Saturday, November 12, 2011

Blowing the whistle on the Capitol Hill Stock Exchange

Public support for Congress has been at an all-time low for months now, and thanks to the revelations of a K Street insider whose past relationship with Congress was cozy in the extreme, that public reaction’s likely to get a lot worse.

Time to welcome back an old favorite: the former lobbyist Jack Abramoff (he of the mail fraud and conspiracy conviction in 2006 and a conviction for corruption in 2008, he of the Boris Badenov wardrobe) has been out of federal prison since June 2010.

In his spare time — presumably the hours after working his shift at a kosher pizzeria in Baltimore, part of his halfway-house plea deal — Abramoff wrote “Capitol Punishment,” a book that chronicles his time as a Washington lobbyist.

In a Friday CNBC interview about the book, published on Nov. 7, Abramoff said that at least a dozen members of Congress are actively engaged in what amounts to insider trading of securities — buying and selling of equities based on their knowledge about what companies Congress may be investigating or planning to make the subject of congressional hearings in the future.

Abramoff also said that members of Congress and their staffs were taking advantage of pending disclosures by whistleblowers within a given company about to report uncomplimentary information about a company’s performance.

“These people should not be using whatever information they gain as public servants to benefit themselves, any more than they should be taking bribes," he told CNBC’s Eamon Javers.

In a separate CNBC interview, Craig Holman, a government affairs lobbyist with Public Citizen, said some senators have achieved a rate of return “12 percent higher” than that of ordinary investors. “For House members, it’s been 6 percent higher than the rest of us,” he said. “Either these members of Congress are geniuses or they know something we don’t know and they’re trading on that.

“Jack Abramoff talked about a dozen examples; it’s far more than that,” Holman said. “A third of senators are actively trading in stocks, 50 percent of the House members are actively trading in stocks. The problem is far more serious than Jack Abramoff told us.”

Holman also said that 72 congressional staffers are actively trading in securities involved in legislation on Capitol Hill.

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Apparently we can thank New York Democratic Rep. Louise Slaughter, ranking member of the House Rules Committee, for fighting the good fight on this inside Congress. With Minnesota Rep. Tim Walz and former Washington state Rep. Brian Baird, Slaughter has reintroduced the STOCK (Stop Trading on Congressional Knowledge) Act, which would bar Members of Congress and their staffs “from buying or selling securities, swaps, security based swaps, or commodity futures based on nonpublic information they obtain because of their status;” and stop Executive Branch employees “from buying or selling securities, swaps, security based swaps, or commodity futures based on nonpublic information they obtain because of their status ...”

It would also stop people from outside Congress from buying or selling stocks or commodity futures based on nonpublic information or tips from their buddies who work on the Hill.

The bill has been proposed in the House since 2006 but it’s gone nowhere, Holman said. “Not only has that legislation failed, it’s never got more than 14 co-sponsors. It [now] only has nine co-sponsors in the House. No hearing is scheduled, and no similar legislation has been introduced on the Senate side.”

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It’s clear that these disclosures have a purpose for Abramoff, besides helping him move copies of his book; they’re part of an obvious bid by Abramoff to restore his good name and return to society’s good graces. And fair enough: every felon deserves a chance once he’s back on the outside.

Time will tell whether the reintroduction of the STOCK Act will go any further this time than before. With the current impact of the Occupy movement across the country, the climate for serious reform of congressional investment ethics may be more favorable than it’s ever been before. A bill introduced during the heyday of the Bush #43 administration may actually have a shot this time.

In the 1987 film “Wall Street,” Gordon Gekko tells us “greed is good.” That may be true, but on Capitol Hill, it’s illegal. Among others, we can thank the man in the black fedora for bringing that fact back into the light.

Image credits: Abramoff: open Abramoff book cover: © 2011 WND Books. Slaughter: House photograph (public domain).

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