Common Cause v. Senators Burr, Loeffler, Feinstein and Inhofe (STOCK Act)

On March 20, 2020, Common Cause filed complaints with the Senate Select Committee on Ethics, Securities and Exchange Commission and Department of Justice calling for investigations of Senators Richard Burr, Kelly Loeffler, James Inhofe and Dianne Feinstein to determine whether the Senators violated the Stop Trading on Congressional Knowledge Act of 2012 (STOCK Act), the Securities Exchange Act, the U.S. Criminal Code and other federal laws and regulations regarding stock trading applicable to Members of Congress. Specifically, Common Cause requested an investigation of whether these Senators engaged in illegal insider trading by trading stocks based on material, nonpublic information regarding the COVID-19 coronavirus pandemic received in private, confidential briefings for Senators by officials from the Centers for Disease Control and Prevention, the National Institute of Allergy and Infectious Diseases and other government officials.

On March 20, 2020, Common Cause filed complaints with the U.S. Department of Justice (DOJ), the Securities and Exchange Commission (SEC,) and the Senate Ethics Committee calling for immediate investigations of Sen. Richard Burr (R-NC), Sen. Dianne Feinstein (D-CA), Sen. Kelly Loeffler (R-GA), and James Inhofe (R-OK) for possible violations of the STOCK Act and insider trading laws. According to widespread reports, each of the Senators sold off significant amounts of stock from the personal portfolios after receiving classified briefings from government officials about the seriousness of the Coronavirus threat to the United States in January and February.

According to widespread media reports, each of these Senators were warned of the potentially catastrophic impact of the Coronavirus in classified briefings and subsequently dumped significant amounts of stock ranging from hundreds of thousands of dollars to millions of dollars. All these trades were made well in advance of the stock market collapse triggered by the spread of the Coronavirus and its related economic disruptions.

After dumping his own stock, Senator Burr warned a February 27th gathering of influential constituents and donors of the seriousness of the possible public health and financial impacts of the Coronavirus in the United States at a time when the White House was downplaying the threat of the virus to the nation and the stock market was unaffected. In a recording of that gathering on Capitol Hill obtained by NPR, Senator Burr likened the Coronavirus to the 1918 Spanish Flu pandemic which killed an estimated 50 million people worldwide, including 675,000 in the United States.

The STOCK Act affirms that members of Congress are not exempt from insider trading laws and states that Senators “may not use nonpublic information derived from such person’s position as a Member of Congress … or gained from the performance of such person’s official responsibilities as a means for making a private profit.”

The Securities Exchange Act prohibits the use of “any manipulative or deceptive device or contrivance” in connection with the purchase or sale of stocks. Securities and Exchange Commission Rules prohibit “any manipulative or deceptive device or contrivance” as well as “any device, scheme, or artifice to defraud” in connection with a stock trade. Securities fraud and conspiracy to commit securities fraud are prohibited under the United States Criminal Code and violations can result in fines and up to 25 years in prison.

“The American people expect and deserve leaders who look after the interests of the people before their own personal interests,” said Karen Hobert Flynn, president of Common Cause. “These potential violations of insider trading laws and the STOCK Act by these Senators, outlined in widespread media reports, show what appears to be contempt for the law and further a contempt for the American people these Senators have sworn to serve. Situations like these are exactly why Common Cause fought to help pass the STOCK Act, to prevent government officials abusing their power for their personal profit.”

“These allegations of potentially criminal misconduct by these Senators warrant full investigations by the DOJ, the SEC and the Senate Ethics Committee,” said Paul S. Ryan, Common Cause Vice President for Policy and Litigation. “These Senators appear to have used classified intelligence briefings as stock tips and sold off significant holdings to avoid losses in the markets. These laws are on the books for a good reason, without them the potential to abuse the power of elected office for personal enrichment would be virtually unlimited.”

“Senator Burr’s stock selloff raises deeply troubling questions and should be thoroughly investigated,” said Bob Phillips, executive director of Common Cause North Carolina. “The American people deserve to have absolute confidence that members of Congress are not using their office to illegally benefit themselves in a time of national crisis. Senator Burr owes the general public and his constituents in North Carolina a complete and transparent explanation of his stock sales. If the accusations against him are true, Senator Burr must resign.”