On Jan. 24, Senate Intelligence Committee Chairman Richard Burr, R-N.C., attended a private, all-senators briefing regarding the novel coronavirus outbreak. At the briefing, top administration health officials identified coronavirus as an emerging public health threat and advised senators to prepare to respond as the situation developed. Sen. Kelly Loeffler, R-G.A., received the same briefing.
At the time, most Americans did not understand the severity of the virus and the market had not yet begun to fall. In fact, just days after the briefing, President Trump reassured a crowd at an Iowa rally that the U.S. had the situation well under control and there was “very little problem in [the] country.”
However, Burr and Loeffler knew there was an incongruity between the information they were presented at the briefing and the public’s understanding of coronavirus. If they had criticized Trump for his inaction, they could have potentially altered the course the virus took by encouraging the Trump administration to implement preventative measures. But instead, the senators sold large stock holdings, cashing in before coronavirus’s spread sent the stock market spiraling downward.
Senate records show that Burr and his wife sold off a significant percentage of their stocks in late January and mid-February, unloading between $600,000 and $1.7 million of their holdings in more than 30 separate transactions. Burr’s biggest sales included companies that are most economically vulnerable during a health crisis. He sold up to $150,000 worth of shares of Wyndham Hotels and Resorts, a company that has lost two-thirds of its value in the past month. Additionally, he sold up to $100,000 of shares of Extended Stay America, a hospitality chain that is now worth less than half of what they did in January.
Similarly, Loeffler and her husband sold 27 stocks between Jan. 24 and Feb. 14 at a value between $1.28 million and $3.1 million. Loeffler’s first transaction was a sale of stock in Resideo Technologies, a company whose stock has fallen by more than half since late January.
Several other senators also sold their stocks earlier in the year. Sen. Dianne Feinstein, D-C.A., sold $1.5 million to $6 million worth of shares of Allogene Therapeutics between Jan. 31 and Feb. 18. However, Feinstein’s sales drew little suspicion because she did not attend the Jan. 24 briefing; her assets are in a blind trust, meaning she did not make the decision to sell; and the transaction lost her money because the biotechnology stock has risen since then.
Further, Sen. James Inhofe, R-O.K., an ex-officio Intelligence Committee member, sold around $400,000 of stock in Apple, PayPal and real estate firms. Despite this, Inhofe’s transactions, like Feinstein’s, were largely dismissed because they were part of a systematic selling of stocks that he started months before the coronavirus outbreak.
Of the four senators who reportedly sold stock before the market crash, Burr and Loeffler have been most criticized for selling their holdings in direct response to the briefing in January. Under the Stop Trading on Congressional Knowledge (STOCK) Act of 2012, members of Congress are required by law to disclose their securities transactions. Additionally, the STOCK Act prevents lawmakers from using nonpublic, material information for personal financial gain.
Because the information concerning coronavirus was not available to the public at the time Burr and Loeffler sold stocks, the senators may have violated the STOCK Act’s provision on trading based on nonpublic information. While the law does not provide for a criminal penalty, violators can face substantial fines.
The allegations aren't just wrong, they are completely false. I'm not involved in the decision-making of these trades, nor have I been in communication with my third-party financial advisors about them. I have no knowledge of these trades until well after they are made. pic.twitter.com/7BC10oW8Ry
— Senator Kelly Loeffler (@SenatorLoeffler) March 20, 2020
Since information about their trading and investment decisions was released, Burr and Loeffler have both denied allegations of wrongdoing.
Burr released a statement claiming that he relied solely on “public news reports” about the crisis from CNBC’s daily health and science reporting from Asia to guide his decisions regarding the sale of stocks. He has also asked the Senate Ethics Committee to open a review of his case.
Loeffler was a former executive at Intercontinental Exchange, which owns the New York Stock Exchange. Her husband, Jeffrey Sprecher, is currently the company’s CEO and chairman. In a statement, Intercontinental Exchange said Loeffler’s transactions were executed by “financial advisers without Sprecher’s or Senator Loeffler’s input or direction.”
Loeffler filled a senate seat last year after being appointed by Georgia’s governor, and is running for election this November. Burr announced in 2016 that he would not be seeking reelection.
The rules regarding trading on information received as a member of Congress are complicated so it's hard to say based on this report, but in most contexts this is a crime. And technical criminality aside, it is an immense and outrageous abuse of the public trust. https://t.co/F0TQlDRzrW
— Susan Hennessey (@Susan_Hennessey) March 19, 2020
Now, members of both political parties are calling on Burr and Loeffler to resign. From Rep. Alexandria Ocasio-Cortez, D-N.Y., to Fox News’ Tucker Carlson, many believe that Burr and Loeffler have violated their duty of trust and confidence to the nation with respect to handling nonpublic information.
As Noah Bookbinder, director of the group Citizens for Responsibility and Ethics in Washington, said: “It appears that in a time of crisis, these senators chose instead to serve themselves, violating the public trust and abdicating their duty. They must be immediately investigated.”