Slaughter, Duncan Introduce Bipartisan Legislation to Bring Transparency to Political Intelligence Industry
WASHINGTON, DC — Today, Representatives Louise M. Slaughter (D-NY) and John J. Duncan (R-TN) introduced the bipartisan Political Intelligence Transparency Act. The bill would bring long-overdue transparency to the political intelligence industry, which generates $400 million in annual profits by gleaning information from the halls of government and selling it to Wall Street to inform investment decisions. This industry continues to operate with little scrutiny despite its powerful impact on financial decision making. This legislation would expand the 2012 Stop Trading On Congressional Knowledge (STOCK) Act and subject those who engage in political intelligence to the same regulations and requirements as lobbyists.
“Five years ago, Congress came together to pass the STOCK Act, a law I wrote that continues to bring unethical trades into the light of day. It is beyond time to finally bring that kind of transparency to the political intelligence industry, which continues to operate in the shadows despite being a $400 million a year industry. The reforms included in this bill are the same kind of commonsense disclosure provisions Republicans and Democrats alike supported as part of the STOCK Act before they were removed by a last-minute political maneuver. This is the time to finally make them a reality. I want to thank Congressman Duncan for his continued leadership on this important issue,” said Slaughter.
“I am happy to be working with Rep. Slaughter on this non-partisan issue. I don’t see how anyone could argue that political intelligence activity should be allowed to continue behind closed doors to the benefit of only a very few elites. I have chosen to make transparency a priority by supporting other pieces of legislation introduced during both Democratic and Republican Presidents and Congresses. I hope to see my colleagues, on both sides of the aisle, do the same by supporting this bill,” Rep. Duncan said.
Every day, political intelligence firms help hedge funds and Wall Street investors profit from information not available to the public that is gathered from government sources. These firms have no oversight and can freely pass along information for investment purposes.
The Political Intelligence Transparency Act would bring much needed transparency to this industry by requiring political intelligence firms to register and comply with the same rules that apply to lobbyists. These include: registration with the House and Senate under the Lobbying Disclosure Act and revolving door restrictions for members of Congress, executive branch officials, and their staff and employees. Just like in the Lobbying Disclosure Act, the Political Intelligence Transparency Act carves out a clearly defined exemption for members of the media to collect and disseminate information from government sources.
The original STOCK Act contained requirements for disclosure and oversight of the political intelligence industry. These provisions were cosponsored in the House by 188 Democrats and 99 Republicans, and were passed by the Senate by a 96-3 margin. However, on the way to passage in the House, these political intelligence requirements were stripped from the bill by former Majority Leader Eric Cantor. Despite the bill sponsors’ best efforts, the STOCK Act was passed into law without political intelligence provisions.
Had these provisions passed in the original STOCK Act, they could have helped agencies with the investigation of a 2013 incident that is still working its way through the legal system. Just before the markets closed on April 1, 2013, shares of a number of health care companies spiked sharply. Minutes later, the Centers for Medicare & Medicaid Services announced that it would reverse an earlier decision to cut Medicare Advantage payment rates. A subsequent investigation revealed that a conversation earlier that day between a House Ways & Means Committee staffer and a political intelligence operative, himself a formerly well-placed congressional staffer, was the likely source of the tip-off. This matter is currently the subject of an ongoing SEC investigation.
In addition, on May 24, 2017, the U.S. Attorney for the Southern District of New York charged an employee of the Centers for Medicare & Medicaid Services (CMS) and four others with criminal insider trading violations. Between 2012 and 2014, the CMS employee allegedly passed information regarding reimbursement rates to a political intelligence operative, who then gave the information to a healthcare-focused hedge fund. The SEC complaint suggests the arrangement led to $3.9 million in profits for the hedge fund and $193,000 in fees for the political intelligence firm.
The Political Intelligence Transparency Act is endorsed by Public Citizen, Citizens for Responsibility and Ethics in Washington (CREW), the Sunlight Foundation, Common Cause, Campaign for Accountability, Center for Media and Democracy, and Government Accountability Project.
The introduction of this bill follows a separate bill introduced by Slaughter in April that would strengthen the STOCK Act and close ethics loopholes, which have been taken advantage of by members of Congress to purchase exclusive stock deals not available to the general public and take part in initial public offerings (IPOs) outside the United States. The End Congressional Stock Market Abuse Act would prohibit members from taking part in foreign IPOs, purchasing stock at discounted prices, selling stock at higher than market value, or from participating in private placement stock offerings.