Morris column smeared Pelosi with misrepresentations of stock ownership

››› ››› JULIE MILLICAN, BEN ARMBRUSTER, SARAH PAVLUS, ROB DIETZ, RYAN CHIACHIERE & JEREMY SCHULMAN

In a June 28 column co-authored with Eileen McGann, Dick Morris falsely suggested that House Speaker Nancy Pelosi (D-CA) -- whose husband owns up to $15,000 in Alcatel-Lucent stock -- previously owned stock in "Alcatel SA." Morris wrote:

House Speaker Nancy Pelosi (D-Calif.) has disclosed that she holds stock valued at up to $15,000 in Alcatel-Lucent (formerly Alcatel SA), a company with extensive investments in Iran and Sudan -- nations that sponsor terrorism.

The column's headline -- "Nancy Pelosi Invests in Iran-Linked Company" -- further suggested that Pelosi purchased stock in Alcatel S.A. In fact, a search of Pelosi's financial disclosure filings dating back to 1996 revealed no evidence that she ever purchased stock in Alcatel S.A. Rather, her husband, Paul Pelosi, purchased stock in Lucent Technologies in 1999. Lucent Technologies then merged with Alcatel S.A. in 2006 and, as a result of that merger, Paul Pelosi now owns stock in Alcatel-Lucent, as personal financial disclosure reports filed by Pelosi in 2006 and 2007 show.

Pelosi's most recent financial disclosure form clearly shows that her husband's Alcatel-Lucent stock was formerly Lucent stock. (The notation "SP" in the left-hand column is an abbreviation for "spouse."):

While Morris detailed several allegations regarding Alcatel S.A.'s alleged ties to "nations that sponsor terrorism," his column cited no objections to the business practices of Lucent before the merger. Furthermore, in attacking Pelosi for owning -- and calling on her to divest from -- Alcatel-Lucent stock, Morris never informed readers that before the merger, Lucent was one of the market's most-widely held stocks. USA Today financial markets reporter Matt Krantz wrote in January 2006: "Look at just about any 'most-widely held' list of stocks, and you'll likely see Lucent near the top." Similarly, in 2002, USA Today listed Lucent as the 13th most-widely held stock in "accounts at Merrill Lynch."

Indeed, Pelosi's husband is not the only prominent figure to own Alcatel-Lucent stock. Republican Sens. Jon Kyl (AZ) and Kay Bailey Hutchison (TX) also own stock in the company. According to Kyl's 2007 personal disclosure form, which covers the 2006 calendar year, Kyl has owned stock in Alcatel since at least 2001 and purchased over $6,500 worth of Alcatel and Lucent Technology stock from 2001-2006. Indeed, unlike Paul Pelosi, prior to the Alcatel-Lucent merger, Kyl appears to have owned stock in both Alcatel and Lucent Technology. According to Hutchison's 2007 personal disclosure form, Hutchison owned between $1,001 and $15,000 worth of Alcatel-Lucent stock as a result of the two companies' merger. Hutchison appears to have owned only Lucent stock prior to the 2006 merger.

Rather than revealing this information, Morris simply wrote, "For the Speaker of the House to own stock in such a company is a particular outrage. She should immediately sell her stock and call on all other members of Congress who hold stock in the company to do likewise."

Moreover, in addition to citing allegations of current ties between Alcatel-Lucent and "nations that sponsor terrorism," Morris cited actions taken by Alcatel prior to the company's merger with Lucent in 2006:

Prior to his overthrow, Alcatel carried out major fiber optic products [sic] for dictator Saddam Hussein in Iraq, despite U.S. government warnings to the French company that the project could advance Iraqi military capabilities.

Morris also quoted a 2006 letter to President Bush in which Rep. Duncan Hunter (R-CA) expressed concerns about the merger:

Criticizing Alcatel, former House Armed Services Committee Chairman and current GOP presidential contender Duncan Hunter (R-Calif.) expressed his worry over Alcatel's activities in a letter to President Bush. In it, he wrote, "I am concerned about potential transfers of technology or sensitive information to other countries with which Alcatel has business dealings, which have included Burma, China, Iran, North Korea, Sudan and Syria."

But as Morris himself suggests, the concerns he quoted from Hunter's letter were about the business practices of Alcatel -- not of Lucent, whose stock Pelosi's husband owned at the time. The Associated Press reported November 14, 2006:

Lucent chief executive Patricia Russo and Mike Quigley, chief operating officer of Paris-based Alcatel SA, are scheduled to appear Tuesday before the House Armed Services Committee, headed by Duncan Hunter, the outgoing Republican chairman from California.

Hunter, whose San Diego district includes many workers of Qualcomm Inc., a key competitor of Lucent and Alcatel, says he is worried about whether classified work Lucent's Bell Labs performs for the Defense Department will be kept secret when Alcatel completes its takeover of Murray Hill, N.J.-based Lucent.

"I am concerned about potential transfers of technology or sensitive information to other countries with which Alcatel has business dealings, which have included Burma, China, Iran, North Korea, Sudan and Syria," Hunter wrote in an Oct. 26 letter to President Bush.

Moreover, Morris did not note that Bush signed off on the merger between Alcatel and Lucent. According to a December 1, 2006, Financial Times article, the Bush administration's Committee on Foreign Investment in the United States approved the Alcatel-Lucent merger under the condition that the two companies "entered into a national security agreement that restricted Alcatel's access to sensitive work done by Lucent's research arm, Bell Labs, and the communications infrastructure in the US":

The US government has reserved the right to re-open its national security review of Alcatel's merger with Lucent in the event that the companies fail to comply with some of the restrictions placed on the transaction.

Although the committee that vets foreign takeovers of US assets approved the merger between the French and US telecommunications equipment makers last month, the condition, revealed in a recent regulatory filing, underscores how significantly the environment for foreign deals has changed since the Dubai ports debacle this year.

Alcatel's merger was approved by the inter-agency panel that reviews sensitive transactions, the committee on foreign investment in the US (Cfius), for 90 days before it was approved by George W. Bush, the US president.

[...]

In order to get approval for the deal, the companies entered into a national security agreement that restricted Alcatel's access to sensitive work done by Lucent's research arm, Bell Labs, and the communications infrastructure in the US.

If the companies "materially fail to comply" with the terms of the national security agreement, the cabinet-level members of the security agencies may, along with the treasury secretary -- who chairs Cfius -- reopen their review of the deal and revise their recommendation to the White House about its approval.

Indeed, on November 17, 2006, the White House released a statement on its approval of the merger, specifically noting the president's role in approving such transactions in order to determine if "there is credible evidence that the foreign interest exercising control [in a U.S. company] might take action that threatens to impair the national security."

From Morris and McGann's column:

House Speaker Nancy Pelosi (D-Calif.) has disclosed that she holds stock valued at up to $15,000 in Alcatel-Lucent (formerly Alcatel SA), a company with extensive investments in Iran and Sudan -- nations that sponsor terrorism.

The disclosure of Pelosi's holdings comes at the same time that legislation is making its way through the California legislature barring state pension fund managers from investing in companies, like Alcatel-Lucent, that do business with "terror-friendly" nations.

[...]

Prior to his overthrow, Alcatel carried out major fiber optic products for dictator Saddam Hussein in Iraq, despite U.S. government warnings to the French company that the project could advance Iraqi military capabilities.

Alcatel is currently "involved in similar telecommunications projects ranging from upgrading networks to the installation underwater fiber optic cables" in Sudan and Libya.

Criticizing Alcatel, former House Armed Services Committee Chairman and current GOP presidential contender Duncan Hunter (R-Calif.) expressed his worry over Alcatel's activities in a letter to President Bush. In it, he wrote, "I am concerned about potential transfers of technology or sensitive information to other countries with which Alcatel has business dealings, which have included Burma, China, Iran, North Korea, Sudan and Syria."

[...]

For the Speaker of the House to own stock in such a company is a particular outrage. She should immediately sell her stock and call on all other members of Congress who hold stock in the company to do likewise.

Only if we send a signal to these companies that their associations with Iran and other terrorist states comes at a huge price can we dissuade them from continued involvement. But if there is a massive selloff of their stock, company executives will feel the pinch in their salaries and bonuses.

Posted In
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Dick Morris
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