While insider trading is banned in Congress, it’s still completely legal for lawmakers to sponsor bills that could benefit the businesses, industries, or their family members have invested in, and according to The Washington Post, 73 congressmen and women have figured out how to use this loophole — a jump from the 16 they found when they published this study in February.
In March, Congress passed a ban on insider trading after being embarrassed by “60 Minutes” last November on the ways members had taken advantage of their information to trade stock on hot legislative tips.
President Obama gave the practice mention in his State of the Union, and after some protests from members, some new rules went into effect like requirements to disclose stocks purchased on the Internet.
So no more sneaky legislators financially benefiting from legislation! Now, as The Washington Post’s team of Kimberly Kindy, David Fallis, and Scott Higham explain, it’s all about legislators blatantly benefiting from legislation.
Due to the remaining loopholes, to name just one example, Rep. Mike Kelly, a Republican of Pennsylvania, was allowed to sponsor a natural gas bill the same month Exxon negotiated a multimillion-dollar deal with his wife.
Across the aisle, former Rep. Dennis Cardozo, Democrat of California, helped pass a bill that involved tax breaks for racehorses and then bought seven such racehorses when the new tax breaks came into effect.
“The practice is both legal and permitted under the ethics rules that Congress has written for itself, which allow lawmakers to take actions that benefit themselves or their families except when they are the lone beneficiaries,” writes The Post, which looked at the financial disclosures of 535 members of the House and Senate and compared them with public records. They did an analysis which was published in February and found 16 members “who have taken actions that aided entities connected to their immediate families.” In their latest analysis published last night, they found that number was actually larger, with 73 members using this loophole to benefit themselves and/or their immediate family in recent years. Now that isn’t to say that there’s an increase since the insider trading ban went into effect — The Post’s team doesn’t disclose how many of those cases are post-insider trading ban. But their example of Rep. John Yarmuth shows how relaxed that “lone beneficiary” loophole is, which has been (in)active for at least five years:
After Rep. John Yarmuth (D-Ky.) took office in 2007, he asked the House Ethics Committee whether he could vote on legislation that might affect his personal holdings, including an investment worth as much as $5 million in his brother’s home health-care business, Louisville-based Almost Family. The panel advised he was prohibited from actions that would benefit his assets in a “direct and distinct manner, rather than merely as a member of a class.” Otherwise, the committee said, he had a duty to vote.
In office, Yarmuth joined the congressional Home Health Caucus, a group of two dozen lawmakers that promotes the value of in-home health care. He also has helped co-sponsor a handful of bills of interest to the industry, including the Home Health Care Planning Improvement Act. That pending bill would expand the number of health professionals who can refer patients to home health care. And, in May, Yarmuth co-sponsored a legislative amendment to block across-the-board Medicare cuts to providers, including home health aides.
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