Representative Alan Grayson holds an unusual position as a member of the U.S. Congress, an active investor and manager of a hedge fund.

Now that the wealthy Florida Democrat is running for the Senate seat being vacated by Republican presidential candidate Marco Rubio, his investments are becoming a more prominent liability.

Last year, Grayson, who was first elected to Congress in 2008, made a passionate speech denouncing trade with dictatorships or countries that employ forced labor.

But weeks earlier, his family cashed in a long-held investment in a mining company that derives its revenue almost entirely from Eritrea, an east African country labeled "a pariah state" by Human Rights Watch in part for its system of forced labor in service of a government that hasn’t held an election since 1991. Grayson said he wasn’t aware of the 2013 report criticizing the company.

The Democratic leader in the Senate, Harry Reid of Nevada, has already called on Grayson to drop out of the race, charging that he used his role as a member of Congress to promote his own hedge fund and saying he appeared to have "no moral compass." 

Grayson, 57, is running against fellow Florida Democratic Representative Patrick Murphy, with a primary set for Aug. 30. On Sunday, Murphy also said Grayson should close his hedge fund and even resign if allegations made in the New York Times and the Tampa Bay Times were proved true that his roles as a member of Congress and hedge fund manager had become intertwined. Grayson has denied using his office for personal gain.

‘Nothing Wrong’

Asked last week about the investment in Nevsun Resources Ltd., Grayson says he wasn’t aware of concerns expressed by human rights groups about Nevsun’s mining operations in Eritrea before the stock was sold last year.

"The fact is I didn’t know, I couldn’t have known, and I did nothing wrong, nor did my children," Grayson said in a Feb. 11 interview at the Capitol.

"If I had known, then I would have divested," he said. "I did actually divest, but I didn’t know when I divested, nor would I have any reason to know that, given the fact that literally thousands of different investments are involved, given the fact that nobody brought it to my attention until I’m in the midst of a competitive campaign."

Asked whether in retrospect he regretted his family profiting off a company that invested primarily in a country known for human rights abuses, including forced labor, Grayson declined further comment and ended the interview.

Slave Labor

When he testified before the House Rules Committee in June against President Barack Obama’s request for authority to fast-track trade deals, including the 12-nation Trans-Pacific Partnership, Grayson spoke at length against trading with dictatorships and countries that have forced labor.

Buying products is a “moral decision,” he told the committee.

"When we buy an item that’s imported from a country that has slave labor, that has forced labor, we’re saying to that world we are okay with that,” he said. “Well, I’m not okay with that. And I think that if we’re going to have trade rules at all, we should have a rule against forced labor. That would seem to me to be a bare minimum of what we should expect of other countries if they want to trade with us."

It’s a theme he’s returned to in his Senate campaign, including in a video he posted last year on a website for his campaign, TradeTreachery.com.

In the same House Rules hearing last year, he also spoke against trading with dictatorships and offered amendments that would have required freedom of religion, speech, and assembly, as well as other human rights provisions in trade deals.

“And once again, why do we want to enter into commercial arrangements with dictatorships?" he said. “How is that any different from entering into commercial arrangements with the Stalin regime or the Mao regime or the Hitler regime?”

A Gold Mine

It’s not clear exactly how much Grayson’s family profited from Nevsun because congressional reporting rules only list broad ranges of monetary value. 

Grayson’s May sale of Nevsun stock, listed in the account of one of his dependent children on his disclosure forms, was in a reported range from $15,000 to $50,000. It’s an investment he reported when he was first running for Congress, when he declared that his family owned somewhere between $50,000 to $100,000 of the stock in his 2007-2008 disclosure. 

Grayson also reported dividends in other years, as well as family income of between $100,000 and $1 million from selling Nevsun stock in 2011. That sale came during a two-year period when he was out of Congress. He lost a re-election bid in 2010 after his first term, but defeated his Republican opponent in a newly drawn district in 2012.

Nevsun’s shares gained at least 60 percent from their high in the 2007 to 2008 period when Grayson declared owning them through when he sold them last year.

Lawmakers are allowed to own and trade stocks under congressional ethics rules, but in most cases must disclose their investments and those of their spouses and dependent children, as well as transactions and income.

Eritrean Mine

Nevsun, which is based in Vancouver, Canada, operates the Bisha gold and copper mine in Eritrea as its main business. It owns a 60 percent interest in the mine; a government-owned company owns the rest.

Nevsun has for years fended off allegations a subcontractor, chosen by the Eritrean government, used forced labor via the national service program to help build the mine.

In 2013, Human Rights Watch published “Hear No Evil,” a report taking Nevsun to task.

In 2014, three Eritrean refugees sued the company in Canada, claiming they were forced to work at the company’s mine. The company is fighting that lawsuit.

After Grayson sold the stock, a United Nations report last year also sharply criticized Nevsun.

Nevsun has rejected the assertions aimed at it in both the Human Rights Watch and UN reports. "Nevsun remains firmly committed to compliance with Eritrean national law and the continuation of international standards and practices with respect to human rights," Chief Executive Officer Cliff Davis said in a statement last June. The company declined to comment for this story.

‘Minor Shareholders’

Grayson said he didn’t know about the 2013 Human Rights Watch report before being informed by a Bloomberg reporter last week.

"The children were extremely minor shareholders in a company that had a spotless human rights record during the entire time that we owned the company. And I say we, meaning the children," Grayson said in the Feb. 11 interview. "The fact is, from what I understand now, the allegations are in dispute."

Indeed, while the company has strongly disputed that it benefited from forced labor, the U.S. has long accused Eritrea of using forced labor. 

The State Department warned as far back as early 2009 about concerns that Eritrea was conscripting workers via its mandatory "national service" program, which often lasts for years at a time.

The State Department also has said over the past several years that the country violates freedom of religion, press, assembly, and travel, and cites reports of the government using torture and killings "with impunity."

The UN reported last year that more than 444,000 Eritrean refugees and asylum seekers have left the country of 6.5 million, often to avoid the system of forced labor.

Long Opposition

Grayson’s campaign dismissed questions about whether his family’s investment matched up with his politics.

"Representative Grayson has long actively opposed labor abuses of any kind, both here and abroad," spokesman David Damron wrote in an e-mail. "It is irresponsible and offensive to seek to trivialize that lengthy record because of a single stock purchase, made several years before any allegations were made against the company’s subcontractor, which have been heavily disputed, and before the project even began."

Human rights advocates say that investors should consider human rights conditions in their decision-making both in purchasing and divesting of stock.

Human Rights Watch "feels that anyone, including elected officials, should look into the human rights record of companies they might want to invest in since companies are responsible for ensuring they don’t contribute to violations in their operations," said Arvind Ganesan, the director of the business and human rights division of New York-based Human Rights Watch, when asked generally about a member of Congress investing in Nevsun.

Hedge Fund

Grayson is one of the richest members of Congress, with a net worth estimated at $60 million in 2014 by the Center for Responsive Politics. His hedge fund, which Grayson recently renamed from the Grayson Fund to the Sibylline Fund, had $16.4 million in sales according to the most recent Securities and Exchange Commission filing.

His wide-ranging investments have come under scrutiny before. Two ethics complaints were filed last year by a conservative group and a Murphy supporter over Grayson’s role as a member of Congress running a hedge fund, but no formal inquiry has been acknowledged by the House Ethics Committee.

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