Monday, May 04, 2009

How corruption is done in the Senate - shovel money to the spouse

Now that Senator Dodd's armor has been pierced, we're starting to see all sorts of stories about what a corrupt sleaze he is. Today's entry concerns how companies were able to surreptitiously steer money to Dodd's way by putting his wife, Jackie M. Clegg Dodd, on many corporate boards.
Clegg Dodd, a former legislative aide and senior federal Export-Import Bank officer, was compensated at a rate of about $500,000 a year in 2007 and 2008 from seats on five corporate boards, according to the most recent filings by the companies to the federal Securities and Exchange Commission. The companies report based on overlapping fiscal years. About half the income is in cash; the remainder, in equity, is more difficult to calculate because of the accounting methods that corporations use to value stock and option compensation. A sixth company lists Clegg Dodd as a director but has not reported her compensation.

A spokesman for Dodd's office, who returned a call first placed to Clegg Dodd by The Courant, said that the annual figure is actually about $100,000 less. Some of the stock values reported in the SEC filings are unlikely to be realized or cannot be collected by Clegg Dodd until after she leaves the boards, said Dodd's press secretary, Bryan DeAngelis.
Does anyone have the least doubt that her position on those boards was due, not to her background at the Export-Import Bank, but to her husband's powerful role on the Banking Committee in the Senate? And the disgusting thing is that this is all perfectly proper according to Senate rules. Those rules facilitate disguising such behavior. And she got that job through a political appointment by Bill Clinton. Though she and her husband claim that she was totally qualified for her positions, the evidence doesn't hold up.
Clegg Dodd holds a variety of committee assignments on the various boards, many of which provide committee members with thousands of dollars in additional income. But two assignments stand out: She is chairwoman of the audit committee at Javelin and is an audit committee member at Blockbuster. Both boards have designated her as an audit committee financial expert.

The designation is a demanding qualification written into SEC rules with the enactment of what has become known as the Sarbanes-Oxley law. The reform followed a succession of corporate accounting scandals and requires that corporate audit committees contain at least one member competent in complex corporate financial accounting. The goal was to put enough sophisticated accounting muscle on audit committees to resist companies' trying to inflate bottom lines.

Charles Elson, who directs the corporate governance program at the University of Delaware, said that Sarbanes-Oxley established a rigorous set of qualifications for directors designated as audit committee financial experts.

"You are held to a very high standard," Elson said. "Basically, if you are on an audit committee you better have been an accountant."

Clegg Dodd's supporters say that corporate boards have qualified her as an audit committee financial expert. But she did not list any financial accounting experience in her responses to questions.

Dodd's political critics say that the greater part of his wife's career has been the result of political appointments and that Dodd had a hand in some of them.

In interviews published during Dodd's unsuccessful effort to win the Democratic presidential nomination last year, Clegg Dodd said that she studied communications at the University of Southern Utah. She obtained an internship in the U.S. House of Representatives, a master's degree in national security studies from Georgetown University and later a job as an aide to former astronaut and Republican Utah Sen. Jake Garn, who was chairman of the Senate banking committee until 1987.

She worked for 10 years in the U.S. Senate as a staff member on both the banking and appropriations committees, according to SEC filings. In 1993, she was appointed as special assistant to the chairman of the Export-Import Bank. The bank, which is authorized by and subject to review by the Senate banking committee, was created to provide export financing for U.S. goods and services.

Over eight years, Clegg Dodd held a variety of positions at the bank, among them chief of staff and vice president for congressional and external affairs. In 1997, President Bill Clinton nominated her as first vice president and vice chairman of the bank. An attendee described her confirmation hearing before her former colleagues on the banking committee as a "love fest."

Eighteen months later, Clegg Dodd was named the bank's chief operating officer. When she left the bank in 2001, her salary was $125,700 a year, a bank spokesman said.

An official familiar with the bank's operations said that Clegg Dodd's duties at the bank involved, for the greater part, administration and public and congressional relations. The official, who asked not to be identified for fear of offending Dodd, said he does not believe that Clegg Dodd's legislative and banking experience qualified her as an audit committee expert.
She doesn't sound like an expert in auditing or accounting, does she?

I have nothing against spouses of politicians earning a lucrative living in their own chosen field. But when that field overlaps with the politician's career and the spouse, or children for that matter, get hugely lucrative opportunities simply because of their relationship to a powerful politician, we need to apply extra scrutiny and skepticism. And having Senate disclosure rules that allow Senator Dodd to list her income and holdings as somewhere between $100,001 and $1 million dollars, the opportunity for corporations or other interest groups to shovel money to the spouse is too large.