insider trading – Techdirt (original) (raw)

Richard Burr Steps Down From Intel Committee Following FBI Warrant; Feinstein Talks To FBI, While Loeffler Won't Say

from the insider-trading dept

Following the news that the FBI got a warrant and seized Senator Richard Burr’s phone as part of its investigation into his alleged insider trading, Burr has announced that he’s stepping down from being the chair of the powerful Senate Intelligence Committee, where he’s long been one of the biggest boosters of the surveillance state.

Of course, some are now wondering if that’s part of the reason why the Trumpian wing of the GOP have come out against Burr. Because the Senate Intel Committee has released a report confirming that Russia tried to help Trump win in 2016. The report is not particularly surprising, highlighting many widely known points. However, in Trumpland, no one seems to be able to handle the nuanced differences between the campaign directly “colluding” with Russia (for which the evidence is more limited) with the idea that Russia independently sought to boost Trump (for which the evidence is overwhelming). So, Trump supporters have been clamoring for Burr’s head on a platter for merely stating facts, which are not allowed in this world where pointing out that The Emperor is Naked is somehow deemed to be heresy.

Given Attorney General Barr’s recent decisions to more fully weaponize and politicize the Justice Department, it can’t be dismissed out of hand that there are political reasons for the FBI’s sudden interest in Burr, but it still seems like a stretch. Sooner or later it’s likely that there will be some fallout from which one can better assess the validity of the warrant, and whether or not Burr was engaged in insider trading.

One point that a few people have raised is to look at whether or not the FBI is looking into any of the other Senators who sold notable chunks of stock just before the pandemic hit, though as we explained in that original story, the situations and fact patterns with each of the other Senators is at least somewhat different than Burr’s case. For what it’s worth, there are reports that the FBI questioned Senator Dianne Feinstein, who also sold some stock during this period. However, as we pointed out in the original post, there’s little indication that her sales were COVID-19 related, especially since it was mostly selling off biotech stocks (exactly the kind of stocks you’d think would go up in a pandemic).

The other Senator’s selloff behavior that looked at least somewhat sketchy was Senator Kelly Loeffler, whose actions look worse and worse, as she denies things more vociferously. Just recently, she went on Fox News (natch) to claim that “this is 100% a political attack.” Huh? What? You’re the one who sold the stock. She also (get this) tried to blame socialism because why not?

This gets at the very heart of why I came to Washington, to defend free enterprise, to defend capitalism. This is a socialist attack.

Who knew that insider trading was “free enterprise”?

Either way, while Burr has had to hand over his phone and Feinstein had to answer questions from the FBI… Loeffler simply refuses to say whether or not the FBI has reached out to her. If it does turn out that the FBI has investigated the others, but left Loeffler entirely alone (whether or not her sales were aboveboard), that’s certainly going to be some evidence to add to the pile that the focus on Burr was just as much political as it was about the legal issues at play.

Update: After this story was completed, Loeffler’s office announced that she had handed documents over to the SEC and DOJ along with the Senate Ethics Committee. It’s unclear if the DOJ/FBI asked for anything or if she just did this proactively. Just a few days ago, there was a report saying that her team was considering doing exactly this as a “hail mary” to try to get out ahead of this story that she can’t seem to get rid of, and which appears to be having an impact on her campaign to retain the office that she was gifted a few months ago.

Filed Under: dianne feinstein, doj, fbi, insider trading, intelligence community, investigations, kelly loeffler, politics, richard burr, russia, russian election interference, senate intelligence committee

Uh Oh: FBI Serves Search Warrant On Senator Richard Burr, Seizes His Phone

from the how-do-you-feel-about-surveillance-now? dept

I’m wondering how Senator Richard Burr feels about phone encryption right about now? As you may recall, the notoriously pro-surveillance Senator has whined about phone encryption at great length and even introduced legislation that would effectively end encryption on phones.

And yet, the FBI just served a search warrant on him and seized his phone as part of its investigation into claims that he engaged in insider trading:

Federal agents seized a cellphone belonging to Sen. Richard Burr on Wednesday night as part of a Justice Department probe into stock transactions he made ahead of the sharp market downturn sparked by concerns over the coronavirus, a law enforcement official told the Los Angeles Times.

The North Carolina Republican turned over his phone after agents served a search warrant at his home in the Washington area, the official told the newspaper.

This likely means that there’s even more going on than has been made public so far, and it’s unlikely to be good for Senator Burr. As former federal prosecutor Renato Mariotti explains, to get that search warrant, it means that a judge was convinced that Burr likely engaged in insider trading and that there was evidence to that effect on his phone:

This means that a federal judge concluded that there is good reason to believe that Senator Burr engaged in insider trading and that evidence of his insider trading is contained on his cell phone. https://t.co/OkWEjyHAJr

— Renato Mariotti (@renato_mariotti) May 14, 2020

And as others have noted, the FBI — for whatever faults it might have (and they are many) — does not just show up at a Senator’s home with a warrant on a hunch.

Holy moly. Showing up at the home of a U.S. Senator and executing a warrant is not business as usual and not a step the FBI would take lightly. https://t.co/XKgwP5zj65

— Matthew Miller (@matthewamiller) May 14, 2020

Of course, the bigger issue was that while he was selling all those stocks (including a bunch of hotel stocks), he was claiming publicly that everything was fine and that the US had COVID-19 under control. Frankly, that part should be the bigger scandal, but unfortunately it won’t be.

Filed Under: doj, encryption, fbi, insider trading, phone, richard burr, warrant

What A Coincidence! Same Day Senator Burr Dumped His Stock, So Did His Brother-in-Law!

from the what-an-amazing-stroke-of-luck! dept

Senator Richard Burr’s potential insider trading issues, for which he’s being investigated, may have gotten quite a bit worse this week. A new report notes that on the same day Burr sold off a “significant percentage” of his stock holdings (while also telling the public not to worry about COVID-19), it turns out his brother-in-law just coincidentally decided to dump a bunch of stock too. Amazing!

Sen. Richard Burr was not the only member of his family to sell off a significant portion of his stock holdings in February, ahead of the market crash spurred by coronavirus fears. On the same day Burr sold, his brother-in-law also dumped tens of thousands of dollars worth of shares. The market fell by more than 30% in the subsequent month.

Burr?s brother-in-law, Gerald Fauth, who has a post on the National Mediation Board, sold between 97,000and97,000 and 97,000and280,000 worth of shares in six companies ? including several that have been hit particularly hard in the market swoon and economic downturn.

Could this actually be a coincidence? Sure. Maybe. But the timing (the very same day…) does seem notable. As the ProPublica report notes, Fauth “is not a frequent stock trader.” Burr insists that his sales were based on public information, though it’s difficult to see how he could simply ignore the classified briefings he got concerning the rising pandemic issues, and base decisions entirely on public information. Indeed, this is why government officials should be required to hand off any equities like this to a blind trust where they have no visibility into how it’s traded.

Even if this is all legal (which is not certain either way yet…), it again reinforces the belief that the powerful live by different rules and are able to game the system for personal advantage, even as they’re supposed to be serving the public interest.

Filed Under: gerald fauth, insider trading, public interest, richard burr, soft corruption, trust

Senator Loeffler, Already Accused Of Pandemic Insider Trading, Will Convert All Individual Stock Holdings To Managed Funds

from the bit-late-for-that-now,-ain't-it? dept

Over the last few weeks there’s been tremendous attention paid to the prophetic timing of stock sales by two Senators: Richard Burr and Kelly Loeffler. Both of whom were insisting publicly that there was little risk associated with the coronavirus and COVID-19, while receiving important briefings in the Senate and quietly selling stocks in retail and travel companies before the market collapsed and — in Loeffler’s case — buying up stocks in remote work and hospital protective equipment suppliers. It all looks pretty pretty bad. Loeffler, from day one, has defended the stock sales, saying they were done by a third party and she wasn’t aware of them. However, the timing and the choices in stocks are still pretty head-scratching.

Loeffler, who is already one of, if not the, richest Senators, has now said that she and her husband (who runs the NY Stock Exchange) will convert all of their individual equity holdings to managed mutual funds. While some are reporting that she’s “selling” all her stock, it’s not quite that, because she’ll just be putting the proceeds into managed funds:

Loeffler, who is the richest member of the Senate, said in a Wall Street Journal opinion page article announcing her decision that her stock holdings would be converted to mutual funds and exchange-traded funds by third-party advisors who handle her investments.

The thing is, of course, that this gets back to the concept we’ve discussed before of soft corruption. Even if it turns out that it was “legal,” the fact that this kind of thing is okay is exactly what makes everyone else assume the game is rigged and corrupt. It makes people trust our institutions less, and that’s a huge problem. While it was only a few years back that Congress finally agreed that laws against insider trading should finally apply to elected officials, it seems troubling enough that elected officials own any individual stocks at all. The mere appearance of conflict is damning for a public official. There have been proposals that elected officials ought to be required to move any equity holdings into a blind trust that invests in mutual funds, without the official knowing what’s in their investment bucket — and stories like Loeffler’s only gives one more reason why that should be required.

Filed Under: congress, covid-19, insider trading, kelly loeffler, pandemic profiteering, stock trades

Senator Loeffler's COVID-Related Stock Trades Looking Even Worse, While Feds Start Investigating Senator Burr's

from the insider-trading dept

As we noted just a few weeks ago, two Senators — Kelly Loeffler from Georgia and Richard Burr from North Carolina, both of whom were publicly trying to play down the risks associated with COVID-19 — were quietly engaging in stock trades that suggested they had a different viewpoint (while five different Senators sold stock during this period, only Loeffler’s and Burr’s look particularly suspicious). Burr’s stock sell-off was revealed first, and got the most attention, in part because he’s also the Chair of the Senate Intelligence Committee and was getting classified briefings about COVID-19. The latest news on that front is that the Justice Department has supposedly opened an investigation:

Senate Intelligence Committee Chairman Richard Burr sold off a large amount of stocks before the coronavirus market crash, and now the Justice Department is looking into his statements around this time period, NPR can report.

Others have reported that the FBI has been in contact with Burr. That doesn’t mean much for now, and the investigation may turn up nothing. But it’s worth noting that it’s happening.

The other Senator, Kelly Loeffler, has some more bad news, as new reports suggest even more stock trading that at least looks suspicious. As was noted in the original report, Loeffler had sold off a bunch of retail stock, and bought into a company that does videoconferencing. The original reports suggest that she sold off somewhere between 1.3millionand1.3 million and 1.3millionand3.1 million in stock right before the US economy went south. Turns out it was way more. The new report shows that she also sold off nearly $19 million in stock of Intercontinental Exchange, the company that owns the New York Stock Exchange. It is worth noting that Loeffler’s husband is the chair and CEO of Intercontinental Exchange, and the sales took place between February 26th and March 11th. That means at least some of those sales were happening while she was insisting that the US had everything under control.

Perhaps even more damning, though? Beyond buying into a videoconferencing software company, Loeffler and her husband, Jeff Sprecher, also purchased a bunch of stock in DuPont, a major supplier of the personal protective gear that hospitals are all now desperate for:

Sprecher bought $206,774 in chemical giant DuPont de Nemours in four transactions in late February and early March. DuPont has performed poorly on Wall Street lately, but the company is a major supplier of desperately needed personal protective gear as the global pandemic strains hospital and first responders.

So, to recap: they sold somewhere in the range of $20 million worth of mostly stock market and retail companies — and bought into videoconferencing and protective health gear. All while telling the public that the government she’s a part of has everything under control.

Filed Under: congress, covid-19, fbi, insider trading, investigation, kelly loeffler, richard burr, stock trades

Two Senators Sold A Bunch Of Stock After Being Briefed About COVID-19; While Telling The World Things Were Going To Be Fine

from the all-grifting-all-the-time dept

Senator Richard Burr is a real piece of work. In 2012 he was one of only three Senators to vote against the STOCK Act. This was a law put in place following a 60 Minutes expose about how Congress was getting filthy stinkin’ rich off of insider trading, since Congress was exempt from insider trading laws. The bill did pass — Burr’s vote against notwithstanding — and President Obama signed into law. Unfortunately, the next year, Congress passed (and Obama signed) an amendment that rolled the rules back for staffers, though it still does apply to elected officials themselves.

So, it’s quite interesting to see the news that Senator Burr just sold off a “significant percentage” of his stock holdings, according to a ProPublica article detailing the sale. A big chunk of that stock sale? In the hospitality industry that has been so hard hit. He had a big chunk of stock in Wyndam Hotels and Extended Stay America, but sold those off just before everything went bad. The timing is interesting:

Soon after he offered public assurances that the government was ready to battle the coronavirus, the powerful chairman of the Senate Intelligence Committee, Richard Burr, sold off a significant percentage of his stocks, unloading between 628,000and628,000 and 628,000and1.72 million of his holdings on Feb. 13 in 33 separate transactions.

As the head of the intelligence committee, Burr, a North Carolina Republican, has access to the government?s most highly classified information about threats to America?s security. His committee was receiving daily coronavirus briefings around this time, according to a Reuters story.

Now, you might say that there might be another reason why he sold stuff off, but it certainly appears that Burr knew full well what was coming. And that’s because in another news bombshell from just a few hours earlier, a recording was leaked of Burr telling a private luncheon gathering that things were going to be bad — all at the same time he was insisting that the US was totally prepared for COVID-19. A month after he sold all that stock, and a few weeks after he told the private luncheon that the coronavirus was “much more aggressive in its transmission than anything that we have seen in recent history” and compared it “to the 1918 pandemic” he publicly was claiming that we had everything under control:

?Luckily, we have a framework in place that has put us in a better position than any other country to respond to a public health threat, like the coronavirus.”

He also said the same thing just days before selling all that stock:

Thankfully, 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.

That op-ed also said:

The public health preparedness and response framework that Congress has put in place and that the Trump Administration is actively implementing today is helping to protect Americans. Over the years, this framework has been designed to be flexible and innovative so that we are not only ready to face the coronavirus today but new public health threats in the future.

And then he sold most of his stock earning somewhere between half a million and a million and a half dollars — most of which would have plunged in value if he’d kept it invested. And, the fact that such a large chunk was in the hospitality industry is telling: he would have likely realized were going to be hit hard by any form of lock down and the expected decline in travel due to the pandemic.

Hours after the Burr story broke, The Daily Beast highlighted how another Senator, the new Senator from Georgia, Kelly Loefler, sold off millions of dollars of stock the very day she was briefed about the COVID-19 threat. She literally tweeted that day:

And then she dumped tons of stock:

Loeffler assumed office on Jan. 6 after having been appointed to the seat vacated by retiring Sen. Johnny Isakson. Between then and Jan. 23 she did not report a single stock transaction from accounts owned by her individually or by her and her husband jointly.

Between Jan. 24 and Feb. 14, by contrast, Loeffler reported selling stock jointly owned with her husband worth between 1,275,000and1,275,000 and 1,275,000and3,100,000, according to transaction reports filed with Senate ethics officials.

For what it’s worth, it’s probably worth noting that Loeffler’s husband, Jeffrey Sprecher, is the chairman and CEO of the New York Stock Exchange. The stock sales included a bunch of retailers: Ross Stores, TJX (owners of TJ Maxx, Marshalls and a bunch of similar brands), and Autozone. All of those are struggling — TJX just announced it’s closing all its stores for at least two weeks.

Like Burr, Loeffler toed the Trumpian line that the country was all set to handle this pandemic that (spoiler alert!) it’s still not ready to handle:

Some might argue that while she didn’t have any transactions in the weeks leading up to that coronavirus briefing, and then sold a bunch of stock, she did make two purchases of stock in that period. But those really don’t help her case:

One of Loeffler?s two purchases was stock worth between 100,000and100,000 and 100,000and250,000 in Citrix, a technology company that offers teleworking software…

Yes, sold a bunch of other stock, but purchased stock in a company that enables telework, just weeks before practically the whole country moved to telework. The other purchase? Oracle. While Oracle stock has declined along with most of the rest of the market, given how much Oracle pushes itself as a “cloud” provider, you could see someone thinking it might get a boost as well.

Given all, a little other spelunking through the newly released financial disclosures for stocks sales in this period from three other Senators as well: Ron Johnson, Dianne Feinstein, and Jim Inhofe. The details of those sales don’t look quite as suspicious as the other two, but still might raise some eyebrows. Inhofe sold a bunch of Paypal, Intuit, and Apple stock. Feinstein sold a bunch of Allogene Therapeutics stock, a biotech firm doing cancer research — so it’s not clear that that’s related to pandemic info. Johnson made a bundle: between 5millionand5 million and 5millionand25 million in selling all of his share of a plastic extrusion company, Pacur, but that’s a private family company that he ran before becoming a Senator (his brother now runs the firm), and the sale was made to a private equity firm, and shows no evidence of being connected in any way to the pandemic (indeed, the company does plastic extrusion for medical devices, and you can see why that might suddenly be in more demand these days).

In a just world, someone would be looking into the Burr and Loeffler sales as insider trading. I’m not convinced that we’re in that world right now, though. In the meantime, as many of us are isolated at home, we can rest safe, knowing that Senator Burr and Senator Loeffler socked away a bunch of money while the rest of us suffer. The only surprising thing I will note, is that Burr, at least, is now receiving heavy criticism from both Democrats and Republicans, and even Tucker Carlson — usually a trusty voice repeating Trumpian talking points, has called for Burr to resign.

Of course, it’s worth highlighting one more point: profiting off the coming disaster is horrible and disgusting and awful. But it’s much, much worse to have spent weeks or even months knowing what disaster was about to befall the country and lying to the public about it.

The potential insider trading is dreadful and possibly criminal, but what could elevate this to a historic scandal is the idea that senators may have known enough to be alarmed for themselves yet still projected rosy scenarios to the public AND failed to make sure we were ready. https://t.co/PeMktkEPFA

— David French (@DavidAFrench) March 20, 2020

Filed Under: congress, coronavirus, covid-19, insider trading, kelly loeffler, richard burr

Congress Still Fighting SEC's Investigation Of Alleged Insider Trading By Its Members

from the 'pretty-sure-we're-above-the-law,-judge' dept

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.

Filed Under: bruce sutter, congress, insider trading, investigation, sec, stock act, subpoena

Congressional Committee Thinks It Shouldn't Have To Answer The SEC's Questions About Insider Trading

from the we're-electable,-not-accountable dept

“Laws are for other people.”
– Too many legislators to count

It’s common knowledge that insider trading is illegal. In fact, we have an entire government agency in place to regulate trading and to investigate insider trading allegations. Executives have been sentenced to months (sometimes even years) in plush, well-appointed hellholes for participating in insider trading.

Members of Congress, however, were exempt from insider trading rules until 2012. An 2011 expose by 60 Minutes let millions of Americans know that members of Congress had plenty of access to market-changing information and were acting on it.

In a rare (ha!) show of self-preservation, a united House full of Congresspersons facing reelection battles passed the STOCK Act, which basically made Congress and its staffers play by the same trading rules as every other American.

In 2013, with Congressional members safely re-elected, the House decided to roll back its previous legislative effort in order to get back into the insider trading business. It tore out the stipulation demanding disclosure of trading activity — the one thing citizens could use to verify adherence to the “no insider trading” rule — stating that these disclosures were a “security risk.” This sailed through with unanimous consent late on a Thursday afternoon (the end of the Congressional work week) and was signed by the President the following Monday.

Now, Congress is again claiming it doesn’t need to submit to laws that govern US citizens and, again, it’s doing this to avoid any transparency or accountability being applied to its trading activities.

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.

The committee yesterday responded to U.S. District Court Judge Paul Gardephe’s order to explain why it hadn’t complied with the U.S. Securities and Exchange Commission’s requests for documents, phone records and testimony of aide Brian Sutter for more than a year.

The SEC is investigating a suspicious spike in health insurer trading volumes and prices ahead of a report that announced government payments to insurers would be increased, rather than decreased. This investigation claims that a Green Taureg LLC lobbyist sent the information to a Height Securities LLC analyst ahead of the official government announcement and that House Ways and Means staff director Brian Sutter may have been the originating source.

The Committee’s legal rep has responded by claiming Congress is above the law or, if not above, very definitely adjacent to it, but certainly not within in and subject to federal subpoenas.

Kerry W. Kircher, the top lawyer for the House, said the SEC’s request should be dismissed because the information it seeks concerns legislative activities protected by the Constitution, which can’t be reviewed by federal judges.

Kircher also stated that his client does not and will not (EVER) have time for the SEC’s “apply the insider trading rules to _everyone_” bullshit.

Sutter’s connection to the investigation is “tangential” Kircher said, and would also interfere with his work because his schedule is “heavily, and nearly permanently, booked.”

So, if anyone thought an SEC insider trading probe would bring more accountability to the House, those thoughts may now be dismissed to make room for more cynicism. There’s a slim possibility the SEC may extract damning evidence, but it will have to fight its way through a House full of people with no conceivable reason to be compliant. Insider trading was a great Congressional job perk and its uncontested run helped pad the wallets of future lobbyists, board members and consultants. No one really wants to completely end it, but they’d certainly like people to stop talking about it.

Filed Under: brian sutter, congress, house ways and means committee, insider trading, privilege, sec
Companies: green taureg, heigh securities

The One Telco Exec Who Resisted The NSA Has Been Released From 4+ Years In Jail

from the tell-it-like-it-is dept

If you were around during the reign of Joe Nacchio at Qwest, you already should be aware that he was not particularly well-liked. He was brash and obnoxious and often rubbed people the wrong way. There’s a famous story, for example, of him calling up an executive at US West, a company that Qwest bought, which had a building directly across the street from Qwest’s headquarters. Moments after the buyout closed, Nacchio got the exec on the phone and supposedly told him he had 15 minutes to change the sign on the building from US West to Qwest. Qwest collapsed in a somewhat spectacular manner not long after that, with some comparing it to the Enron collapse — a lot of hype and stock pumping built on very little substance. A few years later, Nacchio was famously convicted of insider trading — and certainly many people who had witnessed his earlier antics reveled in that result.

However, it was only later that it started to come out that Nacchio was alone among all of the major telco execs to tell the NSA to get lost when they came calling, demanding the ability to basically tap Qwest’s entire network. For years, Nacchio has insisted that the entire lawsuit against him was retaliation for his refusal. When he first made those claims, it sounded far fetched and ridiculous. However, in the intervening years, as more and more details of the NSA’s activities have become clear, Nacchio’s initial arguments seem a hell of a lot more plausible.

It turns out that Nacchio was just released from prison after his 54 month sentence was completed. The WSJ has an odd but entertaining (and unfortunately paywalled — though, you can get around it if you Google the title) article about his life in prison, where he apparently came out much healthier than he went in (lots of exercise) and is now best buddies with some former drug dealers who had his back in prison. One of whom, who goes by the name Spoonie, calls Nacchio “Joe-ski-luv” and says that they’re best friends. “If he ever needs a lung or a bone, I’m there.” Right.

But, more interesting is the tidbit further down about the NSA stuff:

Mr. Nacchio said he still believes his insider-trading prosecution was government retaliation for rebuffing requests in 2001 from the National Security Agency to access his customers’ phone records. His plans to use that belief as a defense at trial never materialized; some of the evidence he wanted to use was deemed classified and barred from being introduced.

To Mr. Nacchio, the revelations of former NSA contractor Edward Snowden, who leaked documents saying the agency monitors the email and phone records of Americans, have justified his own stance. He contended the NSA’s request was illegal.

“I feel vindicated,” he said. “I never broke the law, and I never will.”

An NSA spokeswoman declined to comment.

I would imagine that Nacchio could add quite a bit of useful information to the ongoing debate. And, in fact, it appears he intends to do so, with plans to write a book about “Americans’ loss of liberty based on his experiences with the NSA and other government agencies.” I look forward to reading it.

Filed Under: insider trading, jail, joe nacchio, joseph nacchio, nsa, nsa surveillance
Companies: qwest

Congress Quickly And Quietly Rolls Back Insider Trading Rules For Itself

from the can't-mess-with-the-profits dept

In November of 2011, the TV show 60 Minutes did a big expose on insider trading within Congress. While everyone else is subject to basic insider trading rules, it turned out that members of Congress were exempt from the rules. And, as you would imagine, many in Congress have access to market-moving, non-public information. And they made use of it. To make lots and lots of money. Of course, after that report came out and got lots of attention, Congress had to act, and within months they had passed the STOCK Act with overwhelming support in Congress to make insider trading laws that apply to everyone else finally apply to Congress and Congressional staffers as well. As that link notes:

The lopsided votes showed lawmakers desperate to regain public trust in an election year, when the public approval rating of Congress has sunk below 15 percent.

Of course, here we are in 2013 and, lo and behold, it is no longer an election year. And apparently some of the details of the ban on insider trading were beginning to chafe Congressional staffers, who found it hard to pad their income with some friendly trades on insider knowledge.

So… with very little fanfare, Congress quietly rolled back a big part of the law late last week. Specifically the part that required staffers to post disclosures about their financial transactions, so that the public could make sure there was no insider trading going on. Congress tried to cover up this fairly significant change because they, themselves, claimed that it would pose a “national risk” to have this information public. A national risk to their bank accounts.

It was such a national risk that Congress did the whole thing quietly, with no debate. The bill was introduced in the Senate on Thursday and quickly voted on late that night when no one was paying attention. Friday afternoon (the best time to sneak through news), the House picked it up by unanimous consent. The House ignored its own promise to give Congress three days to read a bill before holding a vote, because this kind of thing is too important to let anyone read the bill before Congress had to pass it.

And, of course, yesterday, President Obama signed it into law. Because the best way to rebuild trust in Congress, apparently, is to roll back the fact that people there need to obey the same laws as everyone else. That won’t lead the public to think that Congress is corrupt. No, not at all.

Filed Under: congress, corruption, insider trading, transparency