Bayh's Running-Mate Chances May Be Hurt by Wife's Board Seats

By Timothy J. Burger

Aug. 19 (Bloomberg) -- Indiana Senator Evan Bayh, on a short list of Democrat Barack Obama's possible running mates, may face questions about potential conflicts of interest from his wife's work on seven corporate boards that paid her more than $837,000 last year.

Susan Bayh, a lawyer, is a director at Indianapolis-based WellPoint Inc., which is part of a medical research partnership awarded a $24.7 million federal grant in May after Evan Bayh and his Indiana colleagues in Congress recommended the group to the National Institutes of Health.

She's on the board of E*Trade Bank, a subsidiary of E*Trade Financial Corp., while her husband sits on the Senate Banking Committee. Susan Bayh is lead director at Emmis Communications Corp., an Indianapolis radio-station operator that published Evan Bayh's 2003 memoir.

``When you're vetting a vice president and his wife is on seven boards, that is a serious question of conflict of interest on a whole variety of issues,'' said James Thurber, director of American University's Center for Congressional and Presidential Studies in Washington.

Evan Bayh has gone ``above and beyond what is required under Senate ethics rules'' to prevent possible conflicts, forbidding his staff to communicate with lobbyists for companies where his wife is a director, Bayh's spokesman Eric Kleiman said.

No Lobbying Contact

``There is a wall preventing any and all lobbying contact,'' and Susan Bayh isn't a lobbyist, Kleiman said. ``Spouses of public servants deserve the opportunity to pursue success in their chosen fields of endeavor.''

Bayh, 52, the son of former Indiana Senator Birch Bayh, is considered a leading prospect to be Obama's running mate. After two terms as governor of traditionally Republican Indiana, he has been elected twice to the Senate.

Susan Bayh, 48, isn't the first spouse to face political questions about corporate boards. Michelle Obama, who made $101,000 in 2006 as a director of TreeHouse Foods Inc., quit the suburban Chicago company's board last year. TreeHouse's biggest customer is Wal-Mart Inc., a target of criticism from labor unions. New York Senator Hillary Clinton was on Wal-Mart's board when her husband, Bill Clinton, was governor of Arkansas.

`Smell Test'

While it isn't inherently unethical for Senate spouses to join corporate boards, concerns may arise if companies and lawmakers are in positions to benefit from the connections, said Bill Buzenberg, executive director of the Center for Public Integrity. ``It doesn't pass the ethical smell test,'' Buzenberg said.

WellPoint, which paid Susan Bayh almost $335,000 last year, is the biggest U.S. health-insurance company by membership as Obama's campaign promises to push for universal health-care coverage. WellPoint spent $890,000 lobbying Congress and the Bush administration in the three months ended June 30, according to disclosure forms.

A former lawyer for Eli Lilly & Co., Susan Bayh is a director at four publicly traded biopharmaceutical companies: Curis Inc., Dendreon Corp., Dyax Corp., and MDRNA Inc. Earlier this year, she left the board of closely held Golden State Foods, one of McDonald's Corp.'s biggest suppliers, and became a company adviser.

At Emmis, which owns almost two dozen radio stations, one of the company's biggest investors last month questioned Susan Bayh's effectiveness because of her family's friendship with Emmis founder and Chief Executive Officer Jeffrey Smulyan.

Independence Questions

``The well-chronicled personal relationship that Ms. Bayh and her husband have with the Emmis CEO might logically raise legitimate questions about the extent of Ms. Bayh's independence,'' Martin Capital senior partner Frank Martin wrote in a letter filed with the Securities and Exchange Commission. Martin's filing said his firm owns 9.7 percent of Emmis Class A stock, which has fallen 65 percent in the past year.

Susan Bayh's longest board tenure is at Emmis, where she became a director in 1994, when Evan Bayh was governor. Smulyan said he recruited her because she was well known in the business community and had corporate governance experience.

``I thought Susan would be helpful,'' Smulyan said. ``Independent of being the governor's wife, I think she had pretty good insights.'' Martin is the only shareholder who's complained about Bayh, Smulyan said.

Emmis lost money on Evan Bayh's 2003 autobiography, ``From Father to Son: A Private Life in the Public Eye,'' company spokeswoman Kate Snedeker said. Bayh gave the $4,105 of book royalties to the Evan and Susan Bayh Family Foundation.

Book Deal

The book deal creates the appearance of ``a favor being done for the candidate by the company that his wife is on the board of,'' Buzenberg said.

Smulyan said Emmis published the memoir with expectation of making a profit. Kleiman, Bayh's spokesman, said the deal involved ``a standard book contract that was approved by the Senate Ethics Committee.''

WellPoint is among six companies joining Indiana University and Purdue University in the Indiana Clinical and Translational Sciences Institute, which got a five-year NIH grant. When Bayh's office announced the grant on May 29, it said the senator wrote NIH to support the application.

Anantha Shekhar, the institute's director, said that while Evan Bayh ``certainly helped us,'' Susan Bayh had nothing to do with the grant. ``Until you brought it up, I wasn't even thinking about Susan Bayh and the WellPoint connection,'' Shekhar said.

To contact the reporter on this story: Tim Burger in Washington at tburger2@bloomberg.net .

Last Updated: August 19, 2008 00:01 EDT

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