Blog — Conflict of Interests

May 06, 2015

How Rep. Bill Shuster Came to the Rescue of the U.S. Virgin Islands’ Charter Industry

By Matthew Corley

Shuster headerRead more about CREW's research: Bill Shuster aided Virgin Islands — then asked for cash, Politico, May 11, 2015

When President Obama signed legislation authorizing fiscal year 2015 appropriations for the Coast Guard into law last December, the charter yacht industry in the U.S. Virgin Islands (USVI) was ready to celebrate.  Why were they so happy? The industry knew that tucked into the bill was a provision to lessen the regulation of small passenger boats, and USVI leaders believe the change will boost the U.S. territory’s long-flagging maritime economy.

The industry’s regulatory relief is the result of a successful lobbying effort by the USVI that targeted House Transportation and Infrastructure Chairman Bill Shuster (R-PA). The influence campaign, which involved traditional lobbying, campaign contributions and advocacy by USVI politicians, highlights how official and political work by members of Congress can easily overlap.

A Fundraiser Out of Nowhere

The courtship appears to have begun with a seemingly unsuccessful fundraiser in the USVI by Rep. Shuster’s political operation, raising questions about whether fundraising was actually the purpose of the trip.

In October 2013, Rep. Shuster’s joint fundraising committee (JFC), the Bill Shuster Victory Committee, had not seen any action for more than a year.  The fundraising vehicle would soon, for a brief moment, spring to life in a tropical locale. Over the next two months, the JFC would spend almost $10,000 on fundraising-related expenses, including nearly $4,400 spent on St. Thomas in the USVI.

Despite the expenses, the fundraising effort wasn’t very effective. The Bill Shuster Victory Committee only reported receiving $1,000 in the wake of the Virgin Islands spending, which it waited more than a year to pass on to the committees it is supposed to support.  Following the burst of spending, the committee went dormant again, finally terminating in April 2015.

The USVI fundraising appears to have been tacked on to a work-related trip taken by Rep. Shuster, the chairman of the House Committee on Transportation and Infrastructure.  According to statements by USVI politicians, Rep. Shuster visited the Virgin Islands on an infrastructure visit in November 2013.  During the trip, Rep. Shuster heard from the Virgin Islands Marine Economic Development Council about issues facing the territory’s yacht charter industry.

The Bill Shuster Victory Committee started spending money again that same month, paying thousands to Epiphany Productions, Inc., the fundraising company employed by Rep. Shuster’s campaign and leadership PAC. The JFC reported spending $4,356.47 on goods and services in the USVI in early December 2013.

More than $1,500 went to “lodging” and “site rental” at The Frenchman’s Reef Marriott, which “boasts a beautiful hilltop location overlooking a private beach with sweeping views of the sea.”  The committee also dropped $1,135 at Thirteen Restaurant, considered “one of the top five restaurants on the island” with a menu that is “pricey but oh-so-worth it.”  Another meal, costing $920, was at Grande Cru, a waterfront restaurant offering “an upscale dining experience in a casually chic setting.”  The JFC also spent $212 on “catering” expenses at a supermarket as well as $500 for “fundraising transportation” with Just Because Luxury Charters, a USVI yacht charter company that offers trips on a 45 ft. Sea Ray Sundancer

A Single Contribution

The Bill Shuster Victory Committee only reported receiving a single contribution in December 2013.  On December 30, 2013, the JFC reported a $1,000 contribution from liquor giant Diageo North America’s political action committee (PAC).  Though Diageo’s PAC is officially headquartered in Connecticut, the company has interests in the USVI, having opened a rum distillery in St. Croix in 2010.  Diageo also has an indirect connection to Rep. Shuster, having employed Epiphany Productions to grow the company’s PAC.

It took the Bill Shuster Victory Committee more than a year to distribute the $1,000 it received from Diageo’s PAC to other committees supported by the JFC, only doing so as part its 2015 shut down.

The apparent lack of success of the Bill Shuster Victory Committee’s 2013 fundraising in the USVI stands in stark contrast to what Rep. Shuster’s PAC, Bill PAC, was able to do a year later.  On December 5, 2014, Rep. Shuster held a fundraiser in St. Thomas.  Later that month, Bill PAC paid more than $4,600 for “event catering” at the Old Stone Farmhouse in St. Thomas, which has been called “one of St. Thomas' finest dining experiences.”  In January 2015, Rep. Shuster’s congressional campaign also spent more than $1,100 on “event catering” at a restaurant in St. Thomas called Oceana.

Unlike the 2013 JFC expedition in the USVI, Bill PAC’s December 2014 fundraiser actually pulled in money from residents of the U.S. Virgin Islands.  According to the PAC’s campaign finance records, 15 donors with addresses in the USVI contributed to Bill PAC in December 2014, giving between $500 and $5,000 each.   In all, Bill PAC raised $33,500 that month from donors in the USVI.  Diageo North America’s PAC also contributed $1,500 to Bill PAC in December 2014.

Shuster Helps Out USVI Charter Industry

Bill PAC’s 2014 fundraising success may be related to Rep. Shuster’s role in writing the Howard Coble Coast Guard and Maritime Transportation Act of 2014, which passed the House on December 3, 2014 – two days before the PAC’s fundraiser.   The legislation contained a provision easing regulation of passenger vessels in the USVI, allowing boats carrying up to 12 passengers to be exempt from strict U.S. Coast Guard inspections.  Since 1993, when the Passenger Vessel Safety Act was enacted, small boats carrying more than six passengers had to pass inspections.  The British Virgin Islands, however, allows boats to carry up to 12 passengers without being inspected, causing the charter yacht industry in the USVI to claim it lost an estimated $2 billion in the years after the law was enacted.

USVI politicians sought for years to get the so-called “six-pack” rule changed, but they were hampered by the fact that the USVI’s delegate to Congress is not allowed to vote on the House floor.  Former Del. Donna Christensen (D) spent years seeking floor assistance.  She eventually found a champion in Rep. Shuster.

A lobbyist working for the USVI government may have played a role in triggering Rep. Shuster’s interest in the “six-pack” issue.  On May 13, 2013, Kevin Callwood, a lobbyist who says he “coordinated the lobbying activities related to the Coast Guard Reauthorization Act, and the revitalization of the Virgin Islands charter yacht industry,” contributed $500 to Rep. Shuster’s congressional campaign.  Six months later, Rep. Shuster visited the USVI as part of the Virgin Islands’ congressional outreach program.  It was at this time that Rep. Shuster’s JFC reported paying for fundraising expenditures in the USVI. 

On his LinkedIn page, Mr. Callwood says that he “[c]onceived and developed” the outreach program and has “[c]oordinated 4-6 official Congressional visits to the territory annually as well as numerous unofficial opportunities to introduce Members of Congress to the unique challenges and opportunities facing Americans in the Caribbean.”  In 2006, he told the Billings Gazette that the outreach program includes, among other things, fundraising trips to the USVI.  Mr. Callwood also told the New York Sun in 2006 that fundraising trips he organized to the USVI were paid for by the lawmakers themselves.

According to lobby reports filed with Congress, Mr. Callwood lobbied Rep. Shuster’s transportation committee on the “six-pack” rule during the first half of 2014.  The government of the USVI paid Mr. Callwood’s firm, Callwood Associates, $140,000 during the six month period he reported lobbying on the exemption.

On April 1, 2014, the Coast Guard and Maritime Transportation Act of 2014, which Rep. Shuster co-sponsored, was debated on the House floor. During the debate, Rep. Shuster took notice of Del. Christensen, saying she was “working on a couple provisions that I know are going to be very beneficial to the U.S. territories and to the U.S. Virgin Islands.” When Del. Christensen took the floor to speak, she thanked Rep. Shuster for helping get the provision addressing the “six-pack” rule into the legislation.  “I especially want to thank Chairman Shuster and Ranking Member Rahall for their willingness to include language in the bill that would clarify a problem with the charter boat industry in my district, the U.S. Virgin Islands,” said Del. Christensen.

A month later, then-USVI Governor John P. de Jongh, Jr. was quoted in a press release crediting outreach to Rep. Shuster with causing the “six-pack” rule fix in the Coast Guard bill.  “There is no doubt that the initiative brought forward by our Marine Council to Congressman Bill Shuster, the Chairman of the House Transportation Committee, during his November 2013 infrastructure visit to the territory has resulted in this step towards equity for our charter industry and an economic boost for our maritime industries as a whole,” said Gov. de Jongh.  The governor singled out Rep. Shuster for praise several more times before the “six-pack” provision became law. 

A Family Tradition

Politico recently revealed that Rep. Shuster is involved in a personal relationship with a lobbyist representing an industry with business before his committee, recalling for many the questionable close ties the Transportation Committee chairman’s congressman father had with a lobbyist representing transportation companies.

Like his son now, the elder Shuster also courted controversy with his travel to the USVI.

In 1988, Rep. Shuster’s father, Rep. Bud Shuster (R-PA), then a member of the House Public Works and Transportation Committee, was forced to defend a trip he took to the USVI that was partially paid for by taxpayers. The Associated Press reported that the elder Rep. Shuster wanted to visit the islands, so he had his aides find a reason to travel there for government business. Rep. Shuster’s office denied that he commissioned his staff to find an excuse for travel.  Ultimately, Rep. Shuster toured an airport construction project on the island of St. Thomas following a four-day stay in the USVI. The government paid for a one-day per diem and Rep. Shuster’s flight home while the congressman paid for the rest of his stay. “It's none of your goddamned business what I do in my personal time,'' the first Rep. Shuster told the AP.

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