Skip to content
Search

Latest Stories

Top Stories

Why prosecuting senators for trading on Covid would be so tough

Sen. Richard Burr

Proving beyond a reasonable doubt that what Sen. Richard Burr and others heard was "insider" information could be very difficult, writes Brand.

Samuel Corum/Getty Images

Brand, director of Penn State Law School's Washington internship program, was general counsel of the U.S. House from 1976 to 1983 and for decades a prominent public corruption defense attorney.


Recent allegations regarding stock trading by members of Congress in the middle of the Covid-19 pandemic have raised calls for the investigation of these politicians for illegal "insider trading."

But successful prosecutions would be very difficult. Even federal judges struggle with writing clear instructions to jurors in insider trading cases. Often, verdicts are reversed on appeal due to errors in explaining complicated legal terms.

Two different laws could criminalize trading activity by senators and congressional staff. But proving a violation and convicting them is not likely.

The first is known as Rule 10(b)(5), after the section of the law under which it was issued by the Securities and Exchange Commission. This rule makes it illegal for anyone who has nonpublic information about a company to use that information to trade in the company's stock before that information is available to the public. And it applies to members of Congress because it applies to everyone.

But the second applies only to Congress: Known as the STOCK Act, since 2012 it has barred members and staff from taking advantage of nonpublic information, gained in the performance of their duties, by trading on that information before it is public.

Recently, GOP Rep. Chris Collins of New York pled guilty to violating Rule 10(b)(5). He has resigned and been sentenced to 26 months in prison. His crime was trading stock in a pharmacy company on whose board he served after receiving inside information regarding failed drug trials.

Sign up for The Fulcrum newsletter

This was not difficult to prosecute under the first provision as federal prosecutor's had evidence: Collins' incriminating telephone records. The activity had nothing to do with his congressional duties.

In the current cases involving trading by senators, successful prosecution under either provision will likely be substantially more complicated than the Collins case.

The STOCK Acts defines nonpublic information as confidential and not widely disseminated to the public. That's a hard standard to prove.

Then there's the problem of so much talking by, and information flowing from, multiple sources within Congress. How can it be proved that lawmakers used only information from a confidential briefing to inform decisions to sell stocks?

There is another defense senators might raise, or that might prevent them from being formally charged. The Constitution gives members of Congress immunity for acts they take when performing their legislative duties, in a part of Article I saying that "for any speech or debate in either house, they shall not be questioned in any other place." That could make prosecution impossible for certain types of information received officially in committee or other legislative settings.

The clause has been interpreted by the Supreme Court to cover more than literal speech or debate and include anything "generally done in a session of the House by one of its members in relation to the business before it" including voting, holding hearings, writing reports or gathering information from outsiders.

The language was added to the Constitution to reinforce the separation of powers. But as the Supreme Court has stated, it "has enabled reckless men to slander or even destroy others with impunity."

George Canellos, when he was co-chief of the SEC's enforcement division, said during an earlier insider trading scandal that cases involving information from public companies are different from cases in which a member of Congress sells stock. And when it comes to information that could affect a stock price coming from Congress, he said, "the lines aren't quite as bright and the opportunities for arguments by the defense are greater."

One example is a 2014 case involving Height Securities, a stock brokerage. A confidential decision by Medicare to raise some reimbursement rates had been leaked by a congressional staffer to a Height lobbyist. The lobbyist passed it on to clients, setting off a flurry of trading in health stocks before the decision was made public.

During the subsequent investigation, the FBI discovered that as many as 400 people at the Medicare agency knew the decision before it was announced. The size of that group made it difficult to determine if the lobbyist based his conclusion on his own analysis or publicly available information.

Senate Ethics Committee guidance on the STOCK Act acknowledges how common this problem can be. "While senators and staff are prohibited from using non-public information for making a trade, a great deal of congressional work is conducted on the public record or in the public realm," it says, so whether a lawmaker gets information in a nonpublic briefing or in public proceedings is hard to determine.

Republican Richard Burr of North Carolina, one of at least four senators allegedly involved in trading, heard from intelligence officials about how other countries were responding to the World Health Organization's declaration of a global emergency. The briefing was not classified, but drawn instead from diplomatic wires and publicly reported sources. The attending senators could have gotten the same information elsewhere.

So proving beyond a reasonable doubt that what they heard was "insider" information could be very difficult.

Speech or debate clause immunity doomed previous prosecutions that depended on actions taken during a legislative hearing or related to that hearing.

In 1972, after Democrat Mike Gravel of Alaskaplaced a purloined copy of the Pentagon Papers into a public Senate hearing record, the Justice Department began a criminal inquiry. In the end, the Supreme Court said the speech or debate clause meant the senator was absolutely immune for anything done at the hearing or in communications with his staff beforehand.

In the Height case, when the SEC subpoenaed records from the House Ways and Means Committee to determine the source of the leak, the court upheld the speech or debate protection for committee documents. That made prosecution for insider trading impossible.

These same problems would make prosecuting the insider trading cases difficult.

And while the constitutional shield would not bar the Senate Ethics Committee from getting at the evidence — because it is "the place" where members may be questioned — senators would still be able to defend by showing that the information was based on publicly available non confidential sources.

This article is republished from The Conversation under a Creative Commons license. Click here to read the original article.


The Conversation

Read More

Complaint Filed to Ethics Officials Regarding Commerce Secretary Howard Lutnick
red and white x sign

Complaint Filed to Ethics Officials Regarding Commerce Secretary Howard Lutnick

On Friday, March 21, the Campaign Legal Center (CLC) filed a complaint with the Office of Government Ethics (OGE) related to U.S. Secretary of Commerce Howard Lutnick urging the purchase of Tesla stock on March 19th.

CLC is a nonpartisan legal organization dedicated to solving the challenges facing American democracy. Its mission is to fight for every American’s freedom to vote and participate meaningfully in the democratic process, particularly Americans who have faced political barriers because of race, ethnicity, or economic status.

Keep ReadingShow less
Understanding the Debate on Presidential Immunity

The U.S. White House.

Getty Images, Caroline Purser

Understanding the Debate on Presidential Immunity

Presidential Immunity: History and Background

Presidential immunity is the long-standing idea that the president of the United States has exemption from liability or legal proceedings for acts related to the duties of presidential office. Contrary to popular belief, presidential immunity is not explicitly enumerated in the Constitution; only sitting members of Congress are explicitly granted judicial immunity through the Constitution’s Speech or Debate Clause. Rather, the concept of presidential immunity has arisen through the Department of Justice’s longstanding policy against prosecuting presidents in office and the Supreme Court’s interpretation of Article II, which has developed through a number of Supreme Court cases dating back to 1867.

Keep ReadingShow less
Donald Trump
President Donald Trump.
Brandon Bell/Getty Images

Trump 2.0: Navigating the New Political Landscape

With Trump’s return to the White House, we once again bear daily witness to a spectacle that could be described as entertaining, were it only a TV series. But Trump’s unprecedented assault on our democratic norms and institutions is not only very real but represents the gravest peril our democratic republic has confronted in the last 80 years.

Trump’s gradual consolidation of power and authoritarian proclivities, reminiscent of an earlier era, are very frightening on their own account. But it is his uncanny ability to control the narrative that empowers him to shred our nation’s fabric while proceeding with impunity. His actions not only threaten the very republic that he now leads but overturn the entire post-WWII world order, which is now in chaos. Trump has ostensibly cast aside the governing principle with the U.N. Charter of Sovereignty. By suggesting on multiple occasions that the U.S. will “get Greenland one way or another,” and that Canada might become our 51st state, our neighbor to the north is now developing plans to protect itself from what it views as the enemy across the border.

Keep ReadingShow less
Free Speech and Freedom of the Press Under Assault

A speakerphone locked in a cage.

Getty Images, J Studios

Free Speech and Freedom of the Press Under Assault

On June 4, 2024, an op-ed I penned (“Project 2025 is a threat to democracy”) was published in The Fulcrum. It received over 74,000 views and landed as one of the top 10 most-read op-eds—out of 1,460—published in 2024.

The op-ed identified how the right-wing extremist Heritage Foundation think tank had prepared a 900-page blueprint of actions that the authors felt Donald Trump should implement—if elected—in the first 180 days of being America’s 47th president. Dozens of opinion articles were spun off from the op-ed by a multitude of cross-partisan freelance writers and published in The Fulcrum, identifying—very specifically—what Trump and his appointees would do by following the Heritage Foundation’s dictum of changing America from a pluralistic democracy to a form of democracy that, according to its policy blueprint, proposes “deleting the terms diversity, equity, and inclusion (DEI), plus gender equality, out of every federal rule, agency regulation, contract, grant, regulation and piece of legislation that exists.”

Keep ReadingShow less