Government Officials and Insider Trading

Something is seriously flawed  with Washington in that only recently a ethics bill passed the Senate that would ban insider trading by members of Congress. The bill also would require prompt disclosure of stock transactions by lawmakers and by thousands of officials in the executive branch of government. A 96 to 3 vote followed three days of impassioned debate in which senators tried to outdo one another in proclaiming their support for ethics in government. We should not ask why we would have to pass such a law, but instead  why was this "ever" allowed, and why did it take so long? 

The President called for passage of such legislation in his last State Of  The Union address. More than half of House members, including at least 100 Republicans quickly signaled support for it. A handful of lawmakers have tried for years to enact restrictions on stock dealing by members of Congress. Their efforts drew little support until new attention to the practice last year, coupled with election anxiety, prompted a flood of backing for the action at a time of intense public scrutiny of congressional ethics.

Worth mentioning is that Rep. Spencer Bachus (R-Ala.), who holds one of the most influential positions in the House, has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation’s banking and financial services industries. Office of Congressional Ethics, an independent investigative agency, opened a probe late last year focusing on numerous suspicious trades on Bachus’s annual financial disclosure forms. It is no surprise that in the first case of its kind involving a member of Congress the investigators say that they have found probable cause to believe insider-trading violations have occurred.

One American citizen who may be less then impressed with this double standard that our politicians have enjoyed is Martha Stewart, if I were Martha I would be spiting up blood. According to the Security Exchange Commission in December of 2001 Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock after receiving an inside tip from her broker, Peter Bacanovic. The day following her sale, the stock value fell 16%.

Stewart went on trial in January 2004 and later spent five months in Federal Prison. In a highly publicized five-week jury trial later in the year Stewart was found guilty of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators. She was sentenced and later went on to serve a five month term in a federal prison facility and a two year period of supervised release including five months of  home detention during which she had to wear an electronic monitoring device. Stewart also was forced to pay a fine of $30,000.

But the pain did not end for the "private citizen" Stewart, in August 2006, the SEC announced that it had agreed to settle the related civil case against her. Under the settlement, Stewart agreed to give up $58,062 (including interest from the losses she avoided), as well as a civil penalty of three times the loss avoided, or $137,019. She also agreed to a five-year ban from serving as a director, or any other officer role responsible for preparing, auditing, or disclosing financial results of any public company. 

To add more injury to insult in June 2008 Britain refused to grant Martha Stewart a visa to enter the United Kingdom because of her criminal conviction for obstructing justice. The old saying, "power corrupts, absolute power corrupts absolutely" describes the situation in Washington. Again those in power are the ones who benefit, while the rest of us remain victims of our system, we the people deserve better.