Saturday, August 12, 2006

The numbers behind the numbers: Ned Lamont's financial disclosure, Wal-Mart and the Washington Times

On August 4rd, the Washington Times ran an article titled, "Lieberman rival owns stock in Wal-Mart", by Charles Hunt. See " for the article. Since Lamont famously took incumbent Senator Joe Lieberman to task during the recent Connecticut primary campaign over a $1,000 Wal-Mart PAC contribution to Lieberman's campaign, and, accoring to the opening sentence of the Washington Times article, "sharply criticized the employment practices of Wal-Mart," the surface accusation appears to be one of hypocrisy.

The article says, "Mr. Lamont and his wife jointly own two accounts containing as much as $16,000 in Wal-Mart stock. Their Wal-Mart holdings spin off as much as $3,500 in annual dividends. In addition, a trust fund he set up for one of his children contains as much as $15,000 in Wal-Mart stock and spins off as much as $1,000 in dividends."

Something's not right with those numbers, so at the risk of killing off something that had no legs anyway, I decided to look into it.

I wasn't sure when I first read the article what "as much as" was supposed to mean, but there is no way that $16,000 in Wal-Mart stock is going to generate $3,500 in annual dividends. That would be a dividend rate of more than 20%. At that rate, screw it, I'll be tempted to invest in Wal-Mart. I wonder what kind of math skills are needed suppose that a $16,000 holding might produce $3,500 in annual dividends, while a $15,000 holding produces $1,000 in dividends. Not to mention that "spin off" isn't a term normally applied to regular dividends.

Wal-Mart's current dividend rate is 1.5%. A $16,000 holding in that stock should be paying out less than $250 per year in dividends.

The Washington Times numbers are so bad, and the base level awareness so lame, that I ccouldn't trust any of the information. So I went out and found Lamont's financial disclosure. That's the source for these articles, and it can be found at

There are three Wal-Mart listings, in his Goldman Sachs managed accounts. These aren't his "major" holdings," those are mostly Oak LLCs.

The first Wal-Mart listing is on page 31, for Goldman Sachs account #4. This lists "None (or less than $1,001)" as the value of the holding, with "None (or less than $201)" as the dividend amount.

The 2nd listing is on page 46, for Goldman Sachs account #5. That listing is "$1,001-$15,000," with dividend of $201-1,000."

The 3rd listing is on page 65, for Goldman Sachs account #11 (trust). That listing is for $1,001-$15,000," with dividend of "$201-$1,000."

The Goldman Sachs accounts are apparently partial S&P 500 mirror accounts, so the holdings are pretty obvious. Accounts 5 & 11 may be actual S&P 500 accounts, while account 4 is mostly a much smaller subset. Since Wal-Mart is in the S&P 500, anyone with an S&P 500 mutual fund has some level of Wal-Mart holdings, and by that measure, I'm guilty, too.

Where did the Washington Times numbers come from? Accounts 4 and 5 have maximum holdings of $1000 and $15000, for a total of $16000. Since account 5 payed over $200 in dividends, it's safe to assume that the Wal-Mart holding in that account was near the $15000 number. If we assume the "reporting period" to be tax year 2005, then his holdings of Wal-Mart, which paid 60 cents dividend during the year, had to be at least 333 shares during the year. Wal-Mart's year-end price of $46.80 per share would have his 333 shares worth more than $15,000, so either the reporting period isn't precisely the tax year, or he sold some of the account off before year's end. Most likely, his actual dividend for this account barely surpassed $200.

How about the "as much as $3,500 in annual dividends"? Well, that's just wrong. Account 4 was less than $201 in dividends, and account 5 was $201-$1,000, for a maximum of $1,200. Where's the mistake? Whoever read the disclosure simply misread the listing for account #4, and mistook the entry for Wachovia Bank for that of Wal-Mart. I made the same mistake on first reading; the pdf is presented on a rotated basis, and it's an easy mistake to make. The Wachovia entry is a dividend of $1,001-$2,500; had that been the range for Wal-Mart than the "as much as $3,500 in annual dividends" would have been correct, though entirely misleading. As already noted, his actual dividend amount in account #5 was likely not much beyond $200, and his actual dividend for account #4 was less than $200. So the "as much as $3500 in annual dividends" is bogus; the actual number was probably under $400.

We don't know how much Wal-Mart stock Lamont had in account #4; it appears that account #4 was liquidated prior to the end of the reporting period, so the "None (or less than $1,001)" entry for the stock value does not reflect his holdings throughout 2005. Nonetheless, since his Wal-Mart dividends for that account were less than those for account #5, it seems likely that his Wal-Mart stock holdings were less as well -- that is, it seems likely that they were less than $15,000 in that account even before he sold it off. Considering his other account holdings in account #4 as well as his capital gains reporting, it would seem likely that Lamont's Wal-Mart holdings in that account were beteen $1,001 and $15,000 while he had the account open. Also, since the reporting for this account does not include a capital gain for Wal-Mart, even though the account was liquidated, it seems that Lamont's Wal-Mart position in account 4 was sold at a loss.

The last set of figures in the Washington Times article come from account #11. As with account #5, a position with less than $15,000 of Wal-Mart stock but dividends in excess of $200 is very likely a position that is very close to both of those limits. So, it is likely that his actual dividend for account #11 was just above $200.

Based on the disclosure statements, it would appear that Lamont held a total of maybe $40,000 in Wal-Mart stock in 2005, realized around $600 in dividends from that stock, and sold some of that stock at a loss. Those are substantial holdings, though probably less than what he had in Halliburton. Nonetheless, those holdings pale in comparison to what he held in the big Oak LLCs, some of which were funded with several million dollars, including one with a holding of more than $25 million.

As to whether Lamont knew... not sure it matters, really. Lamont's wife, as a managing partner in Oak Investments, must be aware that Wal-Mart is in the S&P 500 and she's also aware that they hold managed S&P 500 accounts. Whether he knew the composition of the accounts at that level... who knows?

I don't have a position on Ned Lamont, in general. But this charge, it seems to me, is pretty worthless.

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