Report: Insider Trading Transactions Are Illegal Unless You’re a Member of Congress
Members of Congress and their aides have regular access to powerful political intelligence, and many of them have used such intelligence to their advantage for financial gain. Steve Kroft reported Sunday that many members have made well-timed stock market trades in the very industries they regulate. And, the practice is perfectly legal, but some say it is wrong and it is time for the law to change.
In a script of “Insiders” which aired on November 13, Steve Kroft, correspondent for 60 Minutes reported that members of Congress can legally trade stock based on non-public information from Capitol Hill.
Congressmen and senators hold onto jobs that pay about $174,000 a year, however, few of them do it for the salary, even though some say they do it to serve the public. Aside from the power and prestige, these positions give members the opportunity to connections and insider access where rules that govern the rest of the country do not always apply to them.
When Nancy Pelosi, John Boehner and other lawmakers would not answer Steve Kroft’s questions on the issue, he headed to Washington to get some answers about their stock trades.
According to the report, Kroft said most congressmen and senators manage to leave Washington – if they ever leave Washington – with more money in their pockets than when they arrived.
“This is a venture opportunity. This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family,” said Peter Schweizer.
Schweizer’s research led to the 60 Minutes story that they [60 Minutes] have independently verified. Schweizer is a fellow at the Hoover Institution, who began working on a book about soft corruption in Washington with a team of eight student researchers.
Schweizer says he wanted answers as to why some congressmen and senators manage to accumulate immense wealth beyond their salaries, and proved particularly adept at buying and selling stocks.
He says “there are all sorts of forms of honest grafts that congressmen engage in that allow them to become very, very wealthy. He said “so it’s not illegal, but I think it’s highly unethical, I think it’s highly offensive, and wrong.”
When asked by Steve Kroft what he means by graft, Schweizer said “for example insider trading on the stock market. If you are a member of Congress, those laws are deemed not to apply.”
According to Schweizer, congressman members get a pass on insider trading because the rules have been defined this way. The rules are written by the political class in Washington and they have been written in such a way that they don’t apply to them.
The buying and selling of stock by corporate insiders who have access to non-public information that could affect the stock prices can be criminal as seen in the recent case involving hedge fund manager Raj Rajaratnam. Rajaratnam was recently sentenced to 11 years in prison for the very same practice.
Kroft and his team attempted to interview Congressman Bachus, who in mid September 2008, allegedly bought stock options based on apocalyptic briefings he had the day before from the Fed chairman Ben Bernanke and Treasury Secretary Hank Paulson. He however, he declined to talk to them.
Congressman Bachus allegedly made a variety of trades and profited at a time when most Americans were losing their shirts.
Schweizer said he believes self-dealing in Washington is wrong and that leaders should have their stock funds in blind trusts. He also noted that self-dealing does not always involve stock trades – congressmen and senators also seem to have a special knack for land and real estate deals.
Read the full script on cbsnews.com