Yesterday, I wondered how Nancy Pelosi and her husband were able to participate in Visa’s IPO in March 2008. It is very difficult for an individual investor to participate in IPOs, especially those which are heavily ‘oversubscribed’ as Visa’s was. It was the hottest IPO of the year, drawing what one analyst described as “extreme demand.” So, this tidbit from Newsweek’s story on Visa’s campaign to curry favor with Pelosi caught my attention:
Separately, Pelosi’s husband, Paul, a major investor in California, got a lucrative phone call from his personal broker–a pre-screen invite in March 2008 to take part in Visa’s $17.9 billion public stock offering, at the time one of the hottest stock offerings in an otherwise soft market. The initial-public-offering price was $44 per share and was limited to institutional investors and a group of specially selected individuals. Almost $18 billion was made available in public stock to preselected investors. Paul Pelosi made the cut.
Wait, what? He was called and ‘invited’ to purchase shares in the IPO? Seriously? Let’s isolate one particular sentence from this graph:
The initial-public-offering price was $44 per share and was limited to institutional investors and a group of specially selected individuals.
Specially selected individuals? Selected by whom? And, for what reasons, specifically?
If you are John Bresnahan at Politico, this will all seem like a fortuitous coincidence. The Pelosis obviously have lots of money to invest and their broker may have been one of the few people empowered to select who was lucky enough to buy into the hottest IPO of the year. Although, individual investors with access to IPOs tend to be far more active and wealthy investors than the Pelosis, a ‘reporter’ at Politico could view it all as perfectly normal. But, let’s look at the larger context here.
As Newsweek notes, Visa was very worried about Democrat proposals to regulate interchange, or “swipe” fees. Late in 2007, they organized a campaign to “court” then-Speaker Pelosi to plead their case and block new legislation regulating their business. One of their lobbying firms even hired a former top Pelosi staffer, Dean Aguillen, and the company, its executives and lobbyists began donating to her campaign.
Dean Aguillen was prohibited from lobbying his former boss for one year, but, according to Newsweek he provided key strategic advice to Visa:
By law he was unable to lobby his former boss for a year, but he immediately registered to lobby Congress on the credit-card issue, offering guidance to other lobbyists on Visa’s team during strategy sessions, according to a lobbyist present in strategy deliberations.
In other words, the former Pelosi staffer was helping Visa figure out a way to win her support on their top legislative priority.
In Spring 2008, Rep. John Conyers introduces the very legislation that Visa feared most and just a handful of days later, Paul Pelosi is invited to buy shares in Visa’s IPO. Again, really? Who made that decision? Was it Dean Aguillen, perhaps?
If that decision was in any way related to Nancy Pelosi’s position as Speaker, she may run afoul of House ethics rules. As even Politico notes:
Under House rules, lawmakers are prohibited from using their official position “for personal gain.” This ban includes instances when a lawmaker uses “his political influence, the influence of his position … to make pecuniary gains” or take any official action that affects their own personal finances, the House Ethics Manual states.
Being part of Visa’s IPO, where the stock price rose 50% in two days, would generate a heck of a lot of “personal gain.” Was the invitation in any way tied to her position as Speaker? As Politico noted this morning, Nancy Pelosi really does have a ‘golden touch.’
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