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U.S. Senators under scrutiny after selling millions in stocks prior to coronavirus pandemic

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U.S. Lawmakers are being criticized after selling millions in stocks before the coronavirus outbreak hit U.S. markets. Yahoo Finance’s Jessica Smith joins the On The Move panel to break down the latest developments.

Video Transcript

ADAM SHAPIRO: But one thing that's drawn a lot of attention, and a lot of it negative, is news about senators who may have been briefed about the coming pandemic who sold stock and might have gained from insider information. Jess Smith, our correspondent in Washington, DC has more for us on this one. Jess--

JESS SMITH: Yeah, Adam. Several senators are facing criticism this morning after reports that they sold stock after being briefed about the coronavirus, but before the market started tanking. Four senators are said to have made trades, but two in particular are facing a lot of criticism. The first is Senator Richard Burr. ProPublica reports on February 13, he sold between $628,000 to $1.7 million worth of stock in 33 separate transactions. He is the chairman of the Senate Intel Committee, and he was getting daily briefings about the coronavirus at that time, according to Reuters.

So there are a lot of questions about why he made those trades. In a new statement this morning, he acknowledged-- he seemed to acknowledge-- that the virus was impacting his decisions when he was making these transactions. He said that he relied on public news reports. So he's saying he was not using the classified information that he was getting about this, but I think there is going to be a lot of question about how the chair of the Intel Committee separated the public news reports from the classified information that he was getting in these briefings. He has asked the Senate Ethics Committee to look into that. We did reach out to the Senate's Ethics Committee. We have not heard back on the status of that investigation.

The second senator who is facing a lot of criticism this morning is Senator Kelly Loeffler. She is the newest member of the Senate, and the Daily Beast found that the very day there was an all senators private briefing on the coronavirus, she made her first stock sale of the time in hers-- of her time in the Senate. So this is the first one. She also went on to sell seven figures worth of stock. She made two purchases, and one of those purchases was a tech company that deals in teleconferencing software. So a company that could perform well as all of these people are working from home. Loeffler says this is a baseless attack. On Twitter, she has said that she didn't know anything about these investment decisions. She is not involved. Third party advisors told her later about the decisions they made.

Senators Inhofe and Feinstein are also facing questions about trades they made. Both of them say they were not aware. Other parties are making their investment decisions, and Feinstein noted she was not at the all senators private briefing on January 24. Adam--

- Hey, Jess. It's Julia. I'm also going to just point out that the senator from Georgia, Kelly Loeffler, she used to work for the Intercontinental Exchange so just throwing that out there. What kind of consequences could there be for this? And I do remember that "60 Minutes" episode that came out in 2011 that highlighted some of these actions that were taking place back then, and then you had the Stock Act. I thought that was supposed to curb this. What are the rules and what do you think the consequences could be?

JESS SMITH: Yeah. I think that still remains to be seen. We'll find out what comes of a potential Senate Ethics Committee investigation, if they do go forward with that investigation. There are quite a few people who are calling on these senators to resign, especially when it comes to Senator Burr who has acknowledged that the virus did kind of play a role in his thinking, though he says it was all public information. So we'll see what comes of that. And it is worth noting, he was one of the few senators who voted against the Stock Act when that was being considered a few years ago.

ADAM SHAPIRO: And this isn't the first time we've seen this issue of insider trading on Capitol Hill. Akiko, you have some insight for us.

AKIKO FUJITA: I'm not sure i have an insight so much as it is a comment. I mean, I think this-- just from an optics standpoint-- clearly not a very good one. Julia pointing out Senator Loeffler's history, but we should also point out she's married to the chairman of the New York Stock Exchange, so that clearly doesn't look good as well. I mean, I guess the counter argument to all of this would be, well, look. If you had followed the news back in January, you know, we knew coming out of China how seriously this virus was going to be. The question is whether these senators, at a time when the White House was downplaying the virus, was actually hearing otherwise on the other end. And I think that's why you're seeing the outrage now because there's been so much mixed messaging coming from the White House on just how the response should be in all of this. I do wonder how difficult it is, though, to really prove any kind of insider knowledge at this point, given the timing of all of this, and the fact that this was already a full-blown outbreak over in China at the time that they've alleged to have then sold.

ADAM SHAPIRO: Well, they used to be allowed to do that prior to the financial crisis of 2008. Congress passed legislation to prevent insider trading among its members, and then quietly removed that legislation in the few years after we got out of that crisis.