US Chamber of Commerce Chairman Caught Ripping Off Investors
by Matt Stoller, Tue Dec 12, 2006 at 12:37:38 PM EST
Gretchen Morgenson, a good business reporter for the New York Times, has an important story about the Chairman of the US Chamber of Commerce being caught in a very shady insider trading scandal. The scandal involves Sunrise Senior Living, an assisted living provider for the eldery, and insider sales of stock prior to public revelations of accounting problems which crushed the stock price.
Selling during the period were Paul J. Klaassen, the founder and chief executive; Theresa M. Klaassen, his wife and Sunrise's chief cultural officer; Ronald V. Aprahamian, a consultant and investor who is chairman of Sunrise's audit committee; Thomas J. Donohue, a Sunrise director who is chairman of the United States Chamber of Commerce; and J. Douglas Holladay, founder of a private equity firm and a director.
Mr. Donohue's sales are of particular interest, given his day job. He has been a force behind the Chamber of Commerce's efforts to defang Sarbanes-Oxley, the Enron-era law designed to clean up corporate accounting and governance. The chamber also has the S.E.C.'s enforcement division in its sights; one chamber priority is to ''curtail the S.E.C.'s overly broad authority to launch investigations,'' according to its Web site.
Insider sales at Sunrise, in the face of accounting troubles that could clip $100 million from the company's net income for 1999 through 2005 -- equal to 29 percent of its earnings -- have spurred a shareholder to demand the appointment of an independent monitor to investigate the accounting. The shareholder has also asked that a monitor scrutinize the timing of large option grants to the company's top executives from June 1996 to October 2005. Five of those grants were dispensed at or near periodic lows in Sunrise's stock.
Mr. Donohue, the Chamber of Commerce chairman, has been a Sunrise director since 1995 and heads its compensation committee. He is also a member of its audit committee. On Nov. 21, 2005, he sold shares worth $3.4 million, according to regulatory filings. Mr. Klaassen is on both the Chamber of Commerce's board and that of its research arm, the National Chamber Foundation.
It's not surprising that Thomas Donahue is an unethical guy who sold out the investors he's supposed to be looking out for. He's the head of the Chamber of Commerce, the paradigmatic example of corrupted lobbying practices. Kos is right; lobbying is more complex that just suggesting 'it's bad', but it's unquestionably awful to have corrupted people like Donahue arguing on behalf of what is supposed to be a representation of the business community.
In fact, the United States Chamber of Commerce, which, while it purports to work for a business-friendly environment that helps its members, is actually one of the most wingnutty groups around. Despite massive costs for the insurance industry, for instance, the Chamber is still in denial, urging "Congress to carefully review the climate change issue before taking further action." Despite the obvious interest small businesses have in a free and open internet, the Chamber of Commerce opposes net neutrality. The Chamber wants to weaken or eliminate the Family and Medical Leave Act, the minimum wage, and the Americans with Disabilities Act. They want to cut every possible tax despite massive deficits, privatize Social Security, and just generally pursue the right-wing agenda down the line.
The national Chamber of Commerce isn't pro-business, in other words, it's just a fully captured right-wing organization that has been taken over by the Republican Party. There are state and local Chambers all over the country that are not right-wing, but are genuinely apolitical organizations fostering networking and business growth in local areas. Many trial lawyers in the South belong to local Chambers, unwittingly contributing to a massive lobbying operation in DC undercutting their ability to represent the public against abuses.
The business community is not monolithic; small businesses want universal health care and a functional government, tech businesses want net neutrality and education, etc. But more than that, this should be outrageous to all the hardworking businesspeople in America. It is a total disgrace that business managers allow a deeply unethical man like Thomas Donahue to represent their community, to advocate against Sarbanes-Oxley with so little credibility.
Culturally I come from a business-oriented background. My grandparents and parents were and are business professionals, and when I was little I didn't want to be a fireman, I wanted to be an investment banker. Weird, yes, but I always had and continue to have deep respect for people who dedicate themselves to ethical and profitable commercial enterprises. My first job was as a project manager for a software company, and it was an awesomely useful experience to have, building and selling products. I believe that Google has done great things for the world, and the market mechanism is often often the most moral system for increasing individual liberty. I mean a lot of blogs are small businesses!
All of which is to say that I believe that business can and must be an important force for good. At the same time, corruption in our corporate elites is a serious problem. When business turns to paying its managers more as the primary point of its organizational apparatus, it becomes corrupted. And when business leaders allow people like Thomas Donahue to represent their political interests by running groups like the Chamber of Commerce, they undercut their own credibility. Elected officials who took money from the Chamber need to seriously consider whether they ought to speak out on this travesty.
And members of local Chambers or the United States Chamber of Commerce ought to be outraged and demand that Donahue step down.