From:
Seattle Times
By Kyung M. Song
A new book that was the basis of a recent "60 Minutes" investigation into congressional insider trading alleges Rep. Jim McDermott, D-Seattle, made almost $40,000 in 2005 by flipping shares in a Canadian biotech firm that stood to benefit from a massive bioterrorism-defense bill he voted for.
Seattle Times Washington bureau
WIN MCNAMEE / GETTY IMAGES
U.S. Rep. Jim McDermott, D-Seattle, seen at a news conference last month, has been criticized for the timing of a stock trade.
WASHINGTON — A new book that was the basis of a recent "60 Minutes" investigation into congressional insider trading alleges Rep. Jim McDermott, D-Seattle, made almost $40,000 in 2005 by flipping shares in a Canadian biotech firm that stood to benefit from a massive bioterrorism-defense bill he voted for.
The book, by Peter Schweizer, a fellow at the conservative Hoover Institution at Stanford University, said McDermott "bet big" by buying 2,000 shares in ID Biomedical of Quebec for $10 apiece in June 2004. That was six weeks before the House of Representatives passed the $5.6 billion bill dubbed Project Bioshield.
It turns out, however, that an $8 million grant for ID Biomedical's Bothell subsidiary — a grant that Schweizer said resulted from the legislation's passage — actually was funded by a separate competition launched a year before by the National Institutes of Health.
And McDermott says he didn't pick the stock. Instead, he said, the purchase was initiated by his financial consultant at the time at Wells Fargo, Jane Suzick, and he merely gave consent.
"I never make suggestions about what to invest in and I don't suggest when to buy or sell anything. I just take advice from my financial consultant and approve what she suggests," McDermott said through his spokesman, Kinsey Kiriakos. "Alas, I'm no richer than I was years ago."
Suzick, now with Morgan Stanley Smith Barney's Seattle office, declined to comment.
Suzick's stock pick paid off big. McDermott unloaded his ID Biomedical shares in September 2005 for nearly three times what he'd paid. His net profit after 15 months: $37,816.
"McDermott's timing was nearly perfect," Schweizer wrote.
McDermott is one of scores of congressional lawmakers named in Schweizer's book, subtitled, "How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison." Among them are Sen. John Kerry, D-Mass., Sen. Max Baucus, D-Mont., and House Speaker John Boehner, R-Ohio.
Schweizer was prominently featured on "60 Minutes" last month. The show also interviewed former U.S. Rep. Brian Baird, now of Edmonds, who pushed unsuccessfully for an anti-insider-trading bill for members of Congress before retiring last year.
The CBS broadcast stirred momentum behind bills similar to Baird's that are now wending through Congress.
But McDermott's office flatly denies he traded on privileged information. Kiriakos, the spokesman, accused Schweizer of knitting "flimsy links" together to misleadingly depict McDermott's financial dealings.
McDermott took a stake in ID Biomedical — funded out of one of his individual retirement accounts — at a time of widespread fear about severe acute respiratory syndrome (SARS) and avian flu. ID Biomedical developed vaccines for flu and plague, among other things.
In September 2005, GlaxoSmithKline, Europe's largest drugmaker, announced a $1.4 billion offer to buy ID Biomedical, whose share prices had risen nearly threefold since McDermott's purchase. McDermott sold his shares two weeks later, according to his financial-disclosure statements.
Schweizer, for his part, doesn't believe the 180 percent return on ID Biomedical shares was due to sheer investing savvy.
"His investment adviser put 10 percent of his assets into a small Canadian biotech firm without consulting him? And the timing just happened to be right?" Schweizer said. "It doesn't pass the smell test."
Yet even if ID Biomedical were to have benefitted directly from the passage of Project Bioshield, the fate of the legislation was no secret. It passed the Senate unanimously, 99-0, on May 19, 2004, and the House approved it 414-2 on July 15, 2004. McDermott bought his shares two weeks after the Senate vote and six weeks before the House vote.
Asked if he was accusing McDermott of insider trading, Schweizer said, "it is highly unethical to purchase stock in a bill you are supporting and then enjoy the profits when the corporate recipients see their stock climb."
McDermott, Schweizer contends, "benefited from taxpayer money."