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Rating:Federal Indictment Shackles Vanguard with Cheney Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, November 19, 2008

Federal Indictment Shackles Vanguard with Cheney

Reported by Neil Anderson, Managing Editor

Vanguard's investments in a private prison operator are coming back to haunt the fund firm in a high profile way. Papers and wire services across the globe (including the San Antonio Express-News, Bella Ciao, SkyNews and the Bulgarian Novinite Sofia news agency) report that a Texas grand jury just indicted U.S. vice president Dick Cheney for "contributing to the neglect of federal immigration detainees by contracting for-profit prisons," the Express-News writes, from the GEO Group, which Cheney also indirectly invests in via Vanguard. Perhaps the lesson for fund firms is that you never know where the next PR hit is going to come from.

A Vanguard spokeswoman was not immediately able to comment to The MFWire.

Novinite puts Cheney's Vanguard investments at an estimated $85 million (GEO's entire market cap is $747 million, and of course it seems highly unlikely that ALL of Cheney's money with Vanguard would be in GEO alone). And SkyNews notes that GEO itself was already ordered to pay a $47.5 million civil judgment in 2006 to the family of prisoner Gregorio De La Rosa, whose death-by-beating is cited in the fresh indictments. As of yet, a judge could still dismiss the case.

Cheney isn't the only politician cited in the indictments. Outgoing Willacy County district attorney Juan Angel Guerra also targeted ex-U.S. Attorney General Alberto Gonzales, Texas state senator Eddie Lucio Jr. (D-Brownsville), GEO itself, a GEO warden, and a number of local officials (including a district clerk, two special prosecutors and two district judges -- no ham sandwiches appear to have been named). Lucio's attorney, Michael Cowan, described the indictments as "one last act of political revenge" by Guerra, who lost his bid for reelection in the March 2008 Democratic primary (a whopping 70 percent voted against him), according to Bella Ciao.

Yet Vanguard isn't even one of the top ten holders of GEO. Yahoo! Finance lists Fidelity as the single biggest shareholder of GEO (9.42 percent), followed by Wells Fargo, Fred Alger, Rainier, Westfield, Barclays, Schroder, Eagle, Dawson-Herman, and Artisan. The Vanguard Small-Cap Index Fund (a $10.82 billion fund) just barely cracks GEO's top 10 mutual fund holders, with 483,266 valued at $10.87 million. And according to Kiplinger's Dick and Lynne Cheney only hold Vanguard bond funds -- so it appears the case hinges on Cheney owning a piece of Vanguard, since the firm is mutually-owned. 

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