We all know the story by now.
Former Speaker of the House–and current Minority Leader–Nancy Pelosi and her husband, Paul Pelosi, bought 5,000 shares of Visa stock at a preferential IPO price in 2008. That same year, Speaker Pelosi failed to support a bill that would have protected consumers and amended anti-trust laws so that credit card companies would have to negotiate their “swipe fees.”
The Pelosi-Visa IPO story has made the rounds ever since Breitbart editor Peter Schweizer revealed the connection in his new book, Throw Them All Out, which was featured on CBS’s 60 Minutes in November (Schweizer’s book and the CBS report were targeted by Pelosi’s Congressional office in a November 13 statement).
According to Schweizer, the Pelosis were granted the IPO opportunity from Visa just before Nancy could supported the Credit Card Fair Fee Act, a bill which had cleared the Judiciary Committee and reportedly had 77 percent support from the American public (according to the Merchant’s Payment Coalition). If passed, the bill would have dented Visa’s profits by reducing so-called “interchange fees,” the 1 to 3 percent charge retailers pay Visa when customers use their credit cards for purchases. The four major credit card companies reportedly collected $48 billion in 2008 from interchange fees.
Although Pelosi has been known to crusade against credit card companies, disclosure reports indicate that she and her husband bought between $1 million and $5 million of Visa stock (Congressional members are only required to report ranges, not specific amounts) at the IPO price of $44 a share. Two days later, the stock soared to $65 a share, producing a 50 percent profit. The Pelosis then bought more Visa stock, and by the time they engaged in their third purchase on June 4, 2008, Visa was selling for $85 a share.
Sources from the finance industry who worked on Wall Street and contacted Breitbart.com tell Big Government that what Pelosi most likely received was a special rate for “institutional clients,”–a rate usually reserved for major corporations and mutual funds, as opposed to the “retail rate” that is typically offered to individuals.
The special institutional rate is typically offered when there is a “hot IPO“–such as Visa–where the demand exceeds the supply, and buyers are anxious to purchase the initial offering of shares.
According to a former Wall Street source who worked at EF Hutton: “That isn’t necessarily illegal, but when that special institutional rate is offered to a politician who is voting on legislation that may directly impact the company whose stock they are purchasing, there is a possible conflict of interest.”
The source explained that it is within the power of the company offering the stock, or the brokerage firm through which the stock is being sold, to offer a particular client the preferential “institutional rate.” However, according to the source above and other Wall Street insiders, there is almost always a paper trail called a “directed order.”
A directed order is issued when a client gives specific instructions to their broker concerning the order’s routing destination.
Typically, the allocation of IPO shares is decided and distributed by a “syndicate department” within the brokerage firm, which would have a record of the directed order. In this case, if such an order was given, the order could have come from Wells Fargo, the brokerage firm in San Francisco that Mr. Pelosi uses.
Big Government learned about the possible Wells Fargo/Visa paper trail in the Pelosi IPO on the heels of breaking news coming from Washington today.
Earlier this morning, Roll Call reported that Pelosi has apparently commingled her business portfolio contacts and her congressional activities. According to the article, in May 2010 Pelosi gave an economic presentation in the U.S. Capitol at which she introduced a group of several Democratic leaders and private businesspeople–whom she referred to as consultants who were offering their input on economic growth.
One of the consultants was William Hambrecht, a San Francisco based investment banker who employed Pelosi’s son and has participated in several business deals with her husband–one of which allegedly benefited the Pelosis to the tune of $100,000. The most famous deal the two had worked on together was their investment in the failed United Football League (UFL).
Pelosi’s U.S. House office spokesman Drew Hammill says that Hambrecht was not involved in the Visa IPO deal in any way, and his involvement in Congress has not been exclusive to Pelosi:
Hambrecht has been an intellectual resource on both sides of the Capitol. In these meetings, Hambrecht has spoken about the need, in light of the financial crisis, to help keep homeowners in their homes, help small businesses grow and hire, and help small banks gain access to credit–all macroeconomic goals to grow and stabilize our economy and strengthen our competiveness.
According to Roll Call, however, the May 2010 event was the fourth time since 2007 that Pelosi had invited Hambrecht to a congressional event without disclosing her personal business ties with him. In October 2009, the Washington Post reported that Paul Pelosi had purchased a team in Hambrecht’s league for $12 million.
Roll Call reported:
According to Pelosi’s disclosure form, most of the Hambrecht-linked investments produced losses or very little income last year except for one — an investment worth $5 million to $25 million in an investment firm called Matthews International Capital Management. The firm, partly owned by Hambrecht, specializes in Asian investments and earned Paul Pelosi somewhere from $100,000 to $1 million in income last year. Paul Pelosi also maintained a brokerage account with Hambrecht’s firm last year worth $500,000 to $1 million.
If there was, indeed, a directed order, then there is a paper trail. As the former EF Hutton source speculated: “There’s a paper trail out there somewhere. It may be hard to find, but someone inside Wells Fargo, probably in the syndicate department has access to it.”