Bob Corker May 25, 2016 1
Bob Corker’s CBL Trades Executive Summary
Senator Bob Corker has engaged in a lengthy pattern of suspicious trades in the stock of CBL & Associates Properties, a Chattanooga real estate firm where he worked upon graduating from college and has maintained decades-long business and political ties. Many of the CBL trades were handled by his broker UBS, with whom Corker also has extensive political and business ties. On a number of occasions Corker’s trades in CBL preceded public announcements of changes in UBS ratings for CBL stock. Corker appears to have had frequent contact with CBL and UBS executives at fundraising events. Corker has had considerable dealings with the Chattanooga developer of shopping centers, condominiums and apartment buildings. CBL executives have been among Corker’s most generous donors, contributing nearly $45,000 to his 2012 reelection campaign, as well as making substantial contributions to trade groups that support Corker and with whom he works closely. As a publicly traded REIT sponsor with access to large amounts of capital, CBL is expected to be among the primary beneficiaries of Corker’s top legislative priority, a housing policy bill that could lead to the demise of government-backed mortgage insurers Fannie Mae and Freddie Mac. Another potential beneficiary of Corker’s housing policy program is UBS, which like other big banks will be able to write more mortgages if the GSEs are eliminated. UBS made a major new push into the US mortgage business in mid-2010,
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right around the time of some of Corker’s most prescient trades. UBS has major operations in Tennessee and was previously a tenant of Corker’s real estate company. Local UBS executives donate large sums to Corker’s campaigns. At least four of Corker’s trades closely preceded market-moving announcements by UBS regarding its opinion of CBL stock. For instance, Corker purchased between $2 and $10 million of CBL stock just prior to a July 2010 announcement that UBS was upgrading its CBL rating from “sell” to “neutral”. Less than a month later, Corker unloaded between $3 and $12 million of his CBL stock, days before UBS returned the CBL rating to “sell.” In the interim, CBL’s stock price leapt by more than 35%, from $11.83 per share to $14.66. This means that Corker was able to make up to $1.87 million in slightly more than three weeks. Statistical analyses establish the suspicious nature of Corker’s trading. Between 2007 and 2014, Corker made a total of 51 trades in the stock of CBL. That’s more than double the number of trades he has made as a senator in any other stock. In 35 of these trades (68%), Corker bought or sold shortly before a significant spike in the trading volume of CBL stock, according to a model approximating the SEC’s approach to identifying insider trading. Corker was twice as likely as a hypothetical average CBL trader to make a trade just before a spike in volume. Spikes in trading volume are generally triggered by public disclosures or news developments that cause large numbers of investors in a stock to buy or sell. Any investor who exhibits a pattern
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http://www.wsj.com/articles/SB10001424052748703787904575403354133923236
Bob Corker May 25, 2016 2 of trading ahead of spikes in the trading volume of a specific stock could be getting advance access to market-moving information about that company. Access to advance or inside information doesn’t guarantee an investor will make a profit on every trade. Corker’s trades are less striking in terms of his actual profits, yet the pattern is still indicative of irregularities. In at least six of his 51 CBL trades, Corker saw abnormally favorable results, meaning he either bought just prior to a spike in the price of CBL or sold shortly before a sharp drop in price. This abnormally prescient performance is three times the expected result for an average trader of CBL stock.
CBL’s Ties with Corker
Since its 1961 founding, CBL & Associates Properties has grown into the nation’s fourth-largest mall REIT, and operates in a number of other real estate realms as well. It has undergone a series of mergers and other institutional changes since its foundation, and began trading publicly in 1993.
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Throughout its existence, Chattanooga’s Lebovitz family has controlled CBL. Seventy-eight-year-old Charles Lebovitz, who founded the firm with his father Moses, is currently the chairman of the board. His sons Alan, Michael, and Stephen serve in top management positions and are members of the CBL board.
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At the outset of what would become a wildly successful career as a real estate developer, Corker worked for CBL following his graduation from college in 1974. Corker struck out on his own shortly thereafter, but he and CBL remained linked in a number of ways. Both are prominent commercial real estate developers in Chattanooga, a city of just 170,000 people. When Corker was elected mayor of his hometown in 2001, CBL and Corker’s companies were the two largest developers in Hamilton County, which is home to Chattanooga.
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During Corker’s administration in Chattanooga, John Foy, the CFO of CBL and a Corker donor, was elected to serve as the Chattanooga Metropolitan Airport Authority, whose board members are appointed by the mayor.
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Improving air service to Chattanooga was a major agenda item of the Corker administration, meaning he entrusted a top priority to a CBL officer.
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CBL employees have also been among Corker’s most prominent campaign donors. Prior to his 2012 reelection, the firm’s top executives and their spouses made 24 donations worth almost $45,000 to Corker’s campaign committee and his PAC. Two-thirds of the contributions came from members of the Lebovitz family. CBL employees have also shown similar generosity to trade groups that have also backed Corker, such as the International Council of Shopping Centers (ICSC) and the National Association for Real Estate Investment Trusts (NAREIT). These two groups were part of a nine-PAC consortium that
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http://www.cblproperties.com/cbl.nsf/corporate_history.html
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http://www.cblproperties.com/cbl.nsf/officers_directors.html
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http://www.highbeam.com/doc/1G1-77390440.html
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http://www.highbeam.com/doc/1G1-87402490.html
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http://archives.californiaaviation.org/airport/msg22262.html
Bob Corker May 25, 2016 3 held a fundraiser for Corker in Washington in 2011, and they have donated $15,000 directly to his campaign committee since his arrival to the Senate.
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Stephen Lebovitz is the current chair of the ICSC, a post Charles held in the 1990s, and members of the Lebovitz family have served on the NAREIT board of governors for several years.
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Since Corker’s election to the Senate, CBL executives have contributed more than $50,000 each to NAREIT and the ICSC. Perhaps thanks to this support, Corker has emerged as a prominent advocate of positions favoring CBL and the trade groups representing the firm. Commercial real estate investors like CBL stand to be among the biggest winners should Fannie Mae and Freddie Mac be shut down, which is a pillar of the housing finance reform that Corker has championed from his perch on the Senate Banking Committee. According to the publication
Multifamily Executive
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Unlike smaller entrepreneurial players, the REITs have many financing avenues available to them by virtue of their size and public-company status. And should the GSEs go away, many small owners might be forced to sell—and large owners would be there, capital in hand, ready to buy.
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CBL, which has been publicly traded for two decades and whose investors included major institutional investors like BlackRock and Vanguard, is an example of a real estate firm poised to thrive following the removal of Fannie and Freddie.
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The scale of Corker’s investments with CBL also offers some indication of their unique relationship. Corker’s portfolio has been more heavily concentrated in CBL than in any other stock, despite the fact that, while it is a big fish in the world of REITs, CBL is a thinly traded security heavily subject to market swings. Since his election to the Senate in 2006, at which point Corker began making annual personal financial disclosures that detailed his stock holdings, he has carried out 51 trades in CBL stock, by far the largest number in his portfolio. The next closest stock was Apple, with 19 trades, followed by AIG (which he unloaded in 2007, prior to its collapse) with 15, and Wells Fargo with 14.
Corker and UBS
Much of Corker’s trading activity implicates or otherwise involves UBS, an institution with which Corker has a long history of political and business ties. Corker has had accounts or investments at UBS since he began filing federal financial disclosures in 2004. At some point prior to 2005, UBS became a tenant in the Corker-owned Krystal Building in downtown Chattanooga.
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https://www.opensecrets.org/pacs/pacgot.php?cycle=2006&cmte=C00217638 https://www.opensecrets.org/pacs/pacgot.php?cycle=2016&cmte=C00303339
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http://www.icsc.org/press/stephen-d.-lebovitz-president-ceo-cbl-associates-properties-inc.-elected-ic http://www.icsc.org/research/research-on-demand-videos/b-industry-leaders-series/charles-b.-lebovitz https://www.reit.com/nareit-you/about-nareit/advisory-board-governors
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http://www.multifamilyexecutive.com/business-finance/reits-stand-to-gain-from-the-gses-demise-1_o
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http://www.cblproperties.com/cbl.nsf/ownership.html
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http://www.chattanoogan.com/2005/7/18/69616/Corker-Group-Renovating-Tallan-Building.aspx