George Allen’s stock-option ‘problem’

October 10, 2006

As if Sen. [tag]George Allen[/tag] (R-Va.) didn’t have enough problems, the hits just keep on coming. In the spring, Allen was on route to an easy re-election victory, which was supposed to be little more than a speed bump before launching his presidential campaign. In most circles, he was a top-tier ’08 candidate and the base’s likely alternative to John McCain.

That was then. Substantiated charges of racism have hampered Allen, who has seen his once-huge lead over former Navy Secretary Jim Webb (D) disappear. By any reasonable standards, this new controversy should seal the deal.

Sen. George Allen did not disclose to Congress that he owned [tag]stock options[/tag] in a Virginia high-tech company and has now requested an opinion from the Senate Ethics Committee about whether that failure violated Senate rules.

Allen (R-Va.) received options on 15,000 shares of stock in Commonwealth Biotechnologies Inc. after serving on its board of directors between the end of his term as governor and his election to the Senate. He disclosed the options before his first Senate term in 2001 but has not reported his continued ownership of them since, campaign officials said Monday.

Congressional conflict-of-interest rules mandate disclosure on all deferred compensation, including stock options. Allen not only failed to do so, he also asked the Army to help another business that gave him similar stock options.

Allen’s defense, thus far, is that the stock options were worthless, and therefore not worth reporting. As it turns out, that’s wrong, too.

Bloomberg reported today:

Stock options that Senator George Allen described as worthless were worth as much as $1.1 million at one point, according to a review of Senate disclosure forms and U.S. Securities and Exchange Commission filings.

The records appear to contradict remarks he made to the Associated Press. “I got paid in stock options which were worthless,” AP quoted him as saying.

Allen served as a board member of Chantilly, Virginia-based Xybernaut Corp. from 1998 until December 2000 and was awarded options on 110,000 shares during that period. His Senate financial disclosure form for 1999, required for candidates as well as officeholders, doesn’t report that he owned the options.

The stock options issue didn’t arise during a televised debate last night between Allen, a 54-year-old Republican, and Democratic nominee Jim Webb, 60. Nevertheless, Mark Rozell, a professor of public policy at George Mason University in Arlington, Virginia, said the issue poses a problem for Allen, who polls show is in a close race with Webb.

“In an election season in which congressional ethics and morality are at the top of public discussion, Allen may now be seen by much of the public as part of a larger problem afflicting his party,” Rozell said.

The Washington Post, which has been active in helping expose Allen’s problems of late, questioned the senator’s ethics in an editorial today.

After he left the Virginia governor’s mansion in 1998 and before he entered the U.S. Senate in 2001, George F. Allen of Virginia did what out-of-office politicians often do: He tried to make some money. As it happens, a number of companies that he had assisted as a pro-business Republican governor returned the favor once he was a private citizen by inviting him to join their boards and furnishing him with potentially valuable stock options. One of them was a high-tech government contractor called Com-Net Ericsson, whose stock options translated into a one-time windfall for Mr. Allen worth $279,000 in 2001. As governor, Mr. Allen had helped Com-Net with its expansion plans.

It is not illegal for a governor to help out companies while in office and then join with them once he leaves — though one can certainly question the ethics of doing so. However, it becomes a potentially graver problem when a U.S. senator owns options to buy a substantial quantity of a government contractor’s stock — and then goes to bat for that company with an arm of the federal government.

I know it’s Virginia, but given the past few months, how can Allen still win this race?

I watched most of the debate last night and he was really really weird – he kept to a mantra of “defending” marriage, that Webb and liberals will raise taxes and trying to paint Webb as in cahoots with Hillary Clinton and John Kerry. It was totally a one-note show and was from the same playbook that any Republican could have used since 1994.

It felt like a time-warp – as if the world has moved on and this guy remains completely out of touch and ranting and raving about the same old stuff as if he has absolutely nothing else to talk about and these issues are the only ones in the world that matter. It will be interesting to see if Virginians continue to buy it.

  • “I know it’s Virginia” – CB

    We in the Commonwealth would really prefer you not to express it that way. George Felix Allen Junior has already given the country the impression that the way to win election in this state is to trapse in from California, throw racial slurs around, spit tobacco juice at the feet of women and wear cowboy boots. Not to mention hang a noose in your law office.

    Hopefully, this time we’ll reject Allen and the image of Virginia he has helped to create in the minds of many Americans. But please save the sly cutting remarks at our expense until we fail to achieve that.

    Air Force Brat settled in [Northern] Virginia

  • We in the Commonwealth would really prefer you not to express it that way.

    Fair enough, Lance. For the record, Mrs. Carpetbagger and I lived in Virginia for seven years and enjoyed the state very much. I characterized it the way I did in the post because, well, Virginians elected Allen twice (once for governor, once for Senate), and he’s still ahead in the polls, even after an awful summer.

    This is not to disparage the entire Commonwealth, only Allen supporters, who, with any luck, won’t be a majority on Nov. 7.

  • “Virginians elected Allen twice (once for governor, once for Senate).” – CB

    Very true. Of course, he’d not made a complete ass of himself then. All the underlying indications that lead us not to give his denials any credit were there (Confederate Battle Flags and Nooses, for instance) but I suppose that people were willing to give him the benefit of the doubt at that time.

    Of course, this is six years later and the demographics of Virginia have shifted somewhat 😉 With luck, sensible people will vote for a native Virginian (Jim Webb) and not this upstart transplant with his weird notions of how to be “authentic”.

  • I watched the debate last night and Webb seemed very stiff, but Allen fared much worse in my eyes. I noticed how Allen tried to keep the issues at the local level, but kept injecting Bush into the debate. This was probably an over estimation from Allen that it would resonate positively with Va. voters. I don’t think it did. Webb held his ground very well and kept the debate on a National level. Allen has been a puppet for this administration voting inline with the Administration 97% of the time and Webb layed pointed this out very nicely is his closing remarks. I think that Virginians got a good impression of Webb and I’m hoping his polling numbers reflect this. I’ve watched Allen and when he’s around his supporters he criminalizes the democrates and outwardly marginalizes the middle class with comments and statements about how he will support the upper income and large business of the state (which he commonly refers to as the Small business class)

  • Stock options are never worthless (until they expire).

    A stock option represents the right to buy stock at a set price, within a period of time. He meant that the strike price, the price at which he was able to buy the stock under the option, was less than the then current market price of the stock. (This is referred to as being “under water”.) Almost all options have that feature when they are issued; in fact, under the tax code, in order to get favorable tax treatment, the exercise price must be not less than the fair value of the stock at the time of issuance.

    The value of a stock option is the right to wait and see whether the stock goes up. If it does, then it can be exercised at a profit. If not, it is allowed to expire. The value of an option resides in the chance of such an increase in value.

    If the options were really worthless, why would the company waste its time issuing them?

    Either Allen is an idiot, or he is deliberatley lying ot us. Well, okay, there is a third possibility. Maybe he was ignorant when he received the options and now understands and is lying.

  • I characterized it the way I did in the post because, well, Virginians elected Allen twice
    Ah yes, but they also elected Mark Warner.

    /Williamsburg

  • Stock options! Are you kidding? Sure, Allen didn’t give full disclosure, but when it comes to stock options and conflicts of interest: Allen is a piker.

    If you want to talk about stock options and conflicts of interest, then there is only one man and one company that stand above all others: Vice President Dick Cheney and Halliburton. And besides the financial corruption, there’s the lost of nearly 3,000 American lives (30,000-plus Iraqi deaths) and thousands more of maimed and wound—all so that certain people could get richer. Now, that’s CRIMINAL.

  • I watched the debate last night too. Webb isn’t a great candidate–he missed chance after chance to tie Allen to the unpopular national leadership and hit him on the easy to substantiate charge that Felix Macaca always puts politics ahead of policy–but I think he would be (hopefully will be) a great Senator.

    It’s always frustrating that the skills needed to win election are so different from the skills needed to govern effectively.

  • I’m officially starting a search for the last honest Republican in Washington. Any nominees? Chuck Hagel, maybe? One of the ME Senators?

  • What I wish newspapers would do a better job reporting is that Sen. Allen can do things with his position to make those “worthless” stock options worth something … most likely at taxpayer expense. The SEC isn’t so much concerned with the value of Allen’s stock options but rather that he now he is now beholden to these companies to make them worth something. Stock options are normally given to people who have a stake in and power to make the options increase in price. These options were given to, and accepted by, Allen in the hopes he would do things in his power to increase their value.

  • Watching this self-important pile of what-you-scrape-off-your-shoes, who (like most big-time Republicans) would be living in a cardboard box under a freeway overpass but for the accident of his birth, finally get his comeuppance, and have it in public, so the coming humiliation will be total, is just amusing as hell. What a halfwit – just from hearing the soundbites that NPR broadcast this morning.The idiot talked in “talking points” and sounded like the quarterwit he really is.

  • Stock options come with a built-in motive to do everything you can to make the company’s stock price go up. That’s why they showered them on kids in the Internet go-go days. Giving them to a politician is making a deal that says “Help us out and you get paid”, with a guaranteed payout to the pol if he comes across. Stock options are worse, corruption-wise, than other forms of remuneration.

  • …and therefore not worth reporting.

    Arrogance of power. Rules are rules – they ought to be obeyed, and if they’re not, someone should pay.

  • With luck, sensible people will vote for a native Virginian (Jim Webb) and not this upstart transplant with his weird notions of how to be “authentic”. — Lance (#4)

    My sudden and intense interest in politics (after 33 yrs in the US, 20+ of it as a voting citizen) is a source of endless amusement to both my husband and my son — both “Virginia born and bred”. DS is in CA and fighting his own battles. DH, now in his early 80ties and a “yellow dog Dem”, doesn’t like Webb too much (been in the Reagan admin, hadn’t he? endorsed Allen in the past, didn’t he?) just snorts when Allen’s mentioned: “That carpetbagger and his fake cowboy boots…” (no offense meant to you, Steve B ). We’ll both vote for Webb, if for different reasons. Most of our *town* (Lexington) tends to vote Dem, come hell or high water. But there aren’t enough of us to overcome the ” rurals” and their suspicion of “guviment” as such. Given that it’s “pox on both your houses” in their opinion, it’s difficult to convince them that they’re better off with a government which gives them food vouchers so that they can spend their occasional (and unreported) income on beer and ciggies. In theory at least, they’re very independent, so “guviment” intervention is an offence, even when it works for them. When it works against them, it’s considered to be “just more of the same shit as usual, only worse”. Heads the Dems lose; tails the Repubs win… And it would take an atomic bulldozer to shift them

    Yours, disheartened, in south-western VA

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