Obama says he was oblivious to investments

Sen. Barack Obama said Wednesday that he was unaware until this week that he once held stock in two companies owned by political contributors, but that he never took action in the Senate or elsewhere to further their business interests before ending his brief foray into high-risk investing.

Under the terms of a trust he was in the process of setting up in February 2005, Obama said, his broker made the decision to invest as much as $100,000 in shares in the companies, both of which had business interests before the federal government about that time.

“At no point did I know what stocks were held,” Obama (D-Ill.) told reporters during a morning news conference. “And at no point did I direct how those stocks were invested.”

Obama said the decisions to invest in the two companies were made by the broker without his knowledge, as part of a “quasi blind trust” arrangement he said he had hoped would fend off questions about conflict of interest. The trust documents were signed three months after the securities were purchased, but Obama was operating under the terms of the agreement and knew no details about the investments.

“The thing didn’t work the way I wanted it to,” said Obama, who added that he terminated the investments at a loss of $13,000 in fall 2005.

As much as $15,000 of Obama’s investment was for shares in AVI BioPharma, which was working on a drug to treat avian flu. Obama waged a high-profile effort for federal funding to fight avian flu, though aides pointed out that it was for early warning systems in Asia and not for drug development.

Obama also had $50,000 to $100,000 in shares of SkyTerra Communications, which had recently sought permission from the Federal Communications Commission for a nationwide wireless network.

Both firms said they were not aware of Obama’s investments.

The questions arose as Obama entered the second month of his campaign for the Democratic nomination for president, an office he is seeking as a freshman senator critical of the ways of Washington and an advocate for ethical reform in Congress.

News of his investment account with UBS, a financial services powerhouse, was reported this week by TheStreet.com and by the New York Times, which is how aides say Obama learned of the two investments.

The arrangement with his UBS broker began not long after Obama signed a $1.9-million three-book deal in December 2004. He said the bulk of his advance went toward the purchase of a new home in Hyde Park, Ill. Obama said in an interview that he turned to a personal friend and political supporter, George Haywood, for help in deciding how to invest the remainder.

“This was very casual,” Obama said, recalling that he said, “ ‘George, I’ve got $100,000 that I’m interested in doing more [with] than the standard mutual fund. What recommendations or suggestions do you have?’ He said, ‘Why don’t you go with this stockbroker who has worked well with me in the past?’ ”

Obama said he met with the stockbroker, whom he declined to identify.

“What I said was, ‘George told me that you could invest in slightly higher-risk stock choices,’ and that I didn’t want to know anything about it,” Obama said. “He provided us with the standard form where they ask you, ‘What’s your risk tolerance?’ and ‘How long do you expect to hold these stocks?’ etc. That was the extent of the conversations.”

Obama said he did not give the broker any specific directions about where to put the money.

But Obama said he realized the system was flawed when one of the companies his broker bought stock in sent information to his house addressed to “Dear Shareholder.”

So Obama liquidated the stocks, took the loss and placed the money in mutual funds and money market accounts.

The Senate Ethics Committee has strict rules for creating actual blind trusts, which require that the trustee be truly independent and not controlled or influenced by anyone.

But aides to Obama said the senator didn’t seek approval from the committee because he wasn’t trying to set up a fully blind trust.

Robert Bauer, the lawyers who helped Obama set up the trust, said the senator didn’t want such a trust because he thought there should be some political accountability, including the chance to declare some kinds of objectionable investments off-limits.