Under fire over allegations of insider trading and profiting off the pandemic, Georgia U.S. Sens. Kelly Loeffler and David Perdue have responded with a similar refrain.
The bipartisan Senate Ethics Committee, their campaign ads proclaim, dismissed probes of their stock trades without finding any wrongdoing.
Those outcomes, however, should be no surprise.
The committee of three Republican senators and three Democrats almost never finds fault with the 100 members of the U.S. Senate. An analysis of the committee’s publicly available annual reports from 2007 through 2019 shows it received 1,189 complaints of alleged violations. Not one resulted in a disciplinary sanction, records show.
Most complaints were dismissed without even a preliminary investigation by staff. Only six cases during that period resulted in private or public letters of admonition — effectively a slap on the wrist — for those who ran afoul of the Senate’s rules or standards.
“A senator saying he or she has been cleared by the Senate Ethics Committee should be taken with a grain of salt,” said Meredith McGehee, executive director of Issue One, a Washington-based watchdog group that has studied the committee’s work. “The Senate Ethics Committee manages to find ethics violations about as often as an NBA referee manages to call a traveling or palming violation.”
In the cases of Loeffler and Perdue, they were caught up in a flurry of insider trading allegations last spring after the Senate received closed briefings that outlined the seriousness of the coronavirus. The Senate Ethics Committee dismissed cases against several senators, including Loeffler and Perdue.
Ethics’ membership is handpicked by party leadership, and the panel largely operates in secret, issuing few public records about its cases. That thwarts independent verification of the extent of the committee’s review or how it reached its determinations. Congressional watchdogs and ethics experts, critical of the secrecy surrounding the committee’s work, have been pushing for years for a more independent and open process that will help restore trust in Congress.
“We have a fox guarding the henhouse situation when it comes to the Congress looking into its own members,” said Beth Rotman, national director of money in politics & ethics with Common Cause, one of the groups that filed the complaint against Loeffler. “It’s a huge problem.”
The committee did not respond to requests for comment for this story. But former members and aides said the panel works hard to stay above partisanship and takes its watchdog role seriously to protect the institution of the Senate. Much of its work is pre-emptive: offering guidance to lawmakers and their staffs about adhering to the chamber’s rules.
“The whole point of the committee as I saw it and all of us saw it was to keep people out of trouble by giving them advice before they did something they would regret,” said former U.S. Sen. Barbara Boxer, who led the committee for nearly a decade before retiring in 2017. In the “rarest of circumstances,” the California Democrat added, the committee would refer cases to the Justice Department if it believed a serious criminal violation may have occurred.
‘Totally exonerated’
Loeffler, for her part, released the letter the committee sent her on June 16 that dismissed the case, saying it found no evidence that laws or Senate rules were violated. The committee specifically reviewed transactions by Loeffler and her spouse, Jeffrey Sprecher, CEO of the Intercontinental Exchange, the parent company of the New York Stock Exchange. But the letter notes that panel conducted a preliminary inquiry and that it left the door open for future review.
“As always, the Committee retains the authority to revisit this matter should additional facts become known to the Committee,” the letter from chief counsel and staff director Deborah Sue Mayer said.
“The Senate Ethics Committee manages to find ethics violations about as often as an NBA referee manages to call a traveling or palming violation."
Loeffler’s campaign in ads has played up the panel’s work as proof she did nothing wrong. Her campaign spokesman Stephen Lawson on Friday attacked the mainstream media that “breathlessly ignores the facts and continues to perpetuate a lie.”
“Kelly Loeffler was completely exonerated by the Bipartisan Senate Ethics Committee as well as the DOJ & SEC because she did absolutely nothing wrong,” he said in a written statement, referring to the Department of Justice and Securities and Exchange Commission, which also had investigated her stock trades.
In Perdue’s case, the allegations and the scope of the Ethics Committee’s review are less clear. His campaign will not provide a copy of his dismissal letter, which it said was issued on June 16 —the same day as Loeffler’s dismissal letter. It provided a two sentence quote from the letter, which says the committee found no evidence that federal laws, ethics rules or standards were violated.
“It has been widely reported by mainstream media outlets, including the Atlanta Journal-Constitution, that Senator Perdue was cleared of any wrongdoing by the Senate Ethics Committee,” said Perdue spokesman John Burke. “Any insinuation otherwise is a sad attempt to deceive Georgia voters.”
Questions surrounding Perdue’s stock trades have intensified in recent weeks after a series of news reports have highlighted his aggressive investment practices while in the Senate.
The Perdue campaign has answered with an ad rolled out a week ago that stated the senator was “totally exonerated” following investigations by the Senate Ethics Committee, SEC and DOJ.
But the recent news reports have expanded the scope of questions surrounding Perdue’s stock trades beyond those he made as the pandemic was taking hold earlier this year.
“We have a fox guarding the henhouse situation when it comes to the Congress looking into its own members. It's a huge problem."
The New York Times reported last week that Perdue, a former CEO, conducted 2,596 stock trades since taking office six years ago. That makes him the most prolific stock trader in the Senate. The Times and other articles have noted that some trades involved companies in industries for which he has oversight duties as a senator.
A separate Times article published in November shed new light on the Justice Department investigation earlier this year into Perdue’s trades, showing that the inquiry was far more involved than previously had been known.
The report also undermined claims Perdue had been making for months that his day-to-day trading was handled by an outside adviser, without his input. Perdue, The Times reported, had direct input with his adviser into a stock trade he made early this year involving Atlanta-based Cardlytics, where Perdue had been a board member before being elected to the Senate.
Perdue contacted his wealth manager at Goldman Sachs to sell Cardlytics stock, resulting in a Jan. 23 trade worth between $1 million and $5 million, according to The Times. Six weeks later, the company’s stock cratered after an executive shakeup at the company was announced, and Perdue bought shares back at a bargain price. The stock has quadrupled in value since then.
The Justice Department probe included questions about whether Perdue had insider knowledge of material information at the company. The FBI interviewed Perdue in June. After a grand jury subpoena produced hundreds of pages of documents and emails, the Justice Department concluded its investigation sometime over the summer without filing charges, according to The Times.
It’s unclear from the public record the extent to which the Senate Ethics Committee review examined the Cardlytics trade, although a campaign spokesman said it was part of the review.
Boxer, the former California senator, said when she led the Ethics Committee members tried to avoid completing investigations close to elections to prevent their work from becoming overly politicized.
“We knew that an Ethics Committee complaint could become a weapon to be used against sitting senators close to an election,” she said. “We didn’t want to have that issue every time somebody was up” for reelection.
Conflicts of interest
Richard W. Painter, a University of Minnesota law professor and securities fraud expert who served as a chief ethics lawyer in George W. Bush’s White House, said the Ethics Committee is not equipped to investigate or monitor complex inside trading issues.
“It looks terrible,” said Painter, a former Republican who ran for Senate in the Democratic primary in 2018 on a platform focused on impeaching President Trump. “You’re receiving all kinds of non-public information in your job as a member of Congress and you’re trading all these stocks. It’s like a congressman walking around the red light district leering at the prostitutes while saying he has no intention to hire them.”
Perdue and Loeffler both restructured their portfolios after questions intensified last spring. They announced they were divesting of most of their individual stocks and moving to mutual funds and exchange-traded funds.
“I’m not doing this because I have to,” Loeffler said in an op-ed in the Wall Street Journal in April. “I’ve done everything the right way and in compliance with Securities and Exchange Commission regulations, Senate ethics rules and U.S. law.”
While the STOCK Act, signed by President Barack Obama in 2012, took aim at insider trading by members of Congress, critics say only an outright ban on owning individual stocks can restore public confidence.
Boxer said the Ethics Committee strongly advised senators to put their holdings into blind trusts because if they traded stocks “at best, you’d look like you were conflicted. At the worst, you actually were conflicted.”
Today, only a handful of senators seem to have taken the committee’s advice.
