Stocks and Bond

Kit Bond, one of the Senate's premier practitioners of cronyism, is up for reelection in Missouri. And he's likely to win despite the ethical questions raised by some of his relationships.

Published October 11, 2004 7:28PM (EDT)

Sen. Christopher "Kit" Bond, R-Mo., is an unusual member of the most exclusive club in the nation. He arrived as a millionaire, but in a reversal of fortune managed to lose it all. Then, in a turn of good luck, he was able to rebuild his wealth. The senator's ability to sustain his political career and replenish his personal portfolio is a classic story of cronyism worthy of the era of the robber barons.

Bond, a three-term Republican, achieved his new riches in part by legislatively helping the companies in which he and his family had begun to invest -- one of them, Kansas City Southern Industries, a Missouri-based railroad, soon after his former chief of staff became its vice president and chief lobbyist. The former colleague is now a major Bush-Cheney campaign official. Kansas City Southern, meanwhile, has been one of Bond's top corporate campaign contributors.

Bond's survival is essential for the Republican Party's hopes of holding on to its one-vote majority in the Senate. Though he has never pulled in more than 53 percent of the vote in his three elections, Bond is strongly favored to win again next month, not because of conservative consistency but largely because of his pork-barrel fiscal values, reflected in big federal spending for his constituents. Bond's work in bringing federal dollars to Missouri has also had the fringe benefit of helping him line his own pockets: When Bond used his influence to aid Kansas City Southern, he was also rewarding himself as a stockholder in the company.

Now Bond is squaring off against Democrat Nancy Farmer, the Missouri state treasurer. She figures to be badly outspent by her incumbent opponent, but is nonetheless an energetic campaigner.

Bond was elected governor of Missouri in 1972 at the age of 33, the youngest chief executive in the history of the Show Me state. He built a reputation as a moderate that would help him in later years, pushing affordable-housing programs and starting the state's Parents as Teachers program, which trains new parents in how best to raise their children. "Bond has been able and continues to be able as a candidate to avoid being typecast as a particularly conservative Republican," said Terry Jones, a political science professor at the University of Missouri at St. Louis. One veteran Missouri Democrat said, "The thing about Bond is, the less you know about him, the more inoffensive he is."

"Pork is a mighty fine diet for Missourians," a Bond spokesman told the nonpartisan, nonprofit Citizens Against Government Waste in 2002. "It is low in fat and high in jobs." Indeed, as a member of the powerful Appropriations Committee and the chairman of its subcommittee on VA/HUD-independent agencies, Bond has had a front-row seat at the federal trough. One of Bond's greatest hits is the $1 million he obtained this year for the Missouri Pork Producers Association, according to Citizens Against Government Waste. And the large sums he brings in for urban renewal, including $2.5 million in 2003 for the Applied Urban Research Institute, have helped carve inroads among Democrats. "He uses the appropriations process to buy friends," a Democratic operative explained matter-of-factly. Just last month, Bond's office announced a total of nearly $50 million in new federal spending for Missouri, not including $2 billion in national spending for veterans.

Bond's career has been a gyrating series of ups and downs. He lost reelection in 1976, but regained the Statehouse four years later. He took two years off after finishing that term before making a successful bid for the Senate in 1986, winning with 53 percent of the vote. Unlike other successful incumbents, however, Bond has not been able to broaden his support, winning with 52 percent in 1992 and 53 percent in 1998.

In the Senate, Bond has built a typical Republican record. In 2002, National Journal gave him an 84 percent economic conservative rating, a 57 percent social conservative mark and a 76 percent foreign policy conservative rating. He has been a reliable if unremarkable cog, supporting the Iraq war, for example, and opposing full funding for the No Child Left Behind Act.

Bond had a complicated relationship with the other Republican senator from Missouri, John Ashcroft, before Ashcroft was appointed attorney general. When President Clinton nominated distinguished black jurist Ronnie White to the federal bench, for example, Bond gave a warm, supportive statement at his confirmation hearing. But when the right-wing Ashcroft opposed White, Bond crumpled, joining in the vote against his nomination. Black leaders say that Bond had promised he would support White, an assertion Bond disputes. "He did not mislead us," the Rev. B.T. Rice, president of the St. Louis Clergy Association, told the Associated Press, "he literally lied to us."

In 1992, Bond's inherited wealth was virtually wiped out when a blind trust that had two years earlier been valued at $1.3 million -- and that Bond had used as collateral for large loans -- was sold by creditors to cover his debts. He was forced to sell his splendid $1.25 million Washington home of five bedrooms, four fireplaces and servants' quarters and move into a modest rental five blocks away. "The senator had hit lean times," the St. Louis Post-Dispatch reported in 1993.

Bond claimed the trust had been drained dry by the malicious incompetence of his fund manager at PaineWebber, William Reik, and sued him for $11 million. The suit stated that Bond's brother, Arthur Bond Jr., had checked on the investments in the trust in October 1989 and instructed Reik to diversify the holdings. Of course, legally a trustee of a blind trust cannot be influenced by the investor, even in the proxy form of a brother, a fact that Reik and PaineWebber noted in the case. In the end, the parties settled out of court; Bond received $900,000.

Many politicians use blind trusts to avoid the conflicts of interest inherent in having a stake in companies affected by their actions in government. Indeed, Bond had used them since his first gubernatorial run. But in the wake of his financial collapse, he soured on the idea. In 1995 he told the Post-Dispatch that putting finances in a blind trust was "stupid."

Bond restored his solvency partly by investing in Missouri companies whose interests he has advanced before the Senate. Bond's pattern of conflicts of interest runs back to 1993, when he bought McDonnell Douglas stock for his son while acting as the "heavy hitter" for the firm's interests in the Senate, as the Post-Dispatch put it. Bond brushed off questions about the propriety of the purchase as "ludicrous."

In February 1997, Bond bought between $15,001 and $50,000 worth of shares in Kansas City Southern, according to the financial disclosure forms he filed with the U.S. Senate. That same day, he purchased between $1,001 and $15,000 worth of stock for his dependent son, Sam. (Precise numbers are hard to come by, as government rules only require disclosure in broad categories.)

Two months before Bond decided to invest in the railroad company, it had hired Warren Erdman, the senator's longtime chief of staff, who joined as vice president and chief lobbyist. Erdman still holds this position, according to records filed with the House and Senate, which also reveal that KCS spent $220,000 on his lobbying activities in the first six months of 2004. Erdman also happens to be the campaign chairman for Bush-Cheney '04 in Missouri, Kansas, Oklahoma and Arkansas.

One of Erdman's first tasks in his lobbying job was to win Senate approval for Kansas City Southern's attempt to turn the defunct Richards-Gebaur Air Force Base into a major rail hub. The base was shut down after the 1994 round of base closings and was losing money as a general airfield. Kansas City leaders approached the company -- which had just acquired a Mexican rail line -- to see whether it was interested in acquiring the property and making it an "inland gateway to Mexico," in order to take advantage of the newly enacted North American Free Trade Agreement.

Bond quickly swung into action. In July 1997 -- five months after he had bought the railroad company's stock -- he inserted into a Senate bill a $500,000 grant for the Kansas City Chamber of Commerce to study the proposal. Closing the airport required formal approval by the Federal Aviation Administration, and Bond tried to circumvent the process by slipping a provision into an October 1997 spending bill to simply shut the airport down. The measure was removed by a House-Senate conference committee, forcing Bond and KCS to take the long route through the federal bureaucracy. Bond then arranged for city officials to meet with then Transportation Secretary Rodney Slater and personally pushed the project with the FAA and other federal bodies.

Critics, including some local officials, argued that the proposed rail hub was a bad deal: It would increase the number of trains and trucks rolling through the area, it would shut down a local airstrip used by small aviators and, as a member of the Kansas City Star's editorial board wrote, it was "a sweetheart financial deal for the railway" arranged "with too little scrutiny."

Apparently agreeing with that assessment, when the FAA decided to close the base in December 1998, it stipulated that Kansas City Southern would have to pay $15 million more in rent than originally thought -- $74 million instead of $59 million -- over the course of its 50-year lease.

Bond has been there for KCS on other occasions as well. In the mid-1990s, when the company opposed the merger of Union Pacific and Southern Pacific railroads, Bond held joint House-Senate hearings to examine the issue. Later he testified before the Federal Surface Transportation Board on the railroad's behalf. And in recent years, when the railroad industry was pushing asbestos liability "reform," which would cap the amount of damages culpable companies have to pay, Bond spoke out on the Senate floor on the legislation's behalf.

Kansas City Southern has demonstrated its appreciation for Bond's efforts with extensive campaign donations. From 1993 to 2004, 21 individual corporate officers and the company PAC contributed nearly $42,000 to Bond, according to Federal Election Commission records compiled by That sum includes $4,000 -- the maximum allowable -- from KSC's Erdman this election cycle. Members of the company's board of directors have kicked in an additional $8,500 this cycle. In addition, the company helped underwrite Bond's open-bar reception at the Union League during the 2000 Republican National Convention in Philadelphia.

To understand how Bond's work has helped the company, all one needs to do is look at his stock portfolio. When in December 1999 Bond sold off between $1,001 and $15,000 of his KCS shares, he was liquidating part of a 250 percent profit, thanks to a 1997 three-way stock split and strong performance by the company.

According to information from the Motley Fool, the company's split-adjusted price (a tool used to track stock value across splits) was $1.10 when Bond initially bought the stock and had increased to $3.84 when he sold it nearly three years later. His son did even better. When Bond sold between $1,001 and $15,000 of his son's shares in May 2000, the split-adjusted value had risen to $4.36, an increase of nearly 300 percent.

Bond has bought and sold KCS shares numerous times since those early transactions, though he sold most of his stock in the company at the end of 2003, the latest period covered by the financial disclosure forms (which show that he held between $0 and $1,001 in each of two accounts).

This behavior "is a pretty clear conflict of interest," said Charles Lewis, executive director of the Center for Public Integrity, an ethics watchdog group in Washington. "There's no other way to describe it. You're not supposed to feather your nest while you're a lawmaker." Lewis added, "It's not just another company that he's helping -- his former aide is there, and he has investments for him and his son, and the company did well after the actions he took. This picture seems fairly clear."

"What bothers me is not so much that he has bought stock in the company -- although that is somewhat troubling -- but ... that his former chief of staff is now lobbying," said Celia Wexler, Common Cause's vice president for advocacy. "Investments are a concern, but what is more of a concern is the relationships, personal relationships, that you find in Washington between ... members [of Congress] and former staff members ... How does this affect the public trust in elected officials? So [I'm talking about] a much higher standard than 'Is this against a particular rule, even an ethics rule, or even the law?'"

The Bond campaign declined to comment for this article.

During the 1998 Senate campaign, Missouri Attorney General Jay Nixon, Bond's opponent, said that the senator's "going to bat" for Kansas City Southern raised ethical issues, but the incumbent brushed it off. "That's ridiculous," Bond said. "All of the leadership from Kansas City and the state were behind this. Erdman is a good friend, but he made a point not to discuss it with me."

As it happens, KCS is not the only home-state company with which Bond has had close financial and professional relations. He has been a longtime supporter of Monsanto, the agrochemical giant headquartered in St. Louis, touting the bioengineered crops that Monsanto and other such companies produce. He said he wants to create a "Silicon Valley of biotechnology" in Missouri. Indeed, he made sure that the 2000 foreign aid spending bill included $30 million to promote the sales of these crops to developing nations.

In January 2001, he put his own money where his mouth was, buying between $1,001 and $5,000 of stock in Monsanto, one of three biotechnology companies in which Bond has invested since 1998.

Bond's advocacy for Monsanto has continued since his stock purchases. In August 2001, on an official trip to Malaysia, Bond pushed the biotechnology agenda in a meeting with Prime Minister Mahathir Mohamad. In December 2002, Bond cosigned a letter to President Bush criticizing the European Union's ban on products made from genetically engineered foods. In May 2003, Bond got a Senate resolution passed criticizing the ban, taking to the Senate floor to call the Europeans "Luddites" and complain of "Euro-sclerosis." When the Biotechnology Industry Organization in 2002 honored Bond with its Legislator of the Year Award, the presentation was made by then Monsanto president and CEO Hendrik Verfaillie.

Monsanto officers and the company's PAC were Bond's top overall source of campaign funds in the 1998 race, totaling $54,400. During the current election cycle, they have contributed more than $52,900 to his reelection campaign.

As for his contest against Farmer, Bond has out-raised her $7.6 million to $2.3 million. Bond has been advertising on television for weeks, while Farmer advertising had yet to go up as of the start of October.

Farmer is "articulate, she stays on message, she has a good presence and appearance," said Jones, of the University of Missouri. "The problem is that she's going up against a senator who has a base in the mid-50s."

Perhaps most important for Bond's reelection prospects are the inroads he's made among some Democrats, particularly in Kansas City, where Mayor Kay Barnes has raised money for him. The situation is so peculiar that "St. Louis Democratic leaders openly wonder: Have Kansas City folks lost their minds?" according to the Pitch, a weekly Kansas City newspaper. But there are some St. Louis Democrats who are not immune to Bond's favors. Prominent fundraisers like Kenneth Teasdale and Richard Baron have held events for the senator.

The predominant factor in Bond's support is his pork-barrel politics. And that may well make the uphill struggle his Democratic opponent faces even more difficult. But the interplay between Bond's public work and private finances -- a throwback to backroom, self-dealing politics -- is a story that remains largely untold in Missouri. Bond has not yet been forced to account for the capitalist cronyism that has made him the senator he is today.

By Robert Schlesinger

Robert Schlesinger, a former Pentagon correspondent for the Boston Globe, is a freelance reporter based in Washington and a contributing editor at the Washington Examiner.

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