The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

Insider Trading: From The Halls of Congress!

You can’t stop the swamp! Insider trading is highly illegal for business leaders and financial professionals. An insider trading violation carries a maximum sentence of 20 years in prison and a fine of up $5,000,000 to $25,000,000. That is, of course, unless you’re a Washington insider. In that case it’s just another day in the office and you get a pat on the back. Washington insiders have extensive knowledge unavailable to the public and have been using it to swindle outsiders for years.

Maggie Severns of Politico explores further:

On Sept. 28, 2016, three members of the Senate Judiciary Committee sent a letter to the Justice Department suggesting that the drug company Mylan was violating Medicaid laws.

Nine days later, the Justice Department reached a massive $465 million settlement with the firm.

In between, another action happened almost invisibly: A Judiciary Committee aide to Sen. Dick Durbin (D-Ill.) dropped somewhere between $4,004 and $60,000 in Mylan stock from his and his child’s portfolios.

If an aide had done the same thing in the executive branch, he or she could be investigated for violating federal conflict-of-interest law. But the Durbin aide’s ownership of shares of Mylan, and their timely sale, are reflective of Congress’ persistent refusal to crack down on stock trading by staffers, even in firms overseen by their committees.

Durbin’s aide, Daniel Swanson, isn’t alone. A POLITICO review of federal disclosures for 2015 and 2016 found that some senior aides regularly buy and sell individual stocks that present potential conflicts of interest with their work. A smaller number of staffers trade in companies that lobby Congress and the committees that employ them. In all, approximately 450 aides have bought or sold a stock of more than $1,001 in value since May 2015.

That’s likely just the tip of the iceberg, since most congressional aides aren’t required to report their trades. Only those in positions earning more than $124,406 per year must reveal their investments. Of the 12,500 staffers working for lawmakers, committees and leadership offices, only about 1,700 make that much, according to data compiled by Legistorm and the Brookings Institution.

Government watchdogs say that, at a minimum, staffers should be prevented from buying shares of companies with business before their committees. But they are not. And despite the disparity between the rigorous standards for the executive branch and the laxness of Congress, the House and Senate have taken a permissive approach even to enforcing existing rules.

That’s a serious problem, watchdogs say, because aides often have more of a hands-on role than the members themselves in crafting details of legislation that could have enormous consequences for individual companies. And because aides are rarely in the spotlight, there’s more potential for ethical lapses to go unnoticed.

My View:  Members of Congress and their staffers are exempt from many of the laws that apply to mere citizens. Isn’t it time voters insist on the laws also applying to our masters?