Our elected officials in Congress are supposed to look out for our best interests. In a shocking revelation, it’s been reported that a number of senators sold their stock holdings after being briefed about the coronavirus and the massive impact it will have upon the economy, jobs and the stock market. While telling the American public that there wasn’t much to worry about, they bailed out of their stock holdings to avoid large losses.

In a bizzare quirk, we’ve permitted our politicians to do things that we can’t. Prior to 2012, Congress members were not prohibited from insider trading. Senator Richard Burr from North Carolina was a fierce opponent of a bill that ultimately banned this practice. In an interview at the time, Burr said about the potential new law, “It’s ludicrous.” He voted against the Stop Trading on Congressional Knowledge (STOCK) Act and said, “I mean, it’s insane.”

The STOCK Act passed into law in 2012. It states that members of Congress, other government employees, congressional staffers, members of the executive branch and judiciary are not permitted to engage in insider trading gleaned from information ascertained through their jobs.

Burr’s vehement opposition to the STOCK Act is now coming back to haunt him. Burr, the chairman of the Senate Intelligence Committee, sold 33 stocks held by both him and his spouse. The value of the sales is estimated at between $628,033 and $1.72 million. Some of the stocks were in sectors hit hard by the outbreak.

In a prepared statement from Burr, he claimed:

Georgia Senator Kelly Loeffler was also at the meeting with Burr. Loeffler sold stocks valued at around $1.275 million to $3.1 million in an apparent effort to avoid potential losses. She also purchased stocks in two companies that were deemed to benefit from the coronavirus, including one in a company that offers teleconferencing software, which would help people who are working remotely from home.

Shockingly, Loeffler is a former executive at Intercontinental Exchange and married to Jeffrey Sprecher, the chairman of the New York Stock Exchange. Clearly, they should have been aware of how inappropriate this looks. It also opens them both up to regulatory—and possible criminal—investigations.

Loeffler’s office issued a statement early on Friday. “Sen. Loeffler does not make investment decisions for her portfolio,” the statement said. “Investment decisions are made by multiple third-party advisers without her or her husband’s knowledge or involvement.”

The Democratic senator from California, Diane Feinstein, who’s a ranking member of the Senate Judiciary Committee, sold stock owned by herself and her husband valued at $1.5 million and $6 million between Jan. 31 and Feb. 18.

Tom Mentzer, a spokesperson for Feinstein, said, “All of Senator Feinstein’s assets are in a blind trust.” Mentzer added, “She has no involvement in her husband’s financial decisions.”

Oklahoma Republican Senator Jim Inhofe sold stocks on January 27 that amounted to about $400,000, according to his disclosure report. Inhofe said, in response to the accusations, that he didn’t attend the briefing and doesn’t have “any involvement” in making his investment decisions.

It is possible that the senators have their money in blind trusts and give full trading discretion to their financial advisors. Many wealthy people hire professional money managers to make buy and sell decisions for them. Even if this is the case, how can such high-profile elected officials allow their wealth managers to make these types of investment decisions? At  face value, they look like they are flouting the law and taking advantage of private information only available to them. It’s frightening how arrogant or clueless they are to be unaware of how the public views this perceived breach of trust. At a time when we are depending upon our leaders in Congress, the appearance is that they are looking out for themselves.

Insider trading is a serious matter and can lead to investigations that result in possible civil and criminal indictments. People are now calling for probes into the senators’ financial dealings and demanding that they resign.

This scandal may be a tipping point. When he campaigned for the presidency in 2016, President Donald Trump was emphatic in his belief that regulations hold back businesses. One of his campaign promises was to limit the reach of regulatory agencies. By declawing the regulators, Trump believed that businesses would flourish, as they’re unencumbered by red tape and bureaucracy.

If the heinous actions of the senators prove to be true, it will place great pressure on Trump’s administration to reconsider its rollback of regulations. Regulators will become empowered. It would be reasonable to believe that investigations will be launched into other matters as well.

For example, regulators and the Department of Justice may decide to look into the companies that engaged in massive stock buybacks. When companies buy back their shares, the stock prices usually rise. Executives who receive stock and stock options greatly benefit from the appreciation in value of the company stock.

There are questions if this strategy played a part in over-leveraging the stock market—aiding its current collapse. Boeing, the large aircraft manufacturer that had several of its planes crash with accompanying allegations of faulty software and inadequate pilot training, is now asking the government for a bailout. The American public is now being asked to give the company money when it may have arguably engaged in a massive pump-and-dump-type scheme.

Amazon, Apple, Facebook, Google and a handful of other companies have become incredibly powerful. The coronavirus outbreak may make these companies even larger, asserting even greater control over the economy. Their growth harms their thousands of small and midsize competitors. Antitrust reviews may be initiated to determine if they are abusing their monopolistic grip over their respective sectors to ensure that we don’t end up with a handful of dominant companies controlling our economy.

Accusations over privacy violations have been continually raised, but nothing really has changed. We’ve become resigned to the fact that everything we do will be surveilled and all of our information will be sold off to the highest bidder. This may be looked into as well.

If this administration—or whichever one comes into power after the presidential election—recognized the need to stop the deregulatory environment and ramp up investigations, reviews and examinations of these and other important matters, there will be a huge need for compliance, legal, audit, privacy and regulatory professionals.

The 2020 congressional insider trading scandal was a political scandal in the United States involving allegations that several members of the United States Senate violated the STOCK Act by selling stock at the start of COVID-19 pandemic in the United States and just before a stock market crash on February 20, 2020, using knowledge given to them at a closed Senate meeting. The Department of Justice (DOJ) initiated a probe into the stock transactions on March 30, 2020. No charges were brought against anyone and all investigations into the matter are closed.

Background

On January 26, 2012, Senator Joe Lieberman introduced the STOCK Act that would prohibit the use of non-public information for private profit, including insider trading by members of Congress and other government employees. The bill was passed by the Senate with only Senators Richard Burr, Jeff Bingaman, and Tom Coburn voting against it. The House of Representatives voted to approve of the bill and it was signed into law by President Barack Obama on April 4, 2012.^[1]

Timeline

On January 24, 2020, the Senate Committees on Health and Foreign Relations held a closed meeting with only Senators present to brief them about the COVID-19 outbreak and how it would affect the United States.^[2][3] Following the meeting Senator Kelly Loeffler and her husband Jeffrey Sprecher, the chairman of the New York Stock Exchange, made twenty-seven transactions to sell stock worth between $1,275,000 and $3,100,000 and two transactions to buy stock in Citrix Systems which saw an increase following the correction.^[2] Senator David Perdue made a series of 112 transactions with stocks sold for around $825,000 and bought stocks worth $1.8 million. Perdue started buying around $185,000 in stock in DuPont, a company that makes personal protective equipment, on the same day as the Senate briefing up to March 2.^[4][5] Additionally, John Hoeven of North Dakota purchased $250,000 in health science companies in January, five days after attending a briefing about the pandemic.^[6]

On January 31 and February 18, Dianne Feinstein sold stock in Allogene Therapeutics, with the estimated value to be between $1.5 million and $6 million.^[7] According to Feinstein, the investment decisions are made by her husband, and are reported by her per Senate rules. She states that “this company is unrelated to any work on the coronavirus and the sale was unrelated to the situation.”^[8] Feinstein also reportedly provided documents to the FBI related to her husband’s transactions, in order to show that she had no connection to the decision.^[9]

On February 7, Senator Burr, the Chair of the Senate Intelligence Committee, stated in an open-editorial on how the government could respond to coronavirus that “Luckily, we have a framework in place that has put us in a better position than any other country to respond to a public health threat, like the coronavirus,” However, on February 13, he and his wife sold between $628,000 and $1.7 million worth of stock through thirty-three transactions and on February 27, Burr stated that “There’s one thing that I can tell you about this: It is much more aggressive in its transmission than anything that we have seen in recent history,” at a Capitol Hill Club luncheon and his statement was later leaked in a secret recording.^[10][11]

On March 19, ProPublica published an article showing that Burr had sold stock shortly before the correction and Loeffler, Jim Inhofe, and Dianne Feinstein‘s stock selling was also reported. NPR asked Caitlin Carroll, Burr’s spokesperson, for a comment on the alleged violations and she responded with “lol” and then clarified that “As the situation continues to evolve daily, he has been deeply concerned by the steep and sudden toll this pandemic is taking on our economy.”^[10]

Senator Richard Burr, the most prominent Senator implicated in the scandal. He temporarily stepped down as Chairman of the Intelligence Committee during the investigation.

Tucker Carlson called for Burr to resign from the Senate and be prosecuted for insider trading on a segment of Tucker Carlson Tonight.^[12] Representative Alexandria Ocasio-Cortez also called for Burr to resign and Representative Joaquin Castro called for an investigation into the stock selling.^[13] Representative Doug Collins, who ran against Loeffler in the special Senate election in Georgia, criticized her by stating “People are losing their jobs, their businesses, their retirements, and even their lives and Kelly Loeffler is profiting off their pain? I’m sickened just thinking about it.”^[14]

On April 10, Montana Attorney General Tim Fox accused Representative Greg Gianforte, the wealthiest member of the House of Representatives, of insider trading by investing into the manufacturer of hydroxychloroquine. At the time Fox was running against Gianforte for the Republican nomination in the 2020 Montana gubernatorial election.^[15] Although several investments were made in Gianforte’s name for companies which potentially stood to profit from the covid-19 pandemic, such as Roche Holdings, Gianforte says all his investments are made for him through a blind trust.^[16]

Investigation

On March 20, Burr requested for the Senate Ethics Committee to investigate his stock trading history and stated that he only used publicly available information to make his decisions.^[17] On March 30, the Department of Justice initiated a probe into the stock transactions in conjunction with the Securities and Exchange Commission (SEC).^[18]

During the investigation it was discovered that Burr had also sold around $47,000 worth of stock in OCI, a Dutch fertilizer company, before it suffered a forty-two percent decrease in its value in 2018. From September 5 to 8, 2018, Burr and his wife sold all of their stock in OCI, which at the time was experiencing its highest share price; a month later it failed to meet quarterly earnings expectations after the Trump administration granted exemptions to eight countries for sanctions placed on Iranian oil and petrochemicals.^[19]

On May 13, the FBI seized Burr’s phone, to investigate his communications with his stock broker, among other warrants, including one to search his personal iCloud account.^[20] On May 14, Burr told Senate Majority Leader Mitch McConnell that he would temporarily step down as chairman of the Senate Intelligence Committee for the remainder of the investigation.^[21]

On May 26, the Justice Department announced that it had ended its investigation into Feinstein, Inhofe, and Loeffler.^[22] On January 19, 2021, the Justice Department closed its investigation into Burr.^[23]

References

• Wong, Scott (February 2, 2012). “STOCK Act passes Senate by vote of 96-3”. Politico. Archived from the original on March 25, 2014.
• “Sen. Kelly Loeffler Dumped Millions in Stock After Coronavirus Briefing”. The Daily Beast. March 20, 2020. Archived from the original on March 20, 2020.
• “Senate Health Committee Announces Briefing to Update Senators on Coronavirus”. January 23, 2020. Archived from the original on February 26, 2020.
• “David Perdue’s stock trading saw an uptick as coronavirus took hold”. April 7, 2020. Archived from the original on April 7, 2020.
• “Sen. David Perdue bought stock in a company that produces protective medical equipment the same day senators received a classified briefing on the coronavirus”. April 7, 2020. Archived from the original on April 7, 2020.
• “GOP Sen. Hoeven bought up to $250,000 in health sciences fund days after coronavirus briefing”. March 20, 2020.
• Lipton, Eric; Fandos, Nicholas (March 20, 2020). “Senator Richard Burr Sold a Fortune in Stocks as G.O.P. Played Down Coronavirus Threat”. The New York Times. ISSN 0362-4331. Retrieved May 29, 2022.
• Burns, Katelyn (May 27, 2020). “Kelly Loeffler and 2 other senators are no longer being investigated for insider trading”. Vox. Retrieved May 29, 2022.
• Andrew Desiderio. “Feinstein talks with FBI about her husband’s stock trades”. POLITICO. Retrieved May 29, 2022.
• “Intelligence Chairman Raised Virus Alarms Weeks Ago, Secret Recording Shows”. NPR. March 19, 2020. Archived from the original on March 20, 2020.
• “Senate Intel chair unloaded stocks in mid-February before coronavirus rocked markets”. OpenSecrets. March 19, 2020. Archived from the original on March 19, 2020.
• “Tucker Carlson calls on Burr to resign amid reports of stock selloff”. The Hill. March 19, 2020. Archived from the original on March 20, 2020.
• “Burr, other senators under fire for stock sell-offs amid coronavirus outbreak”. NBC. March 19, 2020. Archived from the original on March 21, 2020.
• “How Richard Burr and Kelly Loeffler became political villains in the coronavirus saga”. CNN. March 20, 2020. Archived from the original on March 21, 2020.
• “Richest GOP congressman accused of ‘insider trading’ on coronavirus — by a Republican AG”. April 10, 2020. Archived from the original on April 11, 2020.
• GAISER, COLIN (April 19, 2020). “Rep. Gianforte responds to accusations about profiting from pandemic”. Daily Inter Lake. Retrieved May 29, 2022.
• “Burr requests ethics investigation into stock sale, denies wrongdoing”. The Hill. March 20, 2020. Archived from the original on March 21, 2020.
• “Exclusive: Justice Department reviews stock trades by lawmakers after coronavirus briefings”. The Hill. March 30, 2020. Archived from the original on March 31, 2020.
• “Senate Intel Chair Sold Dutch Fertilizer Stock in 2018, Right Before a Collapse”. April 7, 2020. Archived from the original on April 7, 2020.
• “FBI serves warrant on senator in investigation of stock sales linked to coronavirus”. May 13, 2020. Archived from the original on May 14, 2020.
• “Richard Burr to step down as Intelligence Committee chairman”. May 14, 2020. Archived from the original on May 14, 2020.
• “Justice Dept. Ends Inquiries Into 3 Senators’ Stock Trades”. May 26, 2020.

“Feds won’t charge Sen. Richard Burr with insider trading”.