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Manufacturing a Scandal

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A few days ago I slammed Democrats for hypocritically exempting American Samoa from the new minimum wage law. In passing, I noted that one of the beneficiaries of low wages on the island is Starkist, a subsidiary of Del Monte, which is based in Nancy Pelosi's San Francisco district.

Partisans have now taken that basic data and run with it, providing a fascinating look at how a scandal can be ginned up out of, literally, nothing.

It started on Jan. 12, when somebody modified the Wikipedia entry on Del Monte to add a sentence claiming that Pelosi's husband, Paul, owns $17 million worth of Del Monte shares — suggesting, of course, that personal financial interest drove the Samoan exception. The right-wing site Newsbusters picked it up that same day, and it started spreading through the right-wing blogosphere. It gained momentum on Jan. 15, with an unsourced allegation by Rush Limbaugh. Along with the buzz came the usual smug and knowing comments of "I wonder why the mainstream media is ignoring this?"

Perhaps because it isn't true. Setting aside the wisdom of relying entirely on an unsourced Wikipedia edit, Wikipedia erased the edit a few hours after it was posted on Jan. 12.

Then the story morphed to say Pelosi owned $17 million of Heinz stock, and since Heinz owns 75 percent of Del Monte, the Pelosis still have a substantial financial interest.

First, consider that Heinz has 332 million shares outstanding, at a current stock price of $46.56, for a total market cap of about $15.5 billion.

So if Paul Pelosi actually does own $17 million worth of Heinz stock, that means he owns approximately 0.1 percent of the outstanding shares.

Further, this accusation appears to represent a misunderstanding of who owns what. The Del Monte transaction was completed in 2002. But it was Heinz shareholders received shares of the new Del Monte based on their share of ownership in Heinz. Thus Heinz shareholders — not Heinz itself — owned 75 percent of Del Monte as of 2002, through separate, non-Heinz stock. Heinz the company has no ongoing interest in Del Monte.

So assuming Pelosi owned 0.1 percent of Heinz in 2002, he would have received a 0.1 percent share of the 75 percent of Del Monte owned by Heinz shareholders. Del Monte is much smaller than Heinz — $3 billion in annual sales, market value of $2.2 billion. So Paul Pelosi's share of Del Monte would be worth about $1.6 million.

Then consider that Starkist represents just part of Del Monte's portfolio, generating annual sales of about $565 million (you'll have to get the 2005 Del Monte annual report and turn to page 54 to verify this). That's 18.8 percent of Del Monte. So Pelosi's direct interest in Starkist would be about $300,000.

But that all assumes Pelosi owns $17 million of stock somewhere. And he doesn't. If you check out the Pelosi's financial disclosure statement for 2005 (click on the link under Nancy's picture), you discover that not only do they not own any stock in Del Monte or Heinz, but they have only one asset worth anywhere near $17 million — a vineyard valued at between $5 million and $25 million.

So to sum up: the right-wing blogosphere, up to and including the venerable Rush, fell for and helped spread a completely false slander about the Pelosis — even though rudimentary logic and standards of evidence should have set off alarm bells, and a few basic fact checks could have shown the whole thing to be bunk.

To their credit, Newsbusters and a few other sites were quick to post updates that at least partially backed away from their initial claims. But Rush remains unrepentant, and the goofballs over at Free Republic took it on faith, as did Red State News and Right Wing News — even three days after the fact.

I don't know who to slam most — the sleazebag that made stuff up in the first place, or the willingly gullible partisans who jumped all over it.

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About Sean Aqui

  • Sean, I just wanted to drop in with a comment about how really excellent I think this article is. You really got to the heart of a problem which is much more pervasive than just this particular scandal.


  • Congress does have jurisdiction, though; they merely needed to amend the Act you refer to. Legislation does that all the time, modifying existing law to conform to the new one.

    It could well have been an oversight; I’m not jumping to conclusions on that. But it needed to be addressed.

  • Zedd


    But you were dishonest because you didn’t reveal that the Congress omitted American Samoa because they did have jurisdiction over that decision.

    This really was not in the hands of the Dems or anyone now was it??? Your articles are typically measured shame shame shame

    I bet you were stunned when things got out of hand. :o) C’est la vie!!

  • Zedd: Nope. Didn’t get into that. Kind of irrelevant to both my original post (which simply took issue with the exception) or this one.

    The basic rule is that f you’re going to have a minimum wage, it should apply to everyone under U.S. jurisdiction. If there’s a good economic reason to exempt Samoa, fine; but make that case specifically. And realize that doing so would open an entire can of worms about the effect and worth of a minimum wage, something I did note in my original post.

  • Zedd


    Did you make it clear in your original article that the minimum wage rates for American Samoa are set by a special industry committee (29 U.S.C. 205, 29 C.F.R. Part 511) appointed by the U.S. Department of Labor, as required by the Act. The rates are set for particular industries, not for an employee’s particular occupation. The rates are minimum rates (29 U.S.C. 206(a)(3)); an employer may choose to pay an employee at a rate higher than the rate(s) for its industry.

  • Nancy

    This was something even I felt was an incredibly stupid & clumsy “oversight” on Pelosi’s part, if indeed oversight it was. She knows what’s in her district, did she actually think no one was going to call her on it? I doubt it, since she’s also a pretty sharp pol, so I don’t know how to ascribe this, except that I’m not surprised at Limbaugh running with totally unsubstantiated material, but that’s because he’s a slob, personally & professionally, regardless of his politics.

  • Problem is, there’s no evidence Pelosi had anything to do with it. The blame appears to lie mostly with George Miller, the Bay-area sponsor of the bill. But even that ignores the fact that American Samoa has *always* been exempted from minimum wage laws.

  • kwando

    Pelosi lets StarKist off the hook and this is supposed to be another right wing conspiracy? Please, let’s put the blame where it belongs. Millionaire Pelosi has egg on her face after promising to be the most honest and ethical. Even the most liberal in San Francisco can see how fishy this whole thing is.

  • Arch: I think the left is equally willing to do so — just consider all the Karl Rove conspiracy theories. This just happened to be the example at hand.

    For the purposes of this post, the actual policy in question — the minimum wage — is irrelevant.

    As it happens I think there’s nothing wrong with a bump in the wage that does little more than make up for inflation. Will it cost some jobs at the margin? Probably. Will it increase the overall share of the pie going to low-wage workers? Yes. Will it make a major economic difference overall? No.

    A more interesting and rarely raised question is what a $7.25 minimum wage will mean in Samoa, where per capita income is just $5,000. Will it destroy the island’s economy with unemployment and rampant inflation, or boost it because Samoa is just a small part of the much larger American economy and so a massive wage increase can be imposed without major bad effects?

    But again, that’s not really the point of this particular essay.

  • Arch Conservative

    Sean if this post was intended to somehow infer that the left would never jump on a false story that cast a negative light on someone to the right side of the aisle and that everyone on the left is somehow above that while people on the right aren’t….. you f-ing bananas

    And with regard to raising the minimum wage……

    Why should everyone be thanking the Dems for that and telling them how great and compassionate they are when they’re just going to vote to raise everyones taxes anyway in 6 months?