Congress Still Fighting Sec's Investigation of Alleged Insider Trading by Its Members

by Tim Cushing
Techdirt
Dec. 03, 2015

Congress is once again declaring its willingness to hold everyone in the nation accountable for their actions, present party excepted.

Back in 2011, it was revealed that members of Congress were participating in insider trading. Spending a great deal of time conversing with lobbyists tends to result in the discussion of information that has yet to be made public. Legislators, being the opportunists they are, chose to buy and sell stock based on this insider info. Lobbyists -- also opportunists -- sometimes did the same thing. And it was all perfectly legal... at least for Congress.

This revelation did nothing to increase the public's goodwill towards its so-called "representatives." With its approval percentage (15%) sliding below that of Bernie Madoff's personal loan applications, Congress swiftly acted to close this loophole in the law.

Two years later, with everyone safely re-elected, Congress quietly excised the disclosure requirement in the new law, making it virtually impossible to verify whether or not it was actually playing by the rules it had made for itself. Predictably, it called the disclosure of such information a "national security risk."

Meanwhile, the SEC opened an investigation into Congressional insider trading related to health insurance companies. Congress refused to answer subpoenas or provide documents to the Commission. When ordered to by a federal judge, the House Ways and Means Committee gently explained that it could do whatever the fuck it wanted to.
The U.S. House Ways and Means Committee and a top staff member say the panel and its employees are "absolutely immune" from having to comply with subpoenas from a federal regulator in an insider-trading probe.
Two years later, Congress is still arguing that rules and laws are for people who can't write their own rules and laws. Judge Paul Gardephe didn't buy Congress' arguments that its conversations with lobbyists were so "privileged" they couldn't be examined by another federal agency. He also pointed out that the "immunity" it relied on was carved out by the very law they had passed to address insider trading a steep drop in approval ratings.
On November 13, U.S. District Judge Paul Gardephe agreed with most of the SEC’s claims and ordered Congress to comply with the subpoena within 10 days. “Members of Congress and congressional employees are not exempt from the insider trading prohibitions arising under the securities laws,” he wrote. Gardephe reminded the attorneys that “Congress barred such claims of immunity when it adopted” the STOCK Act.
Congress' top lawyer fought back, claiming certain, very specific words were missing from the STOCK Act and that legislators' immunity was still intact.
Kerry W. Kircher, the House general counsel, requested more time. Then, shortly before Thanksgiving, on November 25, he filed a motion to appeal the subpoena to the 2nd Circuit. Kircher argued that the STOCK Act did not explicitly authorize the SEC to issue subpoenas to Congress, even to investigate insider trading.
This may not result in the investigation being scuttled or the lawsuit being tossed, but it does buy Congress more time to figure out its next accountability-dodging move. Meanwhile, Congress members are doing what they can to ensure the battle the SEC is waging to at least hold them as accountable as their own STOCK Act promised they would, will be long, expensive and hopefully, ultimately fruitless. These efforts are also shady as hell.
Away from the spotlight, however, congressional leaders continue to fight enforcement and to shore up the target of the SEC inquiry. Rep. Pat Tiberi, R-Ohio, and Rep. Diane Black, R-Tenn., two lawmakers who served on the same committee as Sutter, have used PAC money to donate to the legal defense fund set up to defend him.
Campaign funding -- itself a toxic wasteland where morality and ideals go to die -- is being rerouted to keep Bruce Sutter, a former Ways and Means Committee member who allegedly passed on non-public Medicare reimbursement information to a lobbyist for law firm Greenberg Taurig. Not only will Congress members let nothing stand in the way of personally profiting from their time in office, they'll also apparently ensure those who previously got away with it will continue to elude being held accountable.












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