Democratic presidential candidate Barack Obama said Wednesday he was not aware he had invested in two companies backed by some of his top donors and said he had done nothing to aid their business with the government.
The Illinois senator faced questions about more than $50,000 in investments he made right after taking office in 2005 in two speculative companies, AVI Biopharma and Skyterra Communications. Obama set up a trust that gave his broker authority to trade stocks on his behalf without his input, according to 16 pages of documents he released Wednesday.
"At no point did I know what stocks were held, and at no point did I direct how those stocks were invested," Obama told reporters at the end of a news conference called to trumpet an unrelated immigration bill.
"What I wanted to make sure is that I didn't want to invest in companies that potentially would create conflicts with my work here," said Obama, who has campaigned on the need for stronger congressional ethics rules. "Obviously, the thing didn't work the way I wanted it to."
Avian flu and federal funding
Obama purchased $5,000 in shares for AVI, which was developing a drug to treat avian flu. Two weeks after buying the stock, as the disease was spreading in Asia, Obama pushed for more federal funding to fight the disease, but he said he did not discuss the matter with any company officials.
Obama also had more than $50,000 in shares of Skyterra, a company that had just received federal permission to create a nationwide wireless network that combined satellite and land-based communications systems.
Among the company's top investors were donors who raised more than $150,000 for Obama's political committees, the New York Times reported Wednesday. The stock holdings were first examined Monday by the financial Web site, Thestreet.com.
The reports found no evidence that any of his actions ended up benefiting either company during the roughly eight months he owned the stocks. Obama lost about $15,000 on Skyterra and earned a profit of about $2,000 on AVI. Skyterra stocks continued to drop after Obama divested.
Freedom trust liquidated
Obama said he wanted to invest in stocks after signing a $1.9 million deal for his second book, "The Audacity of Hope." He said after buying a home and putting money in the bank and mutual funds, he asked a friend and political donor, investor George Haywood, to recommend a broker so he could invest a portion more aggressively.
"I thought about going to (billionaire investor) Warren Buffett, and I decided it would be embarrassing that I only had $100,000 to invest," Obama said.
Haywood, a major backer of both AVI and Skyterra, recommended a broker at UBS who also bought stock for Obama in those companies.
Obama said at some point in fall 2005 he got a stockholder letter from AVI or Skyterra, but he couldn't remember which company. But on Dec. 15, 2005, he liquidated the "Freedom Trust," as it was titled in the May 15 agreement establishing it, and put his money in mutual funds and money market accounts that wouldn't raise such questions.
"It's at that point that I became concerned that I might not be able to insulate myself from knowledge of my holdings, that this trust instrument might not be working the way I wanted it to," Obama said.
UBS spokeswoman Karina Byrne said the company would not make Obama's broker available for interviews because they do not discuss client investments.
Blind trust concerns
Obama said he didn't invest in a qualified blind trust because it wouldn't enable him to limit which companies he invested in, such as those in the tobacco industry and other areas that he did not want to support.
Obama attorney Robert F. Bauer added that the senator felt the blind trust left him in an "inadequate ethical position" because it would mean he couldn't respond to media inquires, for example, if questions arose about his investments. But Obama also would have to report the stock holdings each year under Senate rules because they weren't part of a qualified blind trust.
"At this point, I'm only invested in mutual funds or cash or money market accounts. That's my instruction to my accountant," Obama said. "We are not going to own individual stocks precisely because it raises questions like this."
Senate ethics rules do not prohibit lawmakers from owning stocks in companies that do business with the federal government.
Another investor involved in Skyterra was Jared Abbruzzese, a New York businessman now at the center of a federal inquiry into public corruption.
Abbruzzese and his wife had contributed $10,000 to Obama's political action committee. But normally they back Republican causes, such as the Republican National Committee and the Swift Boat Veterans for Truth that damaged John Kerry's presidential campaign.
Obama said he has never met Abbruzzese.