‘INSIDE TRADE’ HEAT
Pol’s timely MS dump
A congressman who oversees the Defense Department’s tech spending dumped up to $250,000 worth of Microsoft stock two weeks before the Pentagon revealed it was canceling a $10 billion contract with the software giant, according to new public documents.
US Rep. Pat Fallon (inset), a Texas Republican who sits on a key subcommittee overseeing the Department of Defense’s technology policy, sold between $100,000 and $250,000 of Micro- soft shares on June
21, government disclosures show.
Two weeks later, the Pentagon made the surprise announcement that it would cancel a $10 billion cloud com- puting contract — called JEDI, or Joint Enterprise Defense Infrastructure — that it had awarded to Microsoft in 2019 after the company fought a bidding war and legal battle against Amazon.
Fallon, who was elected last year to represent a northeastern district of the Lone Star State, is a member of the House’s Subcommittee on Cyber, Innovative Technologies, and Information Systems. According to the subcommittee’s site, Fallon and his colleagues have “jurisdiction over Department of Defense policy related to the acquisition of computer software.”
If members of Congress or their families trade stocks based on nonpublic info, they can be prosecuted under the STOCK Act passed in 2012.
In an audio recording that Fallon’s press secretary Luke Ball sent to The Post, the congressman said the trades were actually part of a bet that Microsoft
stock would go up. On May 26, he said he bought 1,000 shares of Microsoft stock at $250.91. He said he then sold an option called a “covered call” to another investor and was paid $5,041 in return.
“The option was called about three to four weeks later, and at that moment I no longer owned — the other people made the money from the stock rising — I no longer owned Microsoft stock,” Fallon said.
Fallon added that if he were aware of the Pentagon’s intention to cancel the JEDI deal, he would have bet on Microsoft stock falling rather than rising.
“If I had prior knowledge why would I have bought stock and only optioned it upward and only bet on an upward trend?” Fallon said. “I would’ve done the reverse, so it’s provably false.”
Columbia Law professor and securities law expert Joshua Mitts told The Post that the $5,041 payment Fallon received in exchange for the covered call may have been intended to help cover his losses if Microsoft stock fell.
“It sounds consistent with someone who thinks the stock price will potentially fall in the future,” Mitts said. “That would be consistent potentially with someone who had negative information.”
In June, Insider reported that Fallon potentially violated federal ethics laws by failing to disclose up to $17 million in stock trades within 30 days of making them.
At the time, a spokesperson for Fallon claimed the congressman was “unfamiliar with how frequently members of Congress are required to file financial disclosures.”