Another Case of Congressional Insider Trading?
WASHINGTON, D.C. – Several senators sold millions worth of stock just days or weeks before the market began to crash in the wake of the coronavirus pandemic. If these senators fled the stock market in response to nonpublic information they gleaned from their official duties, it would constitute illegal congressional insider trading and be in violation of the STOCK Act that Public Citizen helped pass into law in 2012.
This is the second test of whether the STOCK Act will be effective in shutting down alleged self-dealing by members of Congress cashing in on insider information. The first test involved former U.S. Rep. Chris Collins (R-N.Y.) who long-ridiculed a complaint filed by Public Citizen alleging insider trading, but recently pleaded guilty and has been sentenced to 26 months in prison, a sentence that begins next month. But this second test is in the U.S. Senate, a chamber that places enforcement of ethics with the secretive Senate Select Committee on Ethics.
“We were able to enforce the insider trading laws against Collins largely because the House relies on an independent agency, the Office of Congressional Ethics (OCE), to investigate and publicize cases of wrong-doing,” said Craig Holman, government affairs lobbyist for Public Citizen. “The public report from OCE highlighted the case against Collins and caught the attention of the U.S. Department of Justice, which secured a conviction. There is no such open and independent ethics process in the Senate.”
The allegations of congressional insider trading against several senators first emerged against Senate Intelligence Committee Chairman Richard Burr (R-N.C.). News reports leaked a private “political intelligence” luncheon in which Burr spoke to a group of business leaders seeking information on government policies that may affect their business interests. Burr warned the business leaders of dire economic consequences in the wake of the coronavirus pandemic, exactly the opposite message that Burr was conveying publicly to the rest of the nation.
“Simply by looking at Burr’s transactions that the STOCK Act requires to be posted online, we see that he dumped up to $1.7 million of his stock holdings in a single day, just before the stock market crashed,” said Lisa Gilbert, vice president of legislative affairs for Public Citizen. “Had it not been for the leaked story of the private luncheon, no one would have looked at Burr’s stock trading activity or that of any other senator, for that matter. And there would be no allegations of insider trading. We clearly need a Senate-side OCE to shine sunlight onto the ethics process and ensure that things like this are caught earlier.”
Public Citizen has long advocated for two reforms to strengthen enforcement of the STOCK Act and other ethics laws. First, the Senate needs an independent ethics enforcement agency to investigate charges of wrongdoing fairly and publicly. Second, Congress must adopt the Political Intelligence Transparency Act to shine a public light on political intelligence activities, such as Burr’s luncheon. Transparency is the key to ethics enforcement.