CNN: Congressional Insider-Trading Law Has Family Loophole

Friday, 20 Jul 2012 10:49 AM

By Michelle Smith

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The Stop Trading on Congressional Knowledge Act, also known as the Stock Act, is a piece of legislation that garnered overwhelming bipartisan support and swiftly passed through both houses of Congress. But CNN uncovered that a division of interpretation between the House and Senate creates a gaping loophole.

The Stock Act aims to ban insider trading among members of Congress. To do so, the law requires that trades of $1,000 or more be reported to the House and Senate within 45 days.

CNN said that the Senate Ethics Committee released guidelines last month saying that members, their spouses and dependent children all have to file reports after they make stock or securities trades.

Editor's Note: Sept. 18 Cover-Up Is a Final Turning for America

This interpretation falls in line with the spirit of the law, which aims to promote transparency and eliminate the appearance of a double standard.

But, the House Ethics Committee disagreed and informed its members and aides that their spouses and children are not covered by this legislation.

CNN said the Office of Government Ethics (OGE), which oversees all federal employees, agreed with the House and told its employees that spouses and children do not need to file these reports.

The House and OGE are following the letter of the law. But, as critics point out, it defies the purpose of the law because allowing family members the option to profit from insider information does nothing to restore public confidence.

The Senate bill did include a provision that covered spouses and children, Robert Walker, an ethics attorney and former chief counsel for both the House and Senate Ethics Committees explained to CNN.

However, he said, when the House version was written by House Majority Leader Eric Cantor, R-Va., this language was shifted to a different section of the bill.

In doing so, spouses and dependent children essentially became exempt from the reporting requirements.

When contacted by CNN, Cantor's office initially insisted it did nothing to change the intent of the Stock Act, but later conceded it made changes. However, Doug Heye, Cantor’s spokesman maintained the change was inadvertent.

“Since new information has been brought to our attention, with respect to this discrepancy, we are reviewing our options regarding transaction reports in the House of Representatives,” Heye told CNN.

Last November, 60 Minutes aired a story alleging that some House members benefited from stock trades based on information they were privy to in legislative deliberation.

Relying on data collected from the Hoover Institution, 60 Minutes revealed that elected officials like Minority Leader Nancy Pelosi, D-Calif., are exempt from insider-trading laws — regulations that carry hefty prison sentences and fines for any other citizen who trades stocks with private information on companies that can affect their stock price.

The report alleged House Speaker John Boehner, R-Ohio, and House Financial Services Committee Chairman Spencer Bachus, R-Ala., profited in their stock investments from information during legislative deliberations, while the television show focused on Pelosi’s participation in an initial public offering by the credit card company Visa while she was House speaker.

Peter Schweizer, an author and the centerpiece of the 60 Minutes expose, warned that the public should expect as much.

“We have a problem in Washington, D.C. that the people who are supposed to abide by these rules are the very same people who get to write the rules. That means there are loopholes in this bill,” he told Yahoo.

Editor's Note: Sept. 18 Cover-Up Is a Final Turning for America



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