of any single investment firm, followed by Apollo Global Management, which has spent $6 million this election cycle, and Bain Capital, which has spent $4.4 million. Top of mind for these companies is preserving the carried-interest loophole — a favorite tax break on Wall Street, which allows private equity executives to pay an abnormally low tax rate on income. Many Democrats claim they want to end the loophole, but have avoided doing so even with control of the executive branch.
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While the carried-interest loophole has not drawn as much attention this election cycle as in past elections — a fact that private equity executives have celebrated — there have been other burgeoning legislative attempts to crack down on the industry. Several proposals that would limit or ban private equity ownership of single-family homes have drawn attention in Congress, and most recently, a group of senators proposed legislation that would require additional disclosure and transparency around private equity’s health care acquisitions. Beating back these proposals has been a focus of the industry’s lobbying efforts, federal disclosures show. Additionally, many of the private equity and Wall Street tax breaks in former President Donald Trump’s 2017 tax law are set to expire in the year after the 2024 election. As the Wall Street Journal reported in July, private equity is already gearing up for a fight to keep the tax cuts and ensure that whatever tax policy might be handed down after the elections favors the industry. “Private equity is interested in using their influence on the Hill to push back against regulation, push back against requiring disclosure, so they can keep operating with their opaque business model,” said Matt Parr, the communications director at the Private Equity Stakeholder Project, a watchdog group that focuses on the harms of private equity. To do so, the industry funds candidates on both sides of the aisle. And some of its top beneficiaries are the same lawmakers who have invested millions in the industry. Scott — Congress’ top private equity investor — is also one of the private equity industry’s biggest donation recipients, courtesy of nearly $300,000 in campaign donations from the industry so far this election cycle. Sen. Ted Cruz (R), who reported holding up to $30,000 in private equity on his latest disclosure statement, is another top industry recipient, also receiving more than $300,000 in donations. Apollo Global Management, one of the nation’s biggest private equity companies, is a top donor to Blumenthal, the Democrat with the most money invested in private equity. DelBene, the House’s top private equity investor, counts the industry as one of her own biggest donors. Many of the same lawmakers investing in private equity hold committee roles or other political positions with direct oversight of Wall Street and the finance industry. Take, for instance, Sen. Steve Daines (R-Mont.), who sits on both the Senate Banking and the Senate Finance Committee. In the latter committee, Daines is a ranking member of the Subcommittee on Health Care, which oversees matters related to health care access, Big Pharma, and medical technology, among others. Last year, Daines reported an investment between $100,001 and $250,000 in a private equity fund that invests in medical device companies. Others include Warner, who sits on the Senate Banking Committee and its Securities, Insurance, and Investment Subcommittee, and DelBene, who sits on the House Committee on Ways and Means, which oversees tax policy. Rep. Brad Schneider (D-Ill.), meanwhile, oversees tax policy and trade on the House Ways and Means Committee while also holding more than $7 million in hedge fund and private equity fund investments, according to his financial disclosures. Lack Of TransparencyBut what makes private equity investments particularly concerning to congressional ethics advocates is how difficult it can be to uncover their underlying assets — given that private equity funds, unlike publicly traded mutual funds, are not registered with the Securities and Exchange Commission or subject to the Wall Street regulator’s disclosure requirements. Private equity’s secrecy has helped the industry evade accountability for wrongdoing, and boost its own profits. And in the halls of Congress, investing in such an opaque industry raises new concerns about conflicts of interest. “The [private equity funds] could all be invested in defense stocks. Or the underlying assets could be concentrated in electric vehicles, or oil and gas — and we wouldn’t have any way of knowing,” said Canter, the ethics attorney with Citizens for Responsibility and Ethics in Washington. Members of Congress, like other federal public officials, are subject to the Ethics in Government Act of 1978, a law intended to stamp out public corruption. The law contains provisions that attempt to prevent officials from hiding their investments by shielding them behind another company. “The statute says, look, you have to report not just your investments, but if you’re invested in a company that, in turn, holds other investments, you have to report those underlying investments,” said Brian Galle, a professor of taxation and economics at Georgetown University Law Center.
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Yet many lawmakers who invest in private equity do not disclose the underlying assets of the funds that they hold. Scott, for instance, lists more than 100 investments in private equity funds in his latest financial disclosure, the majority of which do not include additional disclosures about their assets. “He is obviously violating the spirit of this law,” Galle said. Scott is not alone. Most lawmakers who reported private equity investments also claimed at least some of those funds were exempted from additional disclosure. The reason for this apparent loophole is long-standing guidance from Congress’s ethics committees, which allows lawmakers to keep investment funds’ assets hidden if the funds meet certain criteria. In theory, this criteria should only allow funds that are widely diversified and publicly available — like publicly traded mutual funds — to be excepted from additional disclosure. But in practice, as Scott’s financial disclosures demonstrate, it has allowed lawmakers to invest in specialized private equity funds with abandon, and with little transparency. “It’s a very loose requirement, and it’s not adequate, in my view, to prevent conflicts of interest by members of Congress,” Canter said. Officials in the executive branch are subject to more stringent requirements for disclosing investment funds, explained Richard Painter, a former White House ethics lawyer and now a law professor at the University of Minnesota. The Office of Government Ethics, an independent agency that oversees financial disclosures in the executive branch, rarely considers private equity funds exempt from additional disclosure, he said. “The legislative branch is a different ballgame,” Painter said. “It ties into this broader problem of stock trading and investments that create conflicts of interests for members of Congress.” Looking at Scott’s many private equity investments, Painter added, “I doubt these funds would be excepted under [Office of Government Ethics] rules for the executive branch.” Many past proposals that would bar stock trading by members of Congress — including, most recently, a bipartisan stock-trading ban that passed a Senate committee in July — would also force most lawmakers to divest from private equity funds and hedge funds. Under the most recent proposal, lawmakers would only be allowed to invest in publicly traded mutual funds.
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