Conflict of Interest Redefined: U.S. Politicos Invested in Iraq, Afghanistan

Members of Congress invested nearly 196 million dollars of their own money in companies that receive hundreds of millions of dollars a day from Pentagon contracts to provide goods and services to U.S. armed forces, say nonpartisan watchdog groups.

Lawmakers charged with overseeing Pentagon contractors hold stock in those very firms, as do vocal critics of the war in Iraq, says the Center for Responsive Politics (CRP).

Senator John Kerry, the Democrat from Massachusetts who staked his 2004 presidential bid in part on his opposition to the war, tops the list of investors. His holdings in firms with Pentagon contracts of at least five million dollars stood at between 28.9 million dollars and 38.2 million dollars as of Dec. 31, 2006. Kerry sits on the Senate foreign relations panel.

Members of Congress are required to report their personal finances every year but only need to state their assets in broad ranges.

Other top investors include Representative Rodney Frelinghuysen, a New Jersey Republican with holdings of 12.1 million - 49.1 million dollars; Rep. Robin Hayes, a North Carolina Republican (9.2 million - 37.1 million dollars); Republican Rep. James Sensenbrenner Jr. of Wisconsin (5.2 million - 7.6 million dollars); and Rep. Jane Harman, a California Democrat (2.7 million - 6.3 million dollars).

Sen. Jay Rockefeller, the Democrat and former governor of West Virginia who chairs the Senate Select Intelligence Committee, invested some 2.0 million dollars in Pentagon contractors, CRP says.

Other panel chiefs who invested in defense firms include Sen. Joseph Lieberman, the Connecticut Independent who presides over the Senate Homeland Security and Governmental Affairs Committee, and Rep. Howard Berman, the California Democrat who heads the House Foreign Affairs Committee.

In all, 151 current members of Congress -- more than one-fourth of the total -- have invested between 78.7 million dollars and 195.5 million dollars in companies that received defense contracts of at least 5.0 million dollars, according to CRP.

These companies received more than 275.6 billion dollars from the government in 2006, or 755 million dollars per day, says budget watchdog group OMB Watch.

The investments yielded lawmakers 15.8 million - 62 million dollars in dividend income, capital gains, royalties, and interest from 2004 through 2006, says CRP.

Not all the firms deal in arms or military equipment. Some make soft drinks or medical supplies and military contracts represent a small fraction of their revenues. Many are leaders in their industries and, as such, feature in the investment portfolios of millions of ordinary people who invest at least a portion of their savings in mutual funds, which in turn hold stocks in up to hundreds of companies.

"Giant corporations outside of the defense sector, such as Pepsico, IBM, Microsoft and Johnson & Johnson, have received defense contracts and are all popular investments for both members of Congress and the general public," says CRP.

"So common are these companies, both as personal investments and as defense contractors, it would appear difficult to build a diverse blue-chip stock portfolio without at least some of them," the group acknowledges.

If some of the stocks appear innocent, aides say legislators also are. Some did not buy the stocks in question but inherited them. Many hold them in blind trusts, so called because the investments are handled by independent entities, at least theoretically without the politicians' knowledge of how their assets are being managed.

Even so, according to CRP, owning stock in companies under contract with the Pentagon could prove "problematic for members of Congress who sit on committees that oversee defense policy and budgeting."

Members of the Senate Foreign Relations and Armed Services committees held 3.0 million - 5.1 million dollars in companies specializing in weapons and other exclusively military goods and services, it added.