'Unfair advantage': concerns US politicians are using coronavirus briefings to make stock decisions
Stock dealing by some members of the US Congress, or their spouses and associates, has sparked a flurry of questions over whether politicians have used information they received in congressional briefings to profit from the coronavirus pandemic and the resulting economic shutdown.
Senators Richard Burr and Kelly Loeffler have received the majority of the focus. Both senators traded stocks after receiving private briefings about the virus.
Those moves have spurred questions about whether some lawmakers are using private information available to members of Congress on key intelligence committees to make stock decisions as some companies have floundered because of the pandemic and others have flourished.
The justice department has begun an investigation into the stock moves by Burr and the FBI has also contacted the North Carolina senator. Loeffler and Burr have denied any wrongdoing. Burr, in a statement, stressed that he only used public information in making the trades and requested an investigation by the Senate ethics committee.
Members of Congress are barred from using the information they get in their committees in making stock trades. They are also subject to the same insider trading laws as the public.
“It’s problematic. Senators are powerful people who receive and have access to information that not everybody has and that fact can create an impression that anytime they have success in the stock market they may have used unfair advantage to get there,” said Gregg Nunziata, a lawyer who served as a senior policy adviser and general counsel to Senator Marco Rubio.
Nunziata said it would be better if members of Congress placed assets in a blind trust or mutual funds.
Burr has been one of the main focuses of the scandal. The chairman of the Senate intelligence committee sold off somewhere between $628,000 and $1.72m of his stock portfolio on 13 February. That sale came after Burr said publicly that the country was prepared for a pandemic like coronavirus.
But privately, Burr warned a small set of representatives for North Carolina organizations and businesses, about the serious social and economic impacts of the coronavirus in late February. Burr’s moves and the comments were especially notable because as chairman of the intelligence committee, Burr has access to classified information related to American security.
Loeffler, the newest member of the Senate, sold tens of millions of dollars worth of stocks weeks after a closed Senate briefing on the coronavirus. In the following weeks after the sales, Loeffler stressed publicly the country’s preparedness to handle the virus without taking extreme measures.
Loeffler’s sales have also raised eyebrows because her husband serves as the president of the New York stock exchange.
Both senators have denied any wrongdoing.
On Wednesday, the Wall Street Journal published an op-ed by Loeffler announcing that she would divest from individual stocks and instead move into exchange-traded funds and mutual funds. In the weeks after the sales, Loeffler urged calm about the coronavirus.
Other lawmakers who have made stock trades recently have been scrutinized as well. The Georgia senator David Perdue’s stock portfolio went through heavy trading during March. In that month, three spending bills went through Congress in response to the economic fallout of the coronavirus pandemic, the Atlanta Journal-Constitution noted.
The California senator Dianne Feinstein, another member of the Senate intelligence committee, sold somewhere between $1.5m and $6m in stock of Allogene Therapeutics, a biotechnology company.
It’s not just lawmakers themselves; their spouses have been active in stock trading. In the early stages of the coronavirus pandemic, the House speaker Nancy Pelosi’s husband spent $3.3m buying up tech stocks that would probably surge during a coronavirus pandemic: Alphabet, Microsoft and Slack, according to Barron’s. The Oklahoma senator Jim Inhofe’s account manager sold as much as $750,000 in stocks in January, near the stock market’s high so far this year.
The Vermont online website VTDigger reported that roughly a month ago the Vermont congressman Peter Welch bought $7,500 in stock in Qiagen, a company that produces coronavirus tests. He said it was made through his investment adviser. Welch sold the stock in late March and he said he would donate the profits to charity. Welch only made a few hundred dollars off the trade.
Still, Nunziata said that the types of market behavior that raise ethics or public perception concerns by members of Congress “often would fall short of the statutory crime of insider trading”.
None of the mentioned members of Congress have been found guilty of insider trading. But the behavior of lawmakers and officials concerning specific companies has raised eyebrows from experts.
“It’s just stupid for Burr to be doing this stuff,” said a former Republican Senate chief of staff. “Is it criminal? I don’t know, they haven’t established it yet. But the guy’s getting raked over the coals for it and he’s got to make a better defense of himself than he’s done up till now.”
Other lawmakers and senior aides have made trades of companies that have been sensitive to the pandemic – such as Clorox Inc, biotechnology companies, cruise ship companies and airlines. None of those trades were as large as the ones made by Loeffler and Burr, though.
Donald Langevoort, a Georgetown University law professor who specializes in securities regulation, said the impression lawmakers can give from making big trades during a major crisis can send the public a bad message about the lawmakers’ priorities.
“These episodes just create the impression of: here’s somebody who thought the best thing to do with her time and attention is manage the stock portfolio,” Langevoort said.
A bill passed in 2012, the Stock Act, bars members of Congress and government employees from using non-public information from buying or selling stocks. Burr was one of the few votes opposing that bill.
A trio of House lawmakers are supporting a more strict bill, the Humble Act, which would bar members of Congress from owning individual stocks. That bill has five sponsors.