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McCollum portfolio raises conflict issue

Rep. Bill McCollum has stock that could be affected by a bill he helped craft.

By ADAM C. SMITH

© St. Petersburg Times, published July 25, 2000


photo
[Times photo: Lisa DeJong]
Rep. McCollumn says he hasn't always been the wisest investor and has learned through trial and error.
For the wireless communications industry, the stakes over one proposed provision in a bankruptcy reform bill could be worth billions of dollars.

For U.S. Rep. Bill McCollum, the stakes could include his own investment portfolio.

That's because the Republican candidate for Connie Mack's U.S. Senate seat owns up to $15,000 in Global Crossing, a major investor in NextWave Telecom, which would be directly affected by the proposed provision.

McCollum said that he knew nothing about that NextWave issue and that he had no idea Global Crossing had even an indirect connection to the bankruptcy bill he helped craft.

But his investment highlights a little-known hobby practiced by the Longwood Republican: He is an aggressive speculator in the stock market.

He dips in and out of the market, buying and selling tens of thousands of dollars worth of stocks and betting on certain companies rising or falling in value. Last year, a fairly quiet year for McCollum's portfolio, he made 14 trades totaling nearly $50,000. Other years, he has sold more than $150,000 in the market and made as many as 75 different trades in a single year.

"On a scale of one to 10, 10 being ridiculously aggressive, he's probably an 81/2," said Rick Metzger, an A.G. Edwards & Sons broker who reviewed 20 years of McCollum's disclosure reports for the Times.

"He tends to invest in a lot of companies that are borderline and really don't have a lot of financial substance, but have a hope and a dream and a prayer that something fantastic might happen," Metzger said. "It's, ' Let's take a gamble. I'm putting money in there just looking for a big enchilada.' "

Two of McCollum's congressional colleagues, Republican Rep. Rick Lazio of New York and Democratic Sen. Robert Torricelli, have become entangled recently with questions about whether their stock market gains were the result of insider information or special treatment.

McCollum says he never uses inside information to pick stocks. Instead, he gets his information on companies from public sources and investment newsletters. His record shows that he has not had much success.

He released to the Times his tax records over the past decade, which show he has yet to overcome investment losses of at least $74,000 prior to 1990. McCollum said he did not recall precisely where he lost most of that money, but said he took a hit in the 1987 market crash and had other losses dating back to the 1970s.

While the market soared over the last decade, McCollum played it aggressively and, based on the records he released, not especially well. On all his stock sales from 1990 to 1999, he actually wound up with a net loss of more than $5,000, according to his tax returns. Not reflected are paper gains, or losses, on stocks he has held longer term.

"I haven't always been the smartest investor. . . . I've learned through a lot of trial and error," McCollum said. "I do think I know what I'm doing now. I'm not sure I did when I started."

The McCollum campaign produced another securities professional, John Race of Orlando, who reviewed McCollum's latest disclosure report and characterized the congressman's investment strategy as "modestly aggressive" for a 53-year-old man who also has between $100,000 and $250,000 sitting in a conservative 401(k) plan with his old law firm.

"He's simply investing in where the greatest promise and future prospects lie (high technology and biotechnology)," said Race, a friend of McCollum's finance chairman and partner with DePrince, Race & Zollo, an institutional money management firm.

Nothing forbids members of Congress from jumping into the market with the same gusto as many of their constituents. Still, public interest groups are becoming increasingly wary about the trend because members of Congress can often affect stock prices by their legislative action, and they frequently have access to information off-limits to most investors.

"(There is) absolutely no relationship to my stock trades and the votes I've taken, and I'm scrupulous about that," McCollum said.

But when asked about his Global Crossing holdings and the company's connection to the bankruptcy bill, he acknowledged that a busy congressman can't possibly investigate every investment to ensure no indirect ties to pending legislation.

"There is almost no stock you could invest in that couldn't in some way be affected by some vote in Congress you might make at some point in time," he said.

Stock trading has been a hobby of McCollum's for decades, and he said most nights in Washington he unwinds reviewing investment newsletters. He makes his own investment picks, mostly foregoing conventional blue chips, and instead focusing on small high tech and biotech companies. McCollum, who earns about $137,000 as a congressman, also frequently invests in high-risk options, betting on certain stocks rising and others falling, and has at times invested campaign funds.

Timothy McIntosh, a money manager with Strategic Investment Partners and adjunct professor at Eckerd College, was surprised to hear McCollum picks his own stocks, given the hard-to-research, quickly evolving financial sectors he trades in.

"With his hectic schedule, if he's doing it all himself mainly with newsletters, how does he find the time?" wondered McIntosh, who also reviewed McCollum's disclosure reports for the Times. "He seems to be going for the big bang for the buck, and he's willing to take a lot of risk. . . . My recommendation to him is that he's too aggressive and needs to spread out his bets."

McCollum's main opponent in the Senate race is Democratic Insurance Commissioner Bill Nelson, who is considerably more wealthy than McCollum and more conservative with his investments. Most of Nelson's money is invested in mutual funds and bonds, and his disclosure reports show none of the short-term buying and selling that McCollum does.

McCollum serves on the Banking and Financial Services, Judiciary, and Intelligence committees, and until honoraria were banned, he received thousands of dollars from securities industry groups. In at least one case, he invested in an Orlando-based company, Darden Restaurants, that paid for a trip to New Mexico and whose officers have contributed to his campaigns.

"Nobody expects our lawmakers to be financial eunuchs," said Charles Lewis, executive director of the Center for Public Integrity in Washington. "But the question is: In what way are they investing, who's giving them their investment advice and what do they expect in return? Is that information available to average Americans or only to members of Congress?"

Common Cause advocates that members of Congress put their investments in blind trusts, where a professional manages the holdings without knowing who owns them. A number of lawmakers, as well as Bill Clinton, follow that practice.

"It would help members of Congress, because it doesn't put Bill McCollum or Torricelli in a position where they have to defend their (investments)," Common Cause vice president Meredith McGehee said. "It doesn't mean a vow of poverty, but there's a realistic understanding that decisions and votes members of Congress make can have a real impact on their investments."

McCollum's potential conflict with his Global Crossing stock concerns a much-lobbied proposal for which he has had little or no public involvement.

Torricelli also owns Global Crossing stock and pushed for language in the bankruptcy bill protecting NextWave, a bankrupt wireless company that Global Crossing is helping refinance. Torricelli wanted language inserted that would prevent the Federal Communications Commission from taking back licenses that NextWave bought in 1996 for $4.7-billion, licenses now worth twice as much.

That controversial provision has not yet made it into the bill, but it remains on the table as an informal conference of 10 lawmakers, including McCollum and Torricelli, negotiate the final bill.

-- Adam C. Smith can be reached at 727-893-8241 or adam@sptimes.com.

Times staff writer Helen Huntley and researchers Caryn Baird and Kitty Bennett contributed to this report, which included information from Roll Call and the Washington Post.

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