(Bloomberg) -- Government watchdog groups have called for investigations by ethics officials, prosecutors and regulators of sales of stock by senators briefed in January on the coronavirus threat.
Still, enforcement experts say that the trades are unlikely to lead to direct regulatory or legal sanctions, leaving it to ethics officials and voters to decide whether the senators crossed the line.
Republican Senators Richard Burr of North Carolina, Kelly Loeffler of Georgia, and James Inhofe of Oklahoma, as well as Dianne Feinstein, a Democrat from California, have defended the transactions, asserting they weren’t related to any information they received as part of their congressional duties.
While critics of the sales have questioned the legality of the trades, John Britt, a retired Securities and Exchange Commission enforcement attorney who spent three decades at the agency, said there’s little chance authorities could bring a successful insider trading case here. Burr -- who has called on the Senate ethics committee to review the trades -- had been receiving periodic classified briefings about the virus and its potential impact in the U.S. as chairman of the intelligence committee, but many investors had already been adjusting their portfolios as they tried to assess the market impact.
“There was plenty of public information available and the markets were already frothy,” Britt said. “Based on what we now know, he walks.”
Burr Invites Ethics Probe of Stock Sales After Virus Updates
While Burr has said he’ll retire when his term ends in 2022, the others may need to explain the trades to voters.
Loeffler is seen as being at particular risk politically from the controversy. She faces a special election in November after being sworn in two months ago to replace a Georgia senator who retired early citing his health problems. Loeffler, who is married to New York Stock Exchange chairman Jeffrey Sprecher, is already locked in a primary battle with Representative Doug Collins, President Donald Trump’s favorite to fill the empty seat.
Collins seized on the news, tweeting “People are losing their jobs, their businesses, their retirements, and even their lives and Kelly Loeffler is profiting off their pain?”
Loeffler defended her actions in an interview on Bloomberg TV, saying, “I’ve made extra careful precautions to comply not just with the letter of the law but with the spirit of the law.”
She said any investment decisions are handled by a third party and “if anyone reaches out, I will be completely responsive.”
Inhofe, who is also up for re-election in November, also said an adviser handles his investments and that he has no direct input since asking the adviser to begin moving him out of stocks in December 2018.
Feinstein doesn’t go back before voters until 2024. She and her husband sold between $1.5 million and $6 million in a cancer therapy company Allogene Therapeutics, she said, calling it a small part of their portfolio. Feinstein and Inhofe said they didn’t attend the January briefing, a classified session in January with top U.S. public health officials on the looming crisis that preceded some of the sales the senators disclosed.
“During my Senate career I’ve held all assets in a blind trust of which I have no control,” Feinstein tweeted. “Reports that I sold any assets are incorrect.”
The Stocks Senators Unloaded Before the Coronavirus CrashUntil the STOCK Act (Stop Trading on Congressional Knowledge) was passed in 2012, members of Congress were exempt from the insider-trading laws that governed the marketplace. The act was designed to prevent them from benefiting from access to market-moving information ahead of the general public.
Its passage followed a series of media reports, including an expose by the CBS program “60 Minutes,” that showed how members of Congress with oversight of industries such as financial services, defense contracting and health care reaped huge gains through well-timed trades in the market.
Senator Mike Braun, a Republican from Indiana, said the four will need to explain whether they followed ethical guidelines to prevent insider trading.
“Some have had it so they weren’t involved in it, had it in a blind trust and so forth,” Braun said. “That’s what you’re supposed to do, ethically. And you’ll still be required to talk about it in an atmosphere like we’ve got here.”
If assets were actively traded by the senators in question rather than in a blind trust, he added, “then I think that’s a little harder discussion.”
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