Could COVID Insider Trading Scandals Cost Republicans the Senate?

Loeffler with Der Trumpenführer.

Martha Stewart went to prison for insider trading - using non-public information - in the sale of $230,000 of stock, an amount that pales in comparison to the amounts of stock sold by Republicans in the U.S. Senate after an special intelligence briefing on the coming pandemic and just before the stock market collapsed.  Using this privileged information, these senators avoid millions of dollars of losses while the rest of the public and retirement funds were slammed as the market cratered. Now, these individuals are under FBI and Security and Exchange Commission ("SEC") investigation for these "insider" deals.  Vanity Fair looks at the possible repercussions for Republicans.  Here are excerpts:

On Thursday, Senator Kelly Loeffler provided information to federal law enforcement about controversial stock trades she made just before the coronavirus-induced market crash. As Politico reported, the Georgia Republican turned over documents to the Justice Department, the Securities and Exchange Commission, and the Senate Ethics Committee. According to a statement released by her spokesperson on Thursday, the documents showed that she and her husband, New York Stock Exchange chairman Jeffrey Sprecher, “acted entirely appropriately and observed both the letter and the spirit of the law”—something Loeffler has maintained throughout, even as accusations of insider trading have swirled.

Loeffler’s decision to turn over documents came as another of her Republican Senate colleagues faces similar questions. On Thursday, North Carolina Senator Richard Burr announced he would step down from his position as Senate Intelligence Committee Chairman. Burr is being investigated for up to $1.72 million in stock sales he conducted just before coronavirus caused the market to plunge in February. The FBI has reportedly served a warrant for Burr’s cell phone, part of the Justice Department’s inquiry into whether he violated a law prohibiting members of Congress from acting on intelligence they’ve gleaned from their official work. Burr, like Loeffler, denies any wrongdoing.

As the Burr and Loeffler probes escalate, the Senate is facing fundamental questions around whether some of the most powerful lawmakers in the country should buy and sell stock at all. As my colleague Abigail Tracy reported last month, “the perception that anyone in Congress profited off of the coronavirus crisis is a blow to the institution.” In recent weeks, a bill that would prohibit members of Congress from owning individual stocks has gained traction, though Tracy notes that passing such a ban at the moment is unlikely.

The twin controversies have also inspired concern from senior Republicans about their ability to retain control of the Senate. The Washington Examiner’s David Drucker reported on Friday that the GOP is worried about its prospects, fearing that the investigation into Burr’s financial transactions could prompt his resignation before September 4. In that case, Drucker says, “a November special election would be triggered to fill the remainder of his term, multiplying the challenges Republicans face as they scramble to protect their 53-seat majority.” According to a Republican insider, “people still don’t know exactly what transpired, which is why the current review is important. But North Carolina already features what will be a very expensive Senate race, and another one would be quite challenging for Republicans.”

Cuccinelli Continues to Try to Hide Ties to Star Scientific

With Bob "Taliban Bob" McDonnell's popularity plummeting and roughly a third of Virginians believing that he should resign as Governor of Virginia, his would be successor, extremist Ken Cuccinelli is dancing as fast as he can to put distance between himself and McDonnell and Jonnie R. Williams, Sr. (pictured below), who was giving handouts of gifts - and perhaps insider stock trading information - to Cuccinelli as well.  One can only hope the media and Cuccinelli's opponent, Terry McAuliffe continue the drum beat to force Cuccinelli to come clean.  A piece in the New York Times reviews the Cuccinelli-Williams relationship which mirrors that of Williams and McDonnell except for the magnitude of the gifts (at least so far).  Here are highlights:

He first bought the tiny company’s stock after bunking down in its chief executive’s six-bedroom home.

He added to his holdings soon after the rollout of a new product that the company hinted could be a cure for Alzheimer’s disease.  As the stock reached a 52-week high last year, he sold part of his portfolio for a $4,000 profit. 

Kenneth T. Cuccinelli II, Virginia’s attorney general, said that the timing of his ownership of Star Scientific shares reflected nothing more than his own investment analysis. 

Star Scientific and its chief executive have been at the center of an exploding political drama in Virginia as state and federal investigators look into lavish gifts that the executive, Jonnie R. Williams Sr., gave Gov. Bob McDonnell. 

And now, despite his efforts to distance himself, scrutiny is growing of Mr. Cuccinelli’s ties to the executive. 

Mr. Williams, 57, also gave the attorney general $18,000 worth of gifts, including frequent stays at Mr. Williams’s homes outside Richmond and in the Blue Ridge Mountains, according to Mr. Cuccinelli’s financial disclosure statements. Mr. Cuccinelli at first failed to report some gifts, as well as his Star Scientific stock, as required by law, which he has said was an oversight. 

At no time, the attorney general said, did he receive stock tips from the executive. But Mr. Cuccinelli’s buying and selling of Star Scientific shares raises questions about whether he and Mr. Williams were as distant as campaign aides insist. 

Star Scientific was Mr. Cuccinelli’s only stock holding worth more than $10,000 since he became attorney general, according to his disclosure forms. In at least two cases, his buying and selling was closely timed to vacations he and his family enjoyed as guests of Mr. Williams. 

For a relative novice at stock picking, Mr. Cuccinelli’s investment in Star Scientific was highly unusual. It is a thinly traded stock in a company that has lost money for a decade. It stayed afloat by selling stock at a discount in “private placements” to large investors, whose hopes were repeatedly raised by company promotions about big payoffs. 

It is unclear how Mr. Cuccinelli first met Mr. Williams. When the attorney general took office in 2010, he sometimes stayed in Mr. Williams’s $2.2 million home outside Richmond while his family remained in the northern suburbs. 

In late October 2010, Mr. Cuccinelli made his first purchase of 5,060 shares of Star Scientific, at $1.98. A month later he, his wife and their seven children spent Thanksgiving at a vacation home that Mr. Williams owned on Smith Mountain Lake, near Roanoke, dining on a $1,500 catered dinner that Mr. Williams paid for, according to the attorney general’s financial disclosure.

Mr. Cuccinelli made his second purchase of stock, adding 3,600 shares of Star Scientific at $2.80. It continued its climb for a year, hitting a peak in early July 2012. In June, Mr. Cuccinelli used Mr. Williams’s lake house again, and after his vacation, he sold 1,500 shares of Star Scientific for a profit of $4,041.

There's more to the article but the supposed "coincidences" seem rather astounding.  Martha Stewat did prison time for insider trading.  Here, Cuccinelli is supposed to be Virginia's top law enforcement officer.  Jonnie R. Willimas may be many things, but the man isn't stupid.  The question thus becomes, what did he expect in return from Cuccinelli.  He did not give away gifts and use of his homes purely out of affection and the goodness of his heart.  Something is rotten in Cuccinelli land.