Eric Hovde pledges to step away from bank if elected, though conflicts of interest could persist
If he is successful in his bid to oust Democratic incumbent Sen. Tammy Baldwin in November, Republican U.S. Senate candidate Eric Hovde has said he will step away from his managerial role with the Utah-based bank he oversees.
But while the Madison business owner and millionaire would no longer serve as CEO and chairman of the board to Sunwest Bank, Hovde said Monday he is still weighing his options when it comes to his financial holdings in the bank, which has branches in five states and an estimated $3.2 billion in assets.
"I am not going to be involved in my business if I end up being successful," Hovde told the Wisconsin State Journal. "I've been very clear on that. I am going to step off the board, I'm going to step out of any management role."
Asked for his plans regarding his financial holdings, Hovde said, "it may end up going into some kind of trust or blind trust, whatever that may be."
"These are questions where you have to literally sit down with attorneys going through the structure of how you do it from a tax standpoint," Hovde continued. "There's a lot of complications and, frankly, it's an expensive proposition of how to figure out how you position your holdings."
Hovde said his primary focus remains on defeating Baldwin, who is seeking a third term this fall, adding that considerations of a blind trust would be unnecessary if he doesn't win.
Hovde listed assets worth between nearly $195 million and more than $563 million, with the majority of that in real estate holdings in Madison and Milwaukee, corporate securities, and stock in Sunwest Bank, according to a financial disclosure form filed this summer.
The report does not include exact values, but rather ranges, like $500,001 to $1 million. Hovde's nonpublic stock in Sunwest Bank is valued at "over $50 million." Financial disclosure forms do not require individuals to provide the exact value of a holding worth more than $50 million.
"Eric Hovde is a walking conflict of interest who is once again proving he's only running for Senate to make himself richer, while still hiding which foreign governments and banks are depositing money in his bank," Arik Wolk, spokesperson for the Democratic Party of Wisconsin, said in a statement.
Democrats have taken aim at Hovde over Sunwest Bank's transactions with foreign banks like Mexico's Banco Azteca, a bank with alleged ties to the Mexican drug cartel . Hovde told the Milwaukee Journal Sentinel that Sunwest Bank thoroughly vetted transactions with Banco Azteca. There is no evidence that funds sent from Banco Azteca to Sunwest Bank were tied to cartel activities.
Baldwin, who earlier this year reported having between about $600,000 and $1.3 million in assets, keeps her financial assets in a blind trust, a type of living trust in which a trustee manages an individual's assets without communication with the beneficiary.
Blind trusts are often used by elected officials to avoid conflicts of interest when directing government funds or crafting and voting on legislation.
"The idea is really to make sure there's no visibility into what your investments actually are," said Delaney Marsco, director of ethics with the Campaign Legal Center.
While members of Congress are prohibited from engaging in insider trading, nothing requires congressional lawmakers to take additional steps to prevent potential conflicts of interest when it comes to their official duties in office, Marsco said.
"Members of Congress can't really recuse themselves from a lot of things, specifically voting on legislation, because that would be disenfranchising essentially their constituency," Marsco said. "So it's kind of impossible in many respects to cure a conflict of interest in any other way, other than selling off the stock, not buying and selling stock in the first place, or having a blind trust."
A U.S. senator with financial holdings in a bank, for instance, could be involved in choosing the chair or board members to the Federal Deposit Insurance Corporation, an independent agency focused on maintaining public confidence and stability in the nation's financial system. As a senator, Hovde could also be involved in legislation related to banking regulations or bank bailouts.
Marsco said it's possible a conflict of interest never comes up for members of Congress with financial holdings but said the problem is that lawmakers often work across multiple subject matters.
"They're making policies that affect a lot of industries at once, and so even a small piece of a larger bill that has to do with some sort of regulation on a bank could possibly raise a conflict of interest if this potential future senator is involved in crafting that legislation," Marsco said. "And that's not always something that we have an insight into ... there are a lot of things that go on behind closed doors that we don't really have access to."
The Campaign Legal Center this month reviewed financial disclosures filed by 526 members of Congress. Nine lawmakers had not reported by the time of the report.
According to the report, 46% of congressional lawmakers — 189 representatives and 54 senators — own public or nonpublic stock, while only 5% do not hold any stock or widely held investment funds.
Only 2% — three representatives and five senators, including Baldwin — use a qualified blind trust, according to the report.
"There's certainly a lack of incentive to actually remove conflicts of interest," Marsco said. "It's not designed to be a system that promotes public trust."
Hovde described Democrats' focus on his finances as an effort to distract from the potential conflict of interest between Baldwin's government work and that of her partner, a Wall Street private wealth investment adviser.
Republicans have targeted Baldwin for failing to disclose partner Maria Brisbane's assets and income in any of the senator's annually required financial disclosure statements.
"(Baldwin) doesn't report what her partner is doing," Hovde said. "If she was married, they'd have to report that right? So she's, again, trying to confuse people."
But, just as members of Congress are not legally required to move their finances into a blind trust to avoid potential conflicts of interest, federal rules don't require senators to disclose the finances of individuals they are dating, only spouses.
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