WASHINGTON (Gray DC) - Federal authorities are reportedly investigating whether lawmakers used classified information to immunize their stock portfolios from the coronavirus' financial fallout.
Security law experts breakdown how insider trading cases could proceed on Capitol Hill. (Source: Gray DC)
Lawmakers' recent stock transaction raise questions in the media, within their own ranks, and among those charged with investigating insider trading. We turned to experts to understand exactly how justice may be pursued.
Tyler Gellasch helped write the law banning insider trading from Capitol Hill as a former Democratic senate aide, defended clients from trading allegations as an attorney, and built cases while working at the Securities and Exchange Commission.
"I've had a 360 view of how this should work," he said of his wide legal experience surrounding insider trading.
Gellasch said the Senate Ethics committee, SEC, and Department of Justice have different standards.
But, working together or in parallel, each would want to determine:
- What info lawmakers had
- Was it secret and relevant
- And did they trade while they had it
"You meet those requirements, and it starts to look pretty concerning," he said.
The Senate Ethics Committee could take steps to remove a senator, the S.E.C. could issues fines, while the D.O.J. could potentially proceed with a criminal investigation which carries the threat of prison time.
Gellasch noted that investigators would look at individual trades and information, but a clear sense of a lawmakers recent purchases and sales should also account for their previous trades. "One thing that I think the regulators are going to be looking at is historical patterns of trading," he said.
George Mason Law Prof. J.W. Verret, who served on President Donald Trump's 2016 transition team, said cases will likely hinge on granular details. "Insider trading investigations are typically about very specific pieces of information," he said.
Unlike Gellasch, Verret doesn't see scandalous specifics in Sen. Richard Burr's (R-NC) February stock sales. The North Carolina Republican sold off a substantial chunk of his holdings while publicly downplaying coronavirus concerns.
Verret is suspicious of Sen. Kelly Loeffler's (R-GA) recent sale of travel company stock, made just after she spent a day with the President Donald Trump and just before the president expanded travel restrictions.
"It's just incredibly damning evidence," Verret said "if I was at the S.E.C., I would move forward with an investigation."
Gellasch said Loeffler's case may appear simpler, but with money managers in the middle, would likely be tougher to prove.
Loeffler is up for election this November; Burr plans to retire after 2021.
The wait for answers could easily outlast their remaining time in Congress. Cases frequently drag out for a couple of years and both experts say that timeline could stretch out even longer with a lawmaker at the center.
There are proposals on Capitol Hill designed to prevent lawmakers from making questionable stock market transactions. But, it's unclear whether they have enough support to become law.
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