Throw Them All Out, Peter Schweizer’s explosive new expose, has pulled back the lid on congressional insider trading, revealing the shocking regularity with which elected officials use their legislative positions to reap financial rewards.This ‘honest’ graft is by no means limited to using inside knowledge to play the stock market. Schweizer, a fellow at the conservative Hoover Institute, reports that members of Congress are also making a killing in real estate, using federal funds to boost their personal land holdings.
Like Congress’s questionable trading practices, mixing real estate investments with taxpayer money is technically legal. Actually, it’s pretty easy for members of Congress to get rich off of federal projects — land deals are more difficult to detect than trades, and land, unlike stocks, doesn’t have a set price. Members of Congress aren’t required to disclose if a land deal would benefit them personally.
In the corporate world, using company money for personal financial gain would at minimum get you fired. But in Congress, the practice is not only legal, but common.
For years, Pelosi has pushed for federal transportation earmarks to build and extend a lightrail project in her affluent San Francisco district, securing more than $890 million for the project between 2004 and 2011. Interestingly, Pelosi and her husband own an office building, valued between $1 million and $5 million, located at a prime distance from one of the planned lightrail stops. If the project is completed, the Pelosis could see the property value increase by as much as 150%, according to Schweizer.
In 2006, Pelosi also managed to get a $20 million earmark for waterfront redevelopment just blocks away from the same office building. In another instance, she got $12 million for a beautification project abutting another property owned by the Pelosis.
Pelosi's real estate portfolio has also gotten a boost from her friends in Congress. In 2010, Rep. Bernie Thompson (D-MI) got a $800,000 earmark to upgrade the Napa Valley airport. Pelosi, who helped Thompson get his position as chair of the Homeland Security Committee, owns or has stake in multiple properties that would benefit from the project.
In 2005, Reid sponsored a $18 million earmark to build a bridge connecting Laughlin, Nev., with Bullhead City, Ariz. -- an expenditure Arizona's senators denounced as unnecessary pork. Incidentally, the bridge was located just a few miles from a 160-acre land parcel owned by Reid. According to Schweizer, local authorities predicted the bridge would 'undoubtedly' increase surrounding land values.
Schweizer writes that Reid has also leveraged his position in the Senate to persuade local officials. In 1998, for example, Reid bought an undeveloped residential tract for about $400,000, which he later sold to a partner, obtaining a joint stake in the limited liability company that owned the land. The company aggressively petitioned the county to rezone the land as commercial property, at the same time the county was lobbying Reid's office for earmarks.
Needless to say, county commissioners granted the rezoning, and Reid and his partner sold the land to a mall developer for $1.6 million. Reid himself walked away with $1.1 million.
As Speaker of the House, Hastert increased his net worth by more than $2 million by using a road-building earmark to increase the value of land he purchased in Illinois.
In 2005, Hastert purchased (or had a hand in purchasing) 264 acres near the site of the proposed 'Prairie Parkway,' and the site of a planned real estate development. Months after the purchases in early 2005, he placed a $207 million earmark into the federal highway bill to fund the parkway. He sold 69 acres months later for $4.9 million -- and netted between $2 million and $10 million in a year.
Hastert retired in 2007 after conceding House leadership to the Democrats in 2007.
As former chairman of the powerful Senate Budget Committee, Gregg earmarked around $66 million to turn New Hampshire's Pease Airforce Base into a business park, developed by Gregg's brother. The Senator himself invested between $240,000 and $1 million in the development, and collected between $240,000 and $650,000 on his investment.
Gregg retired from the Senate in 2010 and is now a senior advisor to Goldman Sachs.
Yet another politician who used earmarks to benefit himself financially. Calvert and a business partner paid $550,000 for a parcel of land near March Air Reserve Base in California in 2005, not long before he got a $1.5 million earmark to support commercial development around the base. Less than a year later he was able to sell the land for $985,000.
In another instance, his real estate firm brokered the purchase of a property near a proposed highway interchange. Calvert got an earmark to build the interchange, and his firm brokered the sale of the property at a profit. His company received a commission on both sides of the deal.
The House Ethics Committee signed off on the earmarks, saying the earmarks benefitted others besides for Calvert -- but he made hundreds of thousands from the deals.
Maloney has been a strong supporter of plans to build the Second Avenue Subway in New York City -- securing at least $641 million in federal earmarks for the projects.
But Maloney also stands to gain personally from the project, owning a building at 409 East 92nd Street that is currently priced between $5 million and $25 million. The building is just blocks away from a station a station entrance at 94th street and Second Avenue -- which is almost certain to raise the value of her property.
According to Schweizer, Hinchey managed to increase his wealth by 800% between 2004 and 2008 -- mostly as a result of a land deal in his upstate New York hometown.
Hinchey pushed for a $800,000 earmark for infrastructure improvements in the village of Saugerties, NY. Hinchey owned two properties that made up 'a quarter of the land' benefited by the project, Schweitzer writes, and the value of his land increased five-fold -- from between $30,000 and $100,000 to between $250,000 and $500,000.
Update 4:39 11/28/11 : Hinchey's contacted us, and disputed Schweizer's claims.
According to Alex Wade, Director of Special Projects for the Village of Saugerties 'The fact is, we requested these funds from the state to repair 100 year old sewer lines before the Partition Street Project was even initiated. Furthermore, the developer of that project has always planned to build new lines directly into the existing pump station, which is adjacent to the property. The grant Congressman Hinchey secured was for upgrading 100 year old infrastructure - period, end of story. There isn't even any room for argument here - these reporters and bloggers just got it wrong.
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