We previously discussed the insider trading allegations against Senators Richard Burr (R., N.C.) Dianne Feinstein (D., Cal.), James Inhofe (R., Okla.), and Kelly Loeffler (R., Ga.) over the selling of stocks after briefings early in the pandemic. As I stated earlier, I am highly skeptical of such cases as a criminal defense attorney as viable due to the difficulty in both the elements and the proof needed for such a charge. Yesterday, the Justice Department dropped three of the four investigations. Only Burr remains under investigation.
The continuing investigation of Burr is not surprising since he admitted that he personally directed the trades himself while insisting that he relied entirely on public media accounts.
As I discussed in a 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 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.
In Burr’s case, 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.
That does not mean that the DOJ has not found something incriminating and might try to address the difficult language of the elements of the crime. However, I remain highly skeptical.