No, Sen. Burr Is Not Likely To Be Charged With Insider Trading (and Even Less Likely To Be Convicted)

The FBI has reportedly begun an investigation into the stock sales of Sen. Richard Burr before the crisis over the coronavirus. As I discussed in my recent column, such prosecutions are exceptionally difficult to bring by design. Like ethics investigations, these investigations often serve to simply “clear” a politician who is allowed under lax ethical rules to trade in areas of their legislative and committee work. The only real reform is not investigations but either a ban on stock ownership or, more appropriately, a requirement of a blind trust (with criminal penalties for steering trades). Moreover, if he were to be charged, I would likely be the first to object to a prosecution for trades that Congress has kept lawful for decades despite some of our calls for reform. [This article was updated]

ProPublica did a study showing that Burr sold off as much as $1.7 million in stocks in the days before the coronavirus wreaked havoc on the economy. It found that this was done before the great selloff that tanked the market. This reportedly occurred on Feb. 13 in 33 separate transactions. However, there was already considerable media attention to the possible pandemic and Burr had already made public comments about how the government would respond.

As a criminal defense attorney, I fail to see how such a trade could be the basis for prosecution. As I noted in the earlier column, the Stop Trading On Congressional Knowledge Act, also known as the Stock Act, applies the same insider trading rules to members and staff that are applied to company executives. While fines are possible, they are unlikely. Insider trading cases are hard for prosecutors to make against members of Congress because the law was designed to punish corporate officials who trade stocks by using proprietary information. Members of Congress do not deal with proprietary information held by company executives and, even with the broader definitions applied by the courts, it would be very difficult to use the legal language to fit legislative profiteering.

Consider Burr’s situation. When he made these trades, there was already ample media on the rising danger of the virus. In other words, Burr could have made the decision to trade entirely on publicly available information. Members are not required to freeze trades when others are trading. Leading investors have bragged recently of making such trades and beating the crash.

The investigation therefore is more likely to succeed in giving political cover and deterring future trades. The solution has always been obvious: require blind trusts with supporting criminal penalties. Every time these trading scandals hit, members pretend that they are shocked by the news, call for ethics investigations, and then shelter in place until the ethics outbreak has subsided.

FBI visits are simply shiny objects for the public. The only real solution is as obvious as it is unpleasant for members of Congress.

40 thoughts on “No, Sen. Burr Is Not Likely To Be Charged With Insider Trading (and Even Less Likely To Be Convicted)”

  1. They would have to start with Comrade Pelosillyni’s grape ranch… and whatever is growing between the rows.

  2. Let’s see, how many times did Obama cancel the Keystone pipeline for “environmental” concerns? Low and behold Obama’s financial guru Warren Buffet comes to the rescue buying BNSF railway to haul that oil out of the Dakotas. Buffet bought 5000 railway cars, a tar sands pit in Canada and also hauled coal from Indiana to the east coast for export. Sorry West Virginia coal miners. Insider trading?
    And earlier this year Barry and Michelle bought a 12.5 million dollar mansion on Martha’s Vineyard.
    Being president must pays well.

    1. As of 2017, the Obama’s have made about $20 million since joining the US Senate in 2005.

      “Three-fourths of that money came from lucrative book deals, according to a FORBES analysis of 16 years of tax returns and financial disclosure documents. In total, Obama has earned $15.6 million as an author since arriving in Washington.

      He has made $8.8 million from his bestseller Audacity of Hope and children’s book Of Thee I Sing: A Letter To My Daughters. Sales of his memoir Dreams From My Father, originally published in 1995, also took off once he landed in the nation’s capital, resulting in a $6.8 million windfall for the president. Obama made another $3.7 million from government salaries….”

      No doubt your curiosity extends to Trump who has taken every step possible to hide his finances which almost certainly include being bailed out by Russian oligarches close to Putin.

  3. If any of the financial advisors handling these accounts had taken it upon themselves to put stop limit orders on the portfolios, you can kiss any thought of prosecution goodbye.

    Is it possible that the advisors did exactly that? When news about the virus began to appear in the MSM, my wife — who has no background in banking or securities — asked me if this would effect the markets.

    I told her it definitely would. She asked if we should do anything. I told her no and it would be an amazing buying opportunity for anyone with cash.

  4. Barr won’t prosecute and lets just say for the fun of it that Burr gets convicted, the impeached president would just pardon him anyways.

  5. “ Feinstein did not sell $6 million in stocks …”

    Bythebook, youre denying the Sacred Texts from our Sacred Oracle. We need to reprogram you since you are denying the Word from High

    1. Sulzberger, let’s see mainstream coverage of the Feinstein stock sell-off. I’m sure such coverage exists. But I suspect it won’t validate your assertions.

  6. I think I understand the incoherence of the American Ochlocracy.

    The Mob issues an irrational edict allowing only the second and subsequent recipients of pertinent information regarding a particular stock to sell.

    The first recipient of information must be prosecuted because…

    Of course, corporate officers et al. trade “in advance of the public” everyday.

    There are 5,000 actively traded U.S. stocks.

    The malice of one “inside trader” is infinitesimal.

    The jealousy of communists; the desire for other people’s money is immense.

    Covetousness by communists does not constitute a judicious basis for legislation precluding “insider trading.”

  7. Arrest the truly greedy; the abject cretins who absconded with all the toilet paper, willfully and deliberately denying fellow citizens their daily ration.

    1. Nice done, George. 👍

      Absconded is right. We need to take the TP back with force.

      We need a new task force in America, called the Turd Police Task Force. 💩 🚔

      Fighting for your rights to TP, 24/7, 365. 💪

  8. This is the ruling class. They’re above the law. Better yet, let’s see if they get reelected! I’ll bet they do.

  9. Didn’t Feinstein’s husband get the exclusive on the sale of post offices that were closing and the exclusive on the purchase of land for the bullet train?

    1. Yes on the Post Office but he lost it with the trumpster election but I’m sure did really well. I don’t know about the train that’s interesting if true. He does use the Calif. State UC system as his personnel banks and over the years have removed state employees from the schools to private firms owned by friends and himself. Counter Punch did a bunch of stories on him years ago.

  10. I work for a major financial firm. I am allowed to trade stocks, but I have to clear each and every trade to ensure there is no hint of trading at the expense of our clients. There are systems that enable the pre-clearance of transactions. I cannot trade in a stock in which the portfolio managers have transacted in within a 7 day window. If I trade without per-clearance, the company can confiscate my profits. There are times when I could have sold shares at a handsome profit, but the I was prevented from doing so due to trading blackouts, not that I had knowledge of transactions, just because of the normal buying and selling of shares based on the deposits and withdrawals. There are certain stocks that are nearly impossible to buy or sell because they are so commonly traded across the company for our client’s benefit.

    There’s no reason that the same system couldn’t be used for members of congress and their staff. Congress is in a position of trust and they do have non-public information. They should not be able to trade on it. They should have trading blackouts based on the business before Congress.

    1. Solid points. Might work but that would also put the government in business of monitoring and doing market analysis. I’m cool with limiting them to just do pandemic analysis without stretching themselves too thin.

    2. Aussie Expat makes a good point. I am a securities law attorney in New York. My firm provides services to the investment management industry. Both registered broker-dealers and registered investment advisers are required to adopt policies and procedures that are reasonably designed to detect and prevent insider trading. The trading limitations that Aussie Expat mentions are intended to maintain the integrity of the trading markets and also to have an in terrorum effect on firms in the industry. Firms are subject to “control” person liability for the acts of their employees and can be subject to treble damages, i.e. three times the gain realized or loss avoided as a result of the illegal trading activity.

  11. Senate Majority Leader Chuck Schumer (D-NY) has called for ethics investigations, a necessary, but insufficient response. Without a more robust reaction from members of Congress, the call for internal investigations seems perfunctory. It reminds us of that famous scene from the 1942 film Casablanca in which Captain Louis Renault, the Prefect of Police in Casablanca blurts out his famous line. While pocketing his gambling winnings for the evening, he declares with an absolutely straight face that he is “shocked, shocked” that gambling has been going on at Rick’s Café. The investing public will derive little comfort from internal congressional investigations. More intense scrutiny is required.

    The Stock Act of 2012 was designed to stop government officials and employees from trading in securities or derivatives based on information or knowledge derived as a result of their governmental positions. It accomplished that by amending the federal securities laws to impose an explicit duty on members and employees of Congress, as well as executive and judicial branch employees with respect to material nonpublic information. Although the STOCK Act does not define the term “nonpublic governmental information” for purposes of the prohibitions against insider trading, it would be reasonable to conclude that members of Congress who had been privy to intelligence reports about the coronavirus and its probable impact on the economy were prohibited by the statute from trading on information derived from those reports.

    The STOCK Act:

    • expressly states that members of Congress and other federal employees are not exempt from the federal securities laws that prohibit insider trading;

    • prohibits individuals from benefiting from nonpublic information acquired as a result of their governmental positions;

    • requires members of Congress to make public disclosures of certain financial transactions; and

    • makes clear that members of Congress and their staffs owe a duty to the government and the United States not to misappropriate nonpublic information for personal profit.

    Members of Congress are subject to possible criminal and civil penalties for violations of the insider trading laws. Rep. Chris Collins (R-NY) was prosecuted last year, and sentenced to a prison term. The Collins case was different because he admitted to trading on information about a company gained in the course of his position as a member of the board. To the best of my knowledge, we have not yet had a prosecution involving a member of Congress who traded on “governmental” information. Members of the securities bar will be watching.

    On March 23, the Co-Directors of the SEC’s Enforcement Division issued a stern reminder to those who may have access to material nonpublic information of their responsibilities under the federal securities laws: “The Enforcement Division is committing substantial resources to ensuring that our Main Street investors are not victims of fraud or illegal practices in these unprecedented market and economic conditions. The Enforcement Division is committed to protecting investors and maintaining confidence in the fairness and integrity of our markets.” We’ll see what happens.

    The impetus of the passage of the STOCK Act, which languished in Congress for over five years, did not occur until after a 60 Minutes broadcast aired on November 13, 2011. Steve Kroft’s interview of Peter Schweizer, then a fellow at the Hoover Institution of Stanford University, changed the trajectory. Schweizer is now the President of the Government Accountability Institute. Perhaps it is time for another 60 Minutes broadcast. He has been interviewed on FOX – but FOX is not exactly the mainstream media. Ironically, the severity of the current COVID-19 crisis has media attention focused almost solely on the crisis. As a result public outrage about the alleged insider trading has been tamped down.

  12. i agree with the professor as far as he went

    this is a loophole to “insider trading laws” and it needs to be CLOSED in a forward looking way

    promptly! it’s a no brainer. but dont hold your breath….

    but i doubt the Congress will pass corrective laws– too busy doling out the pork and running away to avoid virus

    1. Meanwhile, we have a president appointing relatives still active in domestic and international business to sensitive positions with considerable power and little to zero oversight, has handed his domestic and international business interests over to his sons, and who hides his tax returns and any and all financial records he can get away with, some of which are likely hiding his indebtedness to foreign powers, and specifically Russian oligarchs aligned with Putin.

      And Congress is the problem?



      2. Yes, Congress is the problem.

        There are real problems, and there are pseudo-problems. That Trump owns a family business is not a problem. That he relies on his son-in-law as an unpaid adviser is not a problem, either (and not a subject of objections by partisan Democrats when Jimmy Carter relied on Rosalynn or when Bilge relied on Hellary). That he does not release his tax returns is not a problem to normal people. It’s a problem to media Democrats, who want fodder for hit pieces.

    2. CASSIDY thank you

      i had no idea they “fixed it” already. …. ah well 7 years is like 7 days in Kurtz time…

      shows how effective the fix was I guess. not!

  13. In order of amounts of dollars, from highest to lowest, that the 4 US Senators sold

    Diane Feinstein: ~ $6 Million
    Richard Burr: ~ $1.7 Million
    Kelly Loeffler ~ $1.2 Million
    James Inhofe ~ $400K

    Richard Burr gets the headlines across the liberal news corporations and Feinstein gets 1-2 sentences buried in the “article”

    ProPublica mentions only Burr

    “Senator Richard Burr Sold a Fortune in Stocks as G.O.P. Played Down Coronavirus Threat”


    So what’s everybody doing for lunch today? sandwiches, soup, or chinese? 🙂

    1. Feinstein did not sell $6 million in stocks and neither she or Inhofe attended the private Senate seminar on the growing virus threat on Jan 24. Burr and Loefler did. DF’s stocks are held in a blind trust. Her husband sold $6 million in stocks but her office states that she is not involved in his financial dealings.

      1. Oh, her husband sold the stock. The girl didn’t know anything. They didn’t talk about it beforehand. She didn’t benefit in any way. The rules should be changed, and a blind trust would be one method of separation.

    2. Senator Feinstein has gotten a pass for years. She stepped down as chair of a commitee years ago after her husband firm got contracts that needed them millions. No one investigate. How about the Chinese spy in her office a few years ago. She is one of the weathiest Senators now. This has been going on for years.

  14. 100% agreed, Professor. It shouldn’t be legal to hold stock, or to actively run a business, when in elected office in Washington while being privately privy to inside information that will intimately affect that stock or business.

    No brainer.

    Also agreed on the futility of a prosecution possibility here. Not just with difficulty in proving who knew what and when…, on timing and market technicals as well. The stock market has been channeling for a couple of years, throwing off definite signs for, at minimum, a sizable market correction on the way. It’s why Trump had been leaning on the Fed to keep interest rates artificially lowered — his goal being to trick the market into continuing to rise when it didn’t really have much fundamental reason to continue to rise. So, the market was looking for a reason to take a chop out of itself, Covid 19 gave it that reason. Perfect storm. Burr did what anybody would’ve done given the circumstances combined with the inside information he had.

    Real question is why did people keep buying the lie of ‘market gains forever!!’

  15. The thing is, people who own individual stocks are buying and selling all the time, commonly employing a CFA, investment counselor, or trust officer who is alert to what’s being said in the fad-driven business press (even though they have quantitative models which inform their trading).

    Aside from that, this is not the Obama DoJ. If they prosecute Burr and Loeffler, they’re going to have to explain to the attorney-general why they’re not prosecuting Richard Blum, aka Mr. Dianne Feinstein. Since the career types at the Department of Justice only prosecute Democrats who do crude things like store their bribe receipts in a chest freezer in their basement or use campaign contributions as a personal piggy bank, Blum will not be prosecuted. Ever.

    1. Feinstein and Inhofe did not attend the Jan 24 private presentation to Senators on the growing threat from the virus. Burr and Loefler did.

      1. So, no one in Congress talks to DiFi? Or are you telling me Loeffler’s CFA also attended?

  16. The rest of us should be advised of all stock trades by members of the House or Senate.

  17. He should be prosecuted but I realize there may be issues with such a prosecution. Instead let’s prosecute each and everyone of the persons with whom he shared the insider information and make sure they receive BIG fines and jail time. In the hail of publicity those “big donors” have eluded public view. It’s time for some sunlight!

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