Charges against Rep. Collins highlight lack of trading limits
Bloomberg News
The indictment of a New York congressman on insider-trading charges, along with his colleagues’ holdings in the biotechnology company at the center of the case, highlight how members of Congress face few restrictions on their investments and service on corporate boards, creating the potential for conflicts.
Rep. Chris Collins, a Republican, is the only lawmaker accused by prosecutors of wrongdoing, stemming from his role on Innate Immunotherapeutics’ board. The indictment says he tipped his son to negative drug trial results, prompting the son to sell shares and alert others, who did the same. The stock price tanked after the results were public.
Five other GOP House members bought shares in the Australian biotechnology company in January 2017. That includes John Culberson of Texas, who reported selling his holdings weeks before the company was informed in June 2017 of the negative results for a drug to treat a form of multiple sclerosis. He said Wednesday he didn’t have any inside information when he sold.
The other lawmakers — including Doug Lamborn of Colorado — still hold the stock or didn’t sell it in the weeks prior to the public announcement of the negative trial results.
Unlike executive branch officials, who must resign from outside positions and divest assets that could pose conflicts of interest, Congress relies on disclosure as the mechanism for keeping lawmakers honest. In the past, that’s led to a number of scandals involving investment decisions that resulted in charges of self-enrichment and insider trading.
“There are very few restrictions on members of Congress,” said Larry Noble, a former general counsel of the Federal Election Commission, who said members only have to recuse themselves from voting on legislation that specifically benefits a personal investment. “The rationale for it is that almost anything you can do will affect business. It presents real conflicts.”
In 2012, Congress tried to address some of the problems by passing the Stock Act, a measure that made it illegal for members of Congress and federal officials to trade on nonpublic information about pending regulatory or legislative decisions. The law also requires them to disclose stock transactions up to 45 days after making them — in addition to the annual disclosure listing assets and liabilities.
Congress should go further and consider banning lawmakers from serving on boards of public companies and trading individual stocks, said Virginia Canter, chief ethics counsel at Citizens for Responsibility and Ethics in Washington.