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McCain Adviser Gramm Lobbied for UBS Illegally in 2004, Complaint Said
By Jason Leopold (about the author) Page 2 of 3 page(s)
In mid-2003, Gramm began floating a UBS-backed idea of raising money for the $95 billion Texas Teacher Retirement System through the purchase of retirees’ life insurance policies and the sale of billions of dollars in bonds.
Gramm met with Texas Gov. Rick Perry, Insurance Commissioner Jose Montemayor and state pension officials to discuss the proposal, which Gramm claimed could add as much as $500 million to teachers’ pension funds risk free, according to documents.
Texas Democrats derided the UBS proposal after a review determined that UBS stood to profit far more than the Teachers Retirement System if the plan were implemented.
Furthermore, Democrats found that Gramm’s PAC had donated $612,000 to Gov. Perry during the 2002 election cycle.
The Texas controversy expanded later when it was learned that a Teachers Retirement System trustee had retired from UBS in January 2004, the same month Gramm began an aggressive drive to get Perry to back the proposal.
Kelly Fero, a Democratic Party strategist, told the Fort Worth Star Telegram that “the conflict for Perry is that he's trying to steer retired teacher benefits ... to his political pal Phil Gramm, who gave him hundreds of thousands of dollars in '02, and he has appointed an employee of UBS to the TRS board to help make this whole scam possible."
Democratic Chairman Charles Soechting added, “The plan was a "huge, get-rich-quick scheme on the part of Phil Gramm and his buddies" in the investment and insurance industries, according to a Jan. 11, 2004, story in the Houston Chronicle.
Democrats soon discovered that Gramm hadn’t registered as a lobbyist in Texas as would be required by state law before he could seek changes in policies. The Texas Democratic Party filed a complaint against Gramm with Travis County prosecutors and the state ethics commission.
It is unclear what happened with the ethics complaints. Neither the Travis County prosecutors nor the Texas Ethics Commission would comment on the outcome of their inquiries. A review of public records on the Web sites of both agencies failed to turn up a final ruling on the probe.
Representatives for McCain and Gramm did not return repeated calls for comment. A spokesman for UBS declined to discuss the matter. When asked by reporters about Gramm’s mixed role as a paid UBS lobbyist and an unpaid campaign adviser, McCain has staunchly defended his friend’s ethics.
Sub-Prime Complaints
On another front, UBS is currently under investigation by William Galvin, Massachusetts' secretary of the commonwealth.
Galvin subpoenaed UBS and Bear Stearns after one of its analysts issued a research report that upgraded the stock of New Century Financial, a company that provides sub-prime mortgages to low-income homebuyers, from "underperform" to "peer-perform.”
The stock spiked on the news. But less than two months later New Century filed for bankruptcy protection due in large part to the massive number of borrowers who were defaulting on their loans.
It turned out that UBS and Bear Stearns, which recently was spared bankruptcy by a federal bailout and an arranged sale to JPMorgan Chase, financed New Century’s mortgage operations.
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by Senate Banking Committee
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