Politicians Face Scrutiny Over Stock Transactions Made After Classified Coronavirus Briefing

White house looking at south lawn. (Peter Griffin)

The US Department of Justice, along with the Securities and Exchange Commission (SEC), has opened a probe into potential insider trading and whether lawmakers attempted to profit off of information they gained during a closed-door classified briefing on the pandemic weeks before the information became public.

Insider trading is defined as “the trading of a company’s stocks or other securities by individuals with access to confidential or non-public information about the company. Taking advantage of this privileged access is considered a breach of the individual’s fiduciary duty,” according to Cornell Law School’s Legal Information Institute website.

Sen. Richard Burr (R-NC) sold between $628,000 and $1.7 million in stock on February 13, according to his Senate financial disclosure documents. A week prior he had co-authored an opinion article for Fox News, titled “Coronavirus Prevention Steps the US Government is Taking to Protect You,” in which he urged Americans to have faith in the Trump administration and Congress’ coronavirus response.

“The United States today is better prepared than ever before to face emerging public health threats, like the coronavirus, in large part due to the work of the Senate Health Committee, Congress, and the Trump Administration,” Burr wrote. “The work of Congress and the administration has allowed U.S. public health officials to move swiftly and decisively in the last few weeks.”

Numerous public warnings concerning the growing virus pandemic were issued from international and federal health experts starting late last year. In an interview with CNBC's "Squawk Box" on January 22, Trump said that the United States had the virus "totally under control", adding that he was "not at all" concerned about a public health pandemic here in America.

On January 30, the World Health Organization (WHO) publicly declared a "Public Health Emergency of International Concern". Trump finally implemented recommendations from the Centers for Disease Control and Prevention (CDC) to practice social distancing and not gather in groups of 10 or more on March 16. There have been no federal stay-at-home guidelines issued from the president or Congress. The White House did not respond to questions regarding their coronavirus response.

Burr is a member of the Senate Health Committee, which was the committee briefed on the impending coronavirus outbreak by the nation's top infectious disease experts, including Dr. Anthony Fauci. Publicly released audio shows that afterwards Burr privately warned donors to prepare for significant economic hardship due to the coronavirus, nearly a month before the information became public.

According to the audio recording of the Tar Heel Circle luncheon, Burr told the group of wealthy donors, “There’s one thing that I can tell you about this: It is much more aggressive in its transmission than anything we have seen in recent history. It is probably more akin to the 1918 pandemic.”

Burr’s attorney has since issued a public statement saying, “The law is clear that any American — including a Senator — may participate in the stock market based on public information, as Senator Burr did…he will cooperate with [the Justice Department's] review as well as any other appropriate inquiry.” Sen. Burr's office did not respond to specific questions about his stock transactions.

Sen. Kelly Loeffler (R-Ga.) and her husband Jeffrey Sprecher, who is the chairman of the New York Stock Exchange, sold 27 different stocks worth between $1.275 million and $3.1 million between January 24 to February 14, according to her Senate disclosure forms. The senator and her husband also bought three separate stocks worth between $450,000 and $1 million, including the software company Citrix, which specializes in teleconferencing and allowing people to work from home. Stock shares of Citrix have gone up significantly since the pandemic started.

Loeffler also sits on the US Senate Health Committee and received the classified closed-door briefing. After weeks of heavy criticism over her stock trades, the first-term Senator wrote an Op-Ed for the Wall Street Journal, writing, "I never traded on confidential coronavirus information...But to end the distraction, my family will divest from individual stocks," adding, "I have become a top target of baseless attacks from political adversaries and the media." Sen. Loeffler's office did not respond to questions regarding her specific stock transactions.

Sen. Dianne Feinstein (D-Calif.) and Sen. Jim Inhofe (R-Okla.) have also faced scrutiny over them and their families' recent stock market transactions. According to her Senate disclosure forms, Feinstein’s husband sold between $1.5 million and $6 million in Allogene Therapeutics stock between the beginning of January and the end of February. Allogene Therapeutics is a biotech company that develops therapies for cancer.

Feinstein has denied any wrongdoing, putting out a public statement that reads, “I have no input into [my husband’s stock market] decisions…This company is unrelated to any work on the coronavirus and the sale was unrelated to the situation.”

Inhofe sold six different stocks between January and February worth between $230,000 and $500,000, according to his financial disclosure forms. In a statement issued last month, Inhofe stated that he does not have “any involvement” in his stock trading. Neither Feinstein nor Inhofe sit on the Senate Health Committee.

In 2012 Congress passed the Stock Act, which made it illegal for politicians to use insider information for financial gain. Burr was one of three senators to vote against the legislation, which passed 96-3, with one abstention.

SEC Chairman Jay Clayton declined to comment on this specific inquiry into members of the US Senate, but cautioned, “Anyone who is privy to private information about a company or about markets needs to be cautious about how they use that private information…that applies to government employees, public officials, etc, and the Stock Act codifies that.”