The New York Times: Stock Trades Reported by Nearly a Fifth of Congress Show Possible Conflicts

NEW YORK TIMES, KATE KELLY, ADAM PLAYFORD, ALICIA PARLAPIANO

Senator Tommy Tuberville, Republican of Alabama and a member of the agriculture committee, regularly reported buying and selling contracts tied to cattle prices starting last year, even as the panel, by Mr. Tuberville’s own account, had “been talking about the cattle markets.”

Representative Bob Gibbs, an Ohio Republican on the House Oversight Committee, reported buying shares of the pharmaceutical company AbbVie in 2020 and 2021, while the committee was investigating AbbVie and five rivals over high drug prices.

The timing of one trade by the wife of Representative Alan Lowenthal, Democrat of California, was especially striking: His disclosure statement said she had sold Boeing shares on March 5, 2020 — one day before a House committee on which he sits released damaging findings on the company’s handling of its 737 Max jet, which was involved in two fatal crashes.

These lawmakers — all of whom defended the transactions as proper — are among 97 current senators or representatives who reported trades by themselves or immediate family members in stocks or other financial assets that intersected with the work of committees on which they serve, according to an extensive analysis of trades from the years 2019 to 2021 by The New York Times.

The potential for conflicts in stock trading by members of Congress — and their choice so far not to impose stricter limits on themselves — has long drawn criticism, especially when particularly blatant cases emerge. But the Times analysis demonstrates the scale of the issue: Over the three-year period, more than 3,700 trades reported by lawmakers from both parties posed potential conflicts between their public responsibilities and private finances.

In some cases, the transactions appear to be routine or to have only a tangential connection to any influence the lawmaker might have had on an issue. In others, the trades were conducted by trusts or brokers who, the lawmakers say, were operating without any instructions or input from them.

But many instances show how legislative work and investment decisions can overlap in ways that at a minimum can leave the appearance of a conflict and that sometimes form a troubling pattern — even if they technically fall within the rules.

Under a 2012 law known as the STOCK Act, members of Congress are allowed to buy and sell stocks, bonds and other financial instruments as long as they do not trade on inside information and disclose any transactions by themselves or immediate family members valued at $1,000 or more within 45 days.

Like everyone else, members of Congress are subject to laws against insider trading. Even knowledge that would fall short of the legal definition of inside information, though, has the potential to create ethical dilemmas for members of Congress who, on any given day, might be able to glean insights through legislative work, classified briefings or meetings with constituents, donors, corporate executives, regulators and other government officials.

Both the House and the Senate have been trying to develop legislation to tighten the rules, but whether a bill will be passed by both chambers and make it to President Biden’s desk this year remains in doubt, despite rare bipartisan support.

“The American people don’t want us day trading for profit, and engaging in active trading of the very equities that are connected to the policies that we are deciding on and voting on every day,” said Representative Chip Roy, a Texas Republican. He is co-sponsoring a bill in the House that would require members to put individual stocks, bonds and many other financial assets in a blind trust, a portfolio that is managed by an outside adviser with no involvement by the owner.

To examine the potential for conflicts, The Times used a comprehensive database called Capitol Trades, which was compiled from congressional trading disclosures by the German financial data firm 2iQ Research.

The Times then matched the trades against committee assignments, hearings and investigations to construct a picture of how members’ congressional work and their personal financial transactions could potentially intersect.

Some committees have broad purview over matters like tax policy, which affects every company and individual in the U.S. economy but which the Times analysis would not have flagged. And members of Congress have wide-ranging influence, and access to sensitive information, that their committee assignments may not reflect.

Yet even with those omissions, the 3,700 potentially conflicted trades identified by the analysis amounted to more than 10 percent of the transactions by members of Congress in the Capitol Trades database during the three years.

The analysis shows that 13 lawmakers, including Mr. Gibbs and other members of the House oversight panel, reported that they or immediate family members had bought or sold shares of companies that were under investigation by their committees between 2019 and 2021, encompassing years in which Democrats controlled the House and control of the Senate swung from Republicans to Democrats.

It also showed that 44 of the 50 members of Congress who were most active in the markets bought or sold securities in companies over which their committee assignments could give them some degree of knowledge or influence.

One of the most vexing issues for lawmakers is trading by their immediate family members, some of whom have independent wealth and careers.

The 97 members the Times analysis identified do not include Speaker Nancy Pelosi; her disclosure filings were not flagged because she does not sit on any legislative committees. Her husband, Paul Pelosi, is a real estate and technology investor who reported buying and selling between $25 million and $81 million worth of stocks, options and other financial assets between 2019 and 2021, according to Ms. Pelosi’s filings. Among them were investments in high-profile companies like Alphabet — the parent company of Google — that are regularly the subject of congressional and regulatory scrutiny.

The husband of Representative Carol Miller, Republican of West Virginia, bought shares in the pharmaceutical company AbbVie during the investigation into drug pricing by the House oversight panel while she was serving on the committee, according to Ms. Miller’s disclosure statement.

So did the wife and children of another member of that committee, Representative Ro Khanna, Democrat of California, his filings show. Mr. Khanna’s family members bought or sold shares in not only AbbVie during the committee’s review, but also in those of seven other companies while they were under scrutiny by the oversight panel or other committees on which Mr. Khanna sat.

A page from a stock trading disclosure submitted by Representative Ro Khanna, Democrat of California.

Mr. Khanna, whose wife, Ritu Ahuja Khanna, is the daughter of Monte Ahuja, the founder of a successful automotive equipment company, reported that his wife and children — who are young and whose assets are traded by a trust — bought or sold securities at least 10,500 times in the three-year period The Times studied.

Mr. Khanna said in an interview that he never traded himself and was uninvolved in the trading of his family members’ assets. Mr. Khanna said he favored a complete ban on trading by members, but for family members, he said he thought a “highly diversified trust” that is managed by an outsider — the arrangement used by his wife and young children — was an ethical solution.

“If someone’s coming into a marriage with independent resources, I think that’s the appropriate way to deal with the conflict,” he said.

Whether legislators’ privileged position actually yields financial benefits to those who play the markets is not clear. Although some observers have pointed to specific examples of members who appeared to have made a profit, STOCK Act disclosures often provide insufficient information to make that calculation: They show only wide ranges of values, do not have to specify whether a transaction yielded a profit or a loss and sometimes do not show both a purchase and a sale.

But a Dartmouth College study published earlier this year said the specific stocks that members of Congress reported buying and selling between 2012 and 2020 did not, on average, subsequently perform any better or worse than other, similar stocks.

“You cannot rule out that there’s some serious insider trading going on,” said Bruce I. Sacerdote, an economics professor who was a co-author of the study. “What you know for sure is on average they don’t do particularly well, and these House members and senators would be better served if they were just in index funds.”

A Troubling Recent History
Legal and ethical questions about securities trading by members of Congress have surfaced repeatedly in recent years.

In 2020, Senator Richard M. Burr, Republican of North Carolina, was investigated along with three other senators by the Justice Department for selling stocks after a private briefing on the potential harms of the coronavirus. The “well-timed stock sales” allowed Mr. Burr to avert at least $87,000 in losses, according to a recently unsealed affidavit used by the federal government to obtain a search warrant for the senator’s phone in 2020. But charges were never filed and the investigation was eventually closed, as were the investigations into his colleagues. The status of a separate Securities and Exchange Commission review into Mr. Burr is unclear.

A running investigation by the website Insider that began last year reported that 72 members of Congress had fallen out of compliance with the STOCK Act by making trading disclosures late, inaccurately or not at all.

In a rare insider-trading prosecution of a member of Congress, Representative Chris Collins, Republican of New York, resigned in 2019 after pleading guilty to charges related to giving his son insider information about a failed drug trial at an Australian biotech company on whose board the lawmaker served. He served time in prison before being pardoned by President Donald J. Trump.

A Morning Consult poll in January showed that almost two-thirds of respondents would like to see a ban on members of Congress trading.

In the absence of restrictions, Mr. Pelosi’s transactions alone have spawned a cottage industry of social media accounts and trade-tracking services to help investors emulate his market moves — often accompanied by scathing commentary about his wife’s potential conflicts of interest.

“The speaker does not own any stocks,” a spokesman for Ms. Pelosi said, adding that she “has no prior knowledge or subsequent involvement in any transactions.”

Those critiques are fueled by the fact that as speaker, Ms. Pelosi has immense power over which legislation makes it to the House floor — including various proposals now being considered to tighten the rules for financial trading by her husband, her colleagues and their families.

After initially opposing stricter measures, Ms. Pelosi said in February she would support them but wanted federal judges to be held to similar rules. The Wall Street Journal reported last fall that more than 130 federal judges had overseen cases involving companies in which they or their families owned interests.

A bill passed by Congress this year evened out disclosure requirements between the two branches of government. It was signed into law by Mr. Biden in May.

A legislative proposal now under development by the House’s Democratic leadership, which was outlined in a memo reviewed by The Times, would prohibit lawmakers, their spouses and dependent children from trading stocks, bonds, cryptocurrencies and other financial assets tied to specific companies. Under that proposal — which is separate from the bill that Mr. Roy, the Texas Republican, is supporting — members and their immediate families would be obliged to either sell off those holdings or place them in a blind trust.

Ms. Pelosi supports the proposed framework, according to a senior House official.

In the Senate, Chuck Schumer of New York, the majority leader, has voiced support for new measures to curb trading by members, but no bill that could receive the necessary 60 votes for passage has yet emerged.

The House member designated by Ms. Pelosi to generate a compromise bill to address the issue — Representative Zoe Lofgren, Democrat of California — was herself among the 97 members identified by The Times’s analysis.

Ms. Lofgren ranked 25th among members of Congress for the number of transactions disclosed, as a result of trades made by her husband. Among those were stocks or bonds issued by five drug manufacturers between 2019 and 2021, a period when the House Judiciary Committee, of which Ms. Lofgren has long been a member, introduced multiple bills to lower the cost of prescription drugs and root out what it called anticompetitive practices in the pharmaceutical industry. (Most of the bills never received a vote, although aspects of one proposal were wrapped into a broader spending bill late in 2019.)

Ms. Lofgren said during an April hearing on how to curb congressional stock trading that her husband’s stocks were managed by “some guy at the bank” without the couple’s knowledge. Her office declined to comment on the specifics of the pharmaceutical sales.

“I have never personally purchased or sold any stock,” Ms. Lofgren said in a statement. She added that she and her husband had instructed their broker to avoid fossil fuels, tobacco and gambling companies.

Representative Zoe Lofgren, Democrat of California, has been tasked by the House’s Democratic leadership with generating a compromise bill to address stock trading by members of Congress. Her husband reported trades that intersected with her congressional work. Erin Schaff/The New York Times
Six members of Congress said that subsequent to making transactions that were flagged by the Times analysis, they or their family members sold all their individual stock investments and stopped buying new ones. Another five members said that they are placing or have placed assets in a blind trust.

One lawmaker, Representative Angie Craig, Democrat of Minnesota, said her son had begun buying and selling a range of stocks without her knowledge while he was at college — much to her chagrin.

A few members said there was nothing wrong with their investing in individual companies.

“I’ve had bank stocks and I’ve been strongly against the banks, and they’ve never supported me, and I’ve got drug stocks and I’ve never supported Big Pharma, and they’ve not supported me, and it’s just irrelevant to me,” said Representative Steve Cohen, Democrat of Tennessee, who added that he had bought some of the stocks decades ago and believed he had not purchased a new share in at least 10 years.

Mr. Cohen said he had deliberately sold Boeing shares only after its price had fallen while it was under investigation for the 737 Max crashes by the Transportation and Infrastructure Committee, of which he is a member, to avoid potential criticism.

In some other professions, the rules are much stricter. Corporate law practices, private equity firms, news organizations and hedge funds restrict the trading of securities that could be affected by knowledge gleaned on the job — even in cases where the employer’s interactions with those companies are far removed from the employee who wants to trade. (The Times does not allow employees to hold stock or any other financial interest in a company or enterprise whose coverage the employee regularly provides or oversees.)

Trading prohibitions are even more stringent in the White House, where officials and staff members must sell off individual stock holdings, recuse themselves from matters that could affect their financial interests or, in rare cases, seek a presidential waiver.

“Every single day we have access to information that people share with us because we’re members of Congress,” said Representative Abigail Spanberger, Democrat of Virginia, whose bill to tighten trading restrictions has attracted 67 co-sponsors from both parties, including Mr. Roy. That information, she said, “can drive markets.”

“And so the whole purpose of this legislation is to say, we have the ability, through this one extra step, to tell the American people that we are trustworthy,” Ms. Spanberger added.

Widespread Conflicts
During the three-year period analyzed by The Times, about a third of members of Congress — when all seats are filled there are 535 voting members — bought or sold stocks or other financial assets.

The 97 members who were flagged by the Times analysis amounted to more than half of the people who reported trades, and nearly a fifth of Congress. The group was split almost equally between Democrats and Republicans.

Some committees had multiple members with potential conflicts.

Three members of the House Committee on Financial Services bought or sold Wells Fargo shares during a year in which the committee was investigating the bank’s consumer practices and risk management.

One of them, Representative John W. Rose, Republican of Tennessee, sold between $100,000 and $250,000 worth of the stock late in 2019, a few months before the committee issued a sharply critical report on the company that coincided with a steep decline in the bank’s share price amid pandemic fears. A spokesman for Mr. Rose did not respond to requests for comment.

A quarter of the members of the Senate Committee on Energy and Natural Resources reported purchases or sales of securities in energy companies like Exxon and Chevron.

More than a third of the members of the Senate Committee on Environment and Public Works reported either buying or selling stocks like the oil-field services company Schlumberger, the chemical company DuPont or the manufacturer Illinois Tool Works.

In the House, eight members of the Armed Services Committee reported transactions in defense or aerospace stocks.

Some members reported trades in particular companies over and over.

Dr. Deborah Malumed, the wife of Mr. Lowenthal, the California Democrat, bought or sold Sunrun — which installs solar energy systems in homes — on 97 occasions during a yearlong period, according to his disclosure statements. During that time, Sunrun shares experienced two rallies — one that began late in 2019 and extended into early 2020, and a second, much bigger one after a market wide rout caused by the outbreak of the coronavirus in the United States in March.

In 2020, Mr. Lowenthal, a member of the House Committee on Natural Resources and the chairman of an energy-related subcommittee, was part of a bipartisan group that pushed for the inclusion of renewable energy companies in pandemic relief measures. (Many of the proposals eventually passed last month as part of the Inflation Reduction Act.) In June 2020, he co-sponsored a bill to provide tax incentives for using renewable energy. It never received a vote.

Sunrun shares began rallying around that time; by October they had reached what at the time was a company high of $80. They cost $9 when Dr. Malumed bought shares earlier that year, in March — the month she sold Boeing shares ahead of the Transportation Committee’s preliminary report on the 737 Max jet crashes.

Mr. Lowenthal said in an emailed statement that the “overwhelming majority” of his trades and those of his wife — including the Sunrun and Boeing trades — were made by their stockbroker and without his involvement.

“I have never discussed any congressional matter, including the Boeing 737 Max investigation, with our broker and would never do so,” he said.

Other members traded more broadly within sectors affected by their committees. Mr. Tuberville, a longtime college football coach who joined the Senate in early 2021, quickly established himself as an active trader with recurring potential conflicts.

Senator Tommy Tuberville, Republican of Alabama, at right, reported trades in 20 companies or agricultural commodities that posed potential conflicts, according to the Times analysis. Stefani Reynolds for The New York Times
As a member of the Senate health committee, he bought and sold shares of major pharmaceutical and medical services companies.

As a member of the Armed Services Committee, on two occasions he and his wife bought, and then in a third transaction sold, options called puts — which represent the right to sell shares at a specified future price — tied to Microsoft in a five-month period. The second put sale occurred less than two weeks before the software company lost a $10 billion contract with the Defense Department. And as a member of the agriculture committee and its subcommittee on commodities, risk management and trade, Mr. Tuberville bet on the future prices of farm products.

Toward the end of 2021, Mr. Tuberville made a flurry of contract purchases tied to future prices of corn and cattle. He continued buying and selling corn and cattle contracts this year, even as the agriculture committee discussed two bills that could affect cattle prices if passed.

In a brief interview at the Capitol recently, Mr. Tuberville said, “I don’t trade stocks, my brokers do.” He said that he did not receive nonpublic information on the agriculture committee and would never share committee information with his brokers in any case.

“I don’t limit them to anything, what they can do, what they can’t do,” he said. “I give them money, say to them: ‘I’m in public service now; you do it. Don’t lose it all!’”

In recent years, some lawmakers or their families have bought or sold stocks that were likely to be affected by events they had been briefed on confidentially.

Representative Mike Kelly, Republican of Pennsylvania, fell under scrutiny by the Office of Congressional Ethics over a stock trade.

In 2020, Mr. Kelly’s wife, Victoria Kelly, bought $15,000 to $50,000 of stock in the mining company Cleveland-Cliffs — just one day after Mr. Kelly’s office learned that the Commerce Department would initiate a tariff investigation that might benefit the company, which at the time employed about 1,400 workers at a steel plant in Butler, within his congressional district. Mr. Kelly had lobbied Trump administration officials for additional tariff protections, according to an ethics office report.

Ms. Kelly’s purchase — made before the news was public — was the only trade she made in an individual stock that year; records suggest she took a nearly 300 percent profit when she sold eight months later.

The ethics office’s investigation was disclosed last year. While Ms. Kelly’s Cleveland-Cliffs purchase was not flagged by the Times analysis because it did not overlap in an obvious way with her husband’s committee assignments, 23 other transactions made by her in 2019 were purchases and sales of a variety of pharmaceutical, insurance and medical equipment stocks while Mr. Kelly was a member of the health care subcommittee of the House Committee on Ways and Means.

Mr. and Ms. Kelly did not respond to requests for comment, and it is unclear whether the House Committee on Ethics — to which the Office of Congressional Ethics, a separate and independent body, referred the matter last July — is still investigating.

But even ethics committee members in both chambers, who are responsible for ensuring compliance with the STOCK Act disclosure requirements, have potential stock-trading conflicts.

Representative Dean Phillips, Democrat of Minnesota and a member of the House Ethics Committee as well as the Financial Services Committee, traded more than 150 times in tech companies, banks and other financial institutions.

A spokesman for Mr. Phillips said that he “did not direct the sale or purchase of any stocks after being elected” in 2018 “to avoid even the perception of a conflict of interest with his official duties in Congress.” Some of the transactions occurred after January 2020, when the representative said Mr. Phillips began moving most of his stocks into a blind trust, a process that took 18 months.

Representative John Rutherford, Republican of Florida, traded aerospace and defense companies during his time on the House Appropriations Committee’s Subcommittee on Homeland Security. His office did not respond to requests for comment.

Mr. Rutherford appeared to be late in reporting more than 150 trades, according to an analysis by the Office of Congressional Ethics, which valued the trades involved at between $652,000 and $3.5 million.

In February, the matter was referred to the House Ethics Committee, of which he is a member.

In August, the committee said it had dismissed the matter.

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