Senators Under Fire After Suspicious Stock Trading Just Before COVID-19 Pandemic
By Claudia Smajlaj | DCI
"Insider trading is only illegal when the information is “material,” meaning that it would have caused a significant change in stock price. It is also only illegal when the information is known by the trader and is not public." — Renato Mariotti, former federal prosecutor
The STOCK (“Stop Trading on Congressional Knowledge”) ACT of 2012 forbids members of Congress, staffers, and government employees from using nonpublic, material information for personal financial gain. But that didn’t stop Republican Senators Richard Burr and Kelly Loeffler, who are now being accused of insider trading after selling stocks when they had access to nonpublic information about the economic and market threats posed by the pandemic. Here is everything you need to know about the Senators who are being accused in this political scandal.
THE TWO MAIN SENATORS BEING ACCUSED:
SENATOR RICHARD BURR
Republican Senator Richard Burr from North Carolina sold between $628,033 and $1.72 million in stock back in February 2020 in 33 separate transactions, according to reports from Pro Publica and the Center for Responsive Politics. This happened less than a week after he co-wrote an op-ed on Fox News, arguing that the United States was well-prepared for the pandemic. The selloffs included stocks from hotel, restaurant, and shipping industries, which would eventually be hit hard by quarantine orders and the closing of nonessential businesses to prevent the spread of the virus. Burr sold up to $150,000 worth of shares of Wyndham Hotels and Resorts, a hotel chain who’s stock dropped from $59.10 per share to a low of $21.59 on March 19. He also sold up to $100,000 in stock in Extended Stay America, an economy hospitality company. In the days leading up to the sales, Burr received frequent briefings on the coronavirus outbreak that were not yet made public.
After the news broke of his stock-selling, Burr defended himself in the following tweet:
Fast forward to May 13. The FBI confiscated Burr’s cellphone after executing a search warrant at his Washington, D.C. home, which also led the Senator to step down as chair of the Senate Intelligence Committee on May 15. The FBI served the warrant in a probe of whether or not Burr’s stock trades after being brief on the coronavirus outbreak broke the law.
SENATOR KELLY LOEFFLER
Republican Senator Kelly Loeffler of Georgia became the wealthiest senator currently in office when she was appointed in January. She is married to Jeffrey Sprecher, chair of the New York Stock Exchange and chair and CEO of its holding company, Intercontinental Exchange (ICE). In total, Loeffler and her husband conducted 29 stock transactions in late February.
The transaction that drew the most attention was when Loeffler bought between $100,000 and $250,000 in shares of Citrix, a company whose software helped white-collar workers transition to working from home during the pandemic. Shares in Citrix have increased roughly 8% this year and are up nearly 20% while the Dow Jones Industrial Average has lost a third of its value this year in mid-February.
Loeffler pushed back against the allegations in a March 20 tweet, saying that neither she nor her husband makes decisions about her portfolio.
Unlike Burr, no search warrant has been served on Senator Loeffler up until the publishing of this article.
OTHER SENATORS BEING ACCUSED:
While the media has made Burr and Loeffler the center of attention for this scandal, they aren’t the only senators suspected of insider trading.
SENATOR JIM INHOFE
Republican Senator Jim Inhofe of Oklahoma, who also chairs the Senate Armed Services Committee, reportedly sold up to $750,000 worth of stock, saying it was related to a “continuing divestiture plan.” Inhofe’s suspicious investments are focused on three dates.
On January 13, 2020, Inhofe’s account manager sold stocks valued at $150,000-$350,000. The transaction involved the sale of up to $250,000 worth of Proctor and Gamble and up to $100,000 in Bright Horizons Family Solutions stock.
On January 27, Inhofe made another $170,000-$400,000 from selling stocks in Paypal, Intuit, Danaher, Brookfield Assets Management, and Apple. The stock markets were near record highs at the time.
On February 20, Inhofe also sold Brookfield stocks valued at $50,000-$100,000 when the Dow Jones Industrial Average hit its all-time high. The market began falling on February 21, recovered slightly in early March, and has been tumbling ever since.
SENATOR DIANNE FEINSTEIN
Democratic Senator Dianne Feinstein of California sold millions in stock just before the coronavirus pandemic caused the market crash, but she claims that the trades were made by her husband.
Claudia Smajlaj is a rising sophomore at American University who is studying Finance in the Kogod School of Business. Claudia currently works at the Center for Business Communications (CBC) and is an on-staff writer for the DC Intervention.