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Two U.S. senators sold off stock potentially worth millions of dollars in the weeks leading up to the national economic crisis caused by the coronavirus, sparking accusations they used inside information they gained in classified briefings to cash out their holdings before the market crashed.
Sen. Richard Burr, a Republican from North Carolina, sold between $628,000 and $1.72 million in stock on Feb. 13. A few days later, the stock market began a sharp decline amid uncertainty over the virus’s effects on the economy. As chair of the Senate Intelligence Committee, Burr was reportedly receiving daily briefings on the coronavirus threat.
Sen. Kelly Loeffler — a Republican who was appointed to Georgia’s empty Senate seat in early January — began selling stock worth between $1.28 and $3.1 million on Jan. 24, the same day she attended a briefing on the virus as part of the Senate Health Committee.
Both Burr and Loeffler made public statements touting the Trump administration’s preparedness for a potential outbreak around the time they were selling stock. In 2012, Congress passed a law making it illegal for lawmakers to make financial transactions based on nonpublic information. Burr said he relied on public news reports in deciding to sell his stock. Loeffler called accusations of insider trading “ridiculous and baseless” and said all her investment decisions are made by third-party advisers.
Transactions by three other senators have also raised questions. Sen. Dianne Feinstein sold up to $6 million worth of shares in a biotech company starting in January. The California Democrat said she keeps her holdings in a blind trust, and the stock has increased in value since the shares were sold. Oklahoma Republican Jim Inhofe said sales of stock worth up to $750,000 are part of an ongoing effort to move his investments out of holdings that may present a conflict of interest. Wisconsin Sen. Ron Johnson, a Republican, sold his stake in a plastics manufacturing company, but said the transaction was part of a deal that had been in the works for years.
Why there’s debate
The senators, especially Burr and Loeffler, have received significant criticism for their stock sell-offs. Some experts believe the transactions may be illegal and have called for investigations that could lead to criminal charges, though they concede that intent in insider trading cases is difficult to prove. Even if the sales weren’t illegal, some argue that they represent a major ethical violation. Critics say Burr and Loeffler had information showing the virus posed a much more severe risk than the president’s statements at the time suggested, and instead of sharing that potentially lifesaving information with the public, they used it to protect their own financial interests. Many have called for both senators to resign.
Even if all the senators involved avoid criminal charges and stay in office, there could still be repercussions at the ballot box. Even if she’s proved to be totally innocent, the appearance of financial malfeasance could hurt Loeffler’s bid to retain her seat in what’s expected to be a tight race in November. Burr is expected to retire at the end of his term in 2022. But North Carolina’s other GOP senator, Thom Tillis, is up for reelection this year. Tilllis has faced criticism, including from within his own party, for what some see as a soft response to accusations against Burr.
The situation has also brought renewed calls from progressives for legislation that would bar members of Congress from owning any individual stocks during their time in office.
Burr has volunteered to have the Senate Ethics Committee review his transactions. With Congress currently putting all of its attention into bills to combat the economic impact of the coronavirus outbreak, it’s unclear when or if an investigation will be completed.
Burr should resign
“Maybe there is an honest explanation for what he did. If there is, he should share it with the rest of us immediately. Otherwise, he must resign from the Senate and face prosecution for insider trading. There is no greater moral crime than betraying your country in a time of crisis, and that appears to be what happened.” — Tucker Carlson, Fox News
The sales should be investigated as potential criminal acts
“If the evidence says the legislator-investors moved money to stem personal losses in advance of the bath they knew the rest of us were bound to take, throw the book at them.” — Editorial, New York Daily News
The scandal goes beyond a few financial transactions
“The stock sales are only one piece of this story. The other thing that makes this story scandalous is that officials knew things were far worse than Trump was saying publicly.” — Greg Sargent, Washington Post
Law should be changed to prevent lawmakers from owning individual stocks
“Voters should never have to wonder about their lawmakers’ integrity. It’s not enough that members of Congress report their trades a month after the fact. People with intensively managed investments simply shouldn’t be in public life. If they want to serve, they should buy and hold simple investments that follow the market as a whole.” — Editorial, Washington Examiner
It may be hard to prove criminal wrongdoing in this situation
“I do wonder how difficult it is to really prove any insider knowledge at this point given the timing of all of this and the fact that this was already a full-blown outbreak over in China at the time.” — Akiko Fujita, Yahoo Finance
Criminal prosecution would be going to far
“I am happy to assume that senators insider trade more brazenly than everyone else, but if you’re going to assume that you need to restrict it to cases when they seem to have insider traded brazenly. This is clearly not that.” — Matt Levine, Bloomberg
An ethics investigation is not enough
“Senate Ethics Committee investigations are conducted in secret and can be concluded at any time if the target of the investigation steps down. They are also notoriously slow, taking months or even years to meander to completion.” — Russ Choma, Mother Jones
The accusations could cost Loeffler her Senate seat
“The accusations of self-dealing while the U.S. copes with the unprecedented coronavirus crisis … represent a major early test for Loeffler, a first-time political candidate on whom Republicans are counting to keep a contested Senate seat in GOP hands as Democrats mount a charge to retake the chamber in this year's elections.” — James Arkin, Politico
The senators deserve the chance to challenge the accusations before any action is taken
“There may, of course, be perfectly reasonable explanations for what, initially, appears to be illegal — and morally reprehensible — behavior. Mr. Burr and Ms. Loeffler deserve the opportunity to provide those explanations. The Senate should initiate an ethics investigation of all accusations, and, if warranted, refer relevant findings for criminal prosecution.” — Editorial, New York Times
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Photo illustration: Yahoo News; photos: AP (2), Getty Images