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Did Lawmakers Illegally Profit from Stock Sales?

Insider trading, depending on the circumstances, can be legal or illegal. Legal insider trading occurs when insiders (executives and directors) purchase stock during open and disclosed trading periods. Illegal insider trading occurs when insiders, who possess information that is not yet public, act upon that information and purchase or sell stocks based on that information. The Justice Department is investigating several U.S. Senators to determine if they engaged in insider trading. Senator Burr served on several committees that were routinely briefed on the COVID-19 outbreak in China. Senator Burr sold shares of stock that he co-owned with his wife for nearly $1.7 million in mid-February. Selling those stocks at that time, compared with the March 19 valuation, saved the couple around $250,000. Mr. Burr indicates that he made the decisions to sell based on public information he heard on CNBC. Mr. Burr's trades consisted of hotels, pharmaceuticals, manufacturing, and technology.

Other Senators are also under investigation including Kelly Loeffler, David Perdue, and James Inhofe. In addition, Senator Dianne Feinstein's husband is under investigation. Senators Loeffler and Feinstein are married to investment professionals, but indicate their stock trades are controlled by advisors. Senator Feinstein further noted that her funds are separate from her husband’s and managed through a certified blind trust. Senators Perdue and Inhofe have investment advisors and do not manage their trades.

Members of Congress were banned from insider trading in 2012 because lawmakers have significant access to information that can affect industries or companies. As a result of that access, it was determined they should not receive these additional financial benefits. One 'gray area' in the investigation will be trying to determine how these Senators could have assessed the actual impact of COVID-19 on industries and the stock market. Senator Burr is the leading authority on pandemics, having written the Pandemic and All-Hazard Preparedness Act in 2006. Ironically, he was 1 of 3 senators who voted against the insider trading ban in 2012. His rationale was that insider trading was already considered illegal.

If lawmakers are taking advantage of their positions and access to confidential information and using it to personally benefit through stock trading, they are engaging in unethical and possibly illegal behavior. Being investigated for a possibly illegal act is damaging to the reputation of an elected official and calls to question their foundational integrity.


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