Back in 2003, Martha Stewart was indicted on multiple charges including securities fraud and obstruction of justice. These charges stemmed from an investigation into an investment move back in 2001, when she allegedly dumped her shares of ImClone based on insider information that she had received from her broker. As it turns out, this sort of “insider trading” has been illegal since 1934.
But did you know that these rules, spelled out in the Securities Exchange Act of 1934, don’t apply to members of Congress? Despite the fact that they come into contact with non-public, potentially market-moving information on a daily basis, our Senators and Representatives are apparently free to profit from this knowledge.
This was the topic of an investigative report on 60 Minutes last night, and it was maddening to say the least.
According to Peter Schweizer, a fellow at the Hoover Institution:
“The fact is, if you sit on a healthcare committee and you know that Medicare, for example, is– is considering not reimbursing for a certain drug that’s market moving information. And if you can trade stock on– off of that information and do so legally, that’s a great profit making opportunity. And that sort of behavior goes on.”
In fact, this is very similar to what Martha Stewart was accused of doing. She apparently caught wind that one of ImClone’s experimental drugs wouldn’t be getting FDA approval before that information was made public, and she acted on it.
Why are members of Congress allowed to do this, when you or I would be subject to huge fines and time in prison?
“It’s really the way the rules have been defined. And the people who make the rules are the political class in Washington. And they’ve conveniently written them in such a way that they don’t apply to themselves. […] We know that during the healthcare debate people were trading healthcare stocks. We know that during the financial crisis of 2008 they were getting out of the market before the rest of America really knew what was going on.”
For example, following a top secret briefing about the impending financial collapse in 2008, Congressman Spencer Bachus (R-AL) bought options that would rise as the market collapsed. And collapse it did.
And during the healthcare debate of 2009, then-House Minority Leader John Boehner (R-OH) allegedly loaded up on health insurance stocks just before the “public option” was removed from the Federal healthcare reform legislation.
And these deals aren’t limited to one party or the other… In 2008, former Speaker of the House Nancy Pelosi (D-CA) was granted access to the Visa IPO back in 2008 while the House was considering credit card legislation that would hurt the credit card industry. Her initial $220k investment went up $100k in two days.
While the credit card legislation would ultimately make it into law, that didn’t happen until much later, and the successful legislation was initiated in the Senate.
What do you think? While everyday citizens — as well as members of the Executive and Judicial branches — are barred from this sort of behavior, Congress gets of Scot free. As far as I’m concerned, this stinks.
Interestingly, going back at least to 2004, there has been interest in closing this loophole, but the issue hasn’t gained any traction. And why would it? The inmates are running the asylum, and they have no interest in regulating themselves.
Instant disclosure will not cure it, but it will even thing out with corporate insiders.
“Martha Stewart was indicted on multiple charges including securities fraud and obstruction of justice” through despicable redundant charging to coerce her to cop a plea on the trumped-up charges, including the big-time bogus charge with 10 years prison and a $2 million fine, which was thrown out in court as completely baseless. All of the trumped-up charges related to the time period AFTER her legal stock sale; they had nothing to do with “insider trading” and resulted from grossly inept legal representation.
Her “investment move back in 2001” was the sale of 3,928 shares of almost 8,000,000 ImClone shares traded. This “move” was based on her decision merely two months earlier to sell ALL ImClone stock in a tender offer from Bristol-Myers, despite ImClone’s rebuff of Bristol-Myers takeover offer. The decision to sell was based on sound investment management principles that had no connection to any “insider trading” or “insider information.”
There was no legal adjudication Martha Stewart was involved in any “insider trading.” Under securities laws going back to 1934, she had no “insider information” that “she received from her broker.” She was never charged with “insider trading” and was involved in no “sort of ‘insider trading’ (that) has been illegal since 1934.
Falsely linking Martha Stewart to “insider trading” is brainwashing media lying from the propagandist media that is an abuse and misuse of the freedom of the press and media power.
Sorry but I everything from that site with skepticism. It is after all.
http://en.wikipedia.org/wiki/Media_Matters_for_America
Media Matters for America (MMfA) is a politically progressive media watchdog group which says it is “dedicated to comprehensively monitoring, analyzing, and correcting conservative misinformation in the U.S. media.”
I tried to find somewhat unbiased sources like politifact and politico to get my information from.
http://www.politico.com/news/stories/0310/34900.html#ixzz0jD74U9BK
http://www.politifact.com/truth-o-meter/statements/2010/mar/26/tom-coburn/health-bill-appears-exempt-some-congressional-staf/
The health care reform bill signed into law by President Barack Obama Tuesday requires members of Congress and their office staffs to buy insurance through the state-run exchanges it creates – but it may exempt staffers who work for congressional committees or for party leaders in the House and Senate.
Mike: I’ve seen that as well, but as Jim points out, the primary requirement of the new law is that you have coverage. Since the President and all members of Congress do have health insurance, they are unaffected. Or am I missing something?
Also, the link that Jim posted is worth a read. It was published on the heels of the publication of articles like the one that you posted, and argues that such claims are false.
Jim: Here you go..
http://www.washingtontimes.com/news/2010/mar/23/obamacare-for-everyone-but-obama/
The new health care law exempts the president from having to participate in it. Leadership and committee staffers in the House and Senate who wrote the bill are exempted as well. A weasel-worded definition of “staff” includes only the members’ personal staff in the new system; the committee staff that drafted the legislation opted themselves out.
Yawn. Sorry but its the truth Jim.
———————
http://www.politifact.com/truth-o-meter/statements/2010/mar/26/tom-coburn/health-bill-appears-exempt-some-congressional-staf/
Health bill appears to exempt some congressional staff. All that said, we find Coburn’s claim to be Mostly True.
————————
http://www.washingtontimes.com/news/2010/mar/23/obamacare-for-everyone-but-obama/
The new health care law exempts the president from having to participate in it. Leadership and committee staffers in the House and Senate who wrote the bill are exempted as well.
——————————-
http://www.cbsnews.com/stories/2010/03/23/opinion/main6324480.shtml
One such surprise is found on page 158 of the legislation, which appears to create a carve out for senior staff members in the leadership offices and on congressional committees, essentially exempting those senior Democrat staffers who wrote the bill from being forced to purchase health care plans in the same way as other Americans.
Mike: How would congress be exempt from Obamacare? Not sure how that would work. Most of Obamacare doesn’t directly apply to individuals other than requiring you to get health insurance and improving the benefits of that insurance. Congress has health insurance. I don’t know how exempting them would help them or even really do anything. Doesn’t make much sense.
And I read somewhere that what you read somewhere was a lie :
http://mediamatters.org/research/201003250022
Steve: Absolutely. That makes it even worse.
Evan: The Stock Act is what I was talking about when I said there was legislation that keeps failing to gain traction. It’s gets re-introduce every year, but never goes anywhere.
I thought there was legislation pending called STOCK (I hate when they use puns):
http://www.myjourneytomillions.com/articles/congressional-insider-trading-not-illegalyet/
I wrote that in June I can’t believe it hasn’t passed yet lol
Isn’t this issue compounded by the fact that it creates a conflict of interest?
For instance, to continue the hypothetical situation above: you are sitting on that healthcare committee, and it seems to be leaning towards not reimbursing that drug, and you short that stock of the manufacturer. Then the wind shifts and it looks like it might get approved after all. You now have an incentive to try shifting that back to non-approval, regardless of the merit of the drug in question.
So does this mean that I can engage in insider trading, as long as I get the tip from a member of Congress? From their staff? From their broker? From the company that set up a business model around roaming their hallways?
I think I read somewhere that some members of congress as well as those in the White House were also exempted from Obamacare. Goes to show they really don’t care for the laws they write. They’ll find or write in loop holes if it benefits them.