Congressional Influence Peddling In Exotic Locales

On a 2011 trip to Thailand, a group of visitors sunbathed at a popular beach, lunched at a winery, and went to an elephant preserve. But these were not typical tourists: They were all American congressional staffers, and the Thai government footed their bill.

According to a recent Washington Post report, senior congressional staffers took at least 803 “cultural exchange” trips on foreign nations’ dimes in the six-year period ending in 2011. They visited “historical and cultural sites” such as the Thai beach, the Swiss Alps and the Great Wall of China.

You and I might want to exchange our self-financed vacations for one of these cultural exchange trips. I will let you know as soon as I find a place where we can sign up.

While staffers, as well as legislators, must generally clear plans with the House or Senate ethics committees before allowing lobbyists or private companies to pay their way on trips, congressional ethics rules contain an exception for cultural exchange trips funded by foreign powers. So long as the purpose is general education rather than, say, actual business, it is completely legal for foreign lobbyists to shower policy aides, or even lawmakers themselves, with first-class tickets and luxury accommodations. Only senior staffers are even required to disclose trips of this sort; junior staff members’ trips can go entirely unreported. This means there is no way of knowing exactly how many free trips staffers have actually taken.

The trips’ sponsors argue that their purpose is merely to foster international understanding. (After all, how else will influential people who are supposed to live on government salaries gain important knowledge of our allies’ five-star cuisine?)

I agree that the legislators and congressional staffers who embark on these trips need to broaden their understanding of the world. They should start by looking up the term “conflict of interest.”

Incidentally, if the primary purpose of these trips is not business-related, the cost of such a trip would ordinarily be taxable as income to the employee. We have no way to know for sure how congressional aides treat such trips, but my guess would be that few if any pay taxes on their value. Their position, if they ever had to articulate it, would most likely be that the trips are excludable as “working-condition fringe benefits” under Sec. 132(d) of the Internal Revenue Code (which some of those same staffers are, no doubt, charged with reviewing to find abusive loopholes that can be closed to raise revenue that the Treasury needs, or at least wants, very badly). For this exclusion to apply, the trip’s primary purpose would have to be to conduct the business of the government – the exact purpose for which congressional staffers are not permitted to accept these travel freebies.

These alleged cultural exchange trips are a blatant example, not of an exchange between cultures, but of the exchange of access and influence for gifts. They ought to be stopped immediately.

Like congressional aides, my colleagues and I at Palisades Hudson are in the business of evaluating information and providing advice. Similarly, there are plenty of outside parties – insurance companies and brokers, for example – that stand to gain or lose business or money as a result of the advice we give. To ensure that our advice is never skewed by our relationships with those outside parties, we don’t take money from them. Ever. Our compensation comes exclusively from the clients whose interests we are hired to serve.

There is only one scenario in which the travel expenses of Palisades Hudson employees are paid by anyone other than us or our clients. If a client has invested in a company, and we are managing that investment on the client’s behalf, we will allow the company to pick up certain expenses that we would have otherwise charged directly to the client, such as travel to the company’s annual meeting. In this case, the client would ultimately pay either way, and going through the company generally allows us to obtain lower, group rates; we can then pass those savings on to the client.

As congressional staffers ought to know, there is no such thing as a free lunch, a free hotel room, or a free elephant ride. On “cultural exchange” trips, the expected payment comes in the form of email addresses and phone numbers. Between 2008 and 2010, staffers who had been on trips paid for by foreign governments received more than 200 documented communications from representatives of those countries related to legislation or policy matters, the Washington Post noted. One lobbyist from Cyprus, Christy Stefadouros, led 14 congressional staffers through the cultural highlights of her country in 2009 and followed up on the tour by contacting the staffers 61 times regarding diplomatic relations.

Based on the numbers, China is apparently the country most interested in sharing its culture with congressional staffers. From 2006 to 2011, it hosted lawmakers and senior legislative staff members on 226 trips – nearly twice as many as the second-most statistically amiable government, Taiwan, which paid for 121 visits. Many of those 226 trips were arranged by the U.S.-Asia Foundation, a Washington-based nonprofit.

While China paid for the legislators’ and staffers’ trips, the U.S.-Asia Foundation itself has a wide array of corporate sponsors. Lobbyists for those sponsors, which include UPS, Wal-Mart and Microsoft, sometimes join staffers on trips. A spokesperson for Wal-Mart told The Post that funding the organization is a way to reach congressional staffers. “We look at it as an opportunity to talk about Wal-Mart,” she said. Three other organizations provide similar trip-planning services.

There may be real value in sending congressional staffers overseas. If that’s the case, Congress ought to determine precisely what that value is and dispatch aides to the countries they most need to visit, setting them up with the itineraries that are most useful to lawmakers and constituents. These trips should be 100 percent funded by the U.S. government and should not include foreign or corporate lobbyists as tour guides. If, on the other hand, the U.S. government does not see any particular value in sending its personnel on “cultural exchange” missions, those personnel should pay their own way.

There is nothing wrong with you or me, as private citizens, accepting a trip financed by a foreign government. Unless we happen to be remarkably well-connected, however, no foreign government has a reason to pick up our tab, though we are as capable of exchanging cultures as anyone working on Capitol Hill. This simple fact exposes congressional cultural exchange junkets for the legalized influence peddling that they are. If Congress wants to close some loopholes, it should start at home.

About Larry M. Elkin 553 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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