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Good Luck Sending Any Senators to Jail for Insider Trading on Coronavirus

WASHINGTON – If you’re waiting for the hammer justice to fall on Senators who dumped stocks right before coronavirus fears tanked the market, keep waiting. Members of Congress are exceptionally hard to bust for insider trading, despite evidence they’re somehow mysteriously able to outperform even many expert hedge fund managers with brilliantly-timed stock trades. That’s…

Good Luck Sending Any Senators to Jail for Insider Trading on Coronavirus

WASHINGTON – If you’re waiting for the hammer justice to fall on Senators who dumped stocks right before coronavirus fears tanked the market, keep waiting.

Members of Congress are exceptionally hard to bust for insider trading, despite evidence they’re somehow mysteriously able to outperform even many expert hedge fund managers with brilliantly-timed stock trades.

That’s because legislators enjoy special privileges they can use to bog down investigations and limit the fallout, former prosecutors and others with experience probing Congressional wrongdoing told VICE News.

While it’s technically illegal for members of Congress to buy or sell stocks based on private information — such as intel they might have learned in classified briefings about the coronavirus threat weeks ago — there are plenty of reasons why they’re very unlikely to go to jail for insider trading. Only one member of Congress in history ever has.

“It stinks to high heaven,” said Duncan Levin, a former prosecutor who ran the financial crimes unit of the Manhattan District Attorney’s office. “Unequivocally, without a shadow of a doubt, there’s enough here to say that they may have broken the law. But such a case is much more complicated to actually bring than you’d think by reading Twitter.”

Investigators would need to prove that the private briefings included non-public, market-sensitive information that was used by officials to protect their wealth. So far, such a claim remains far from proven.

“There’s no question this conduct is morally wrong.”

“There’s no question this conduct is morally wrong,” said Mimi Rocah, a former prosecutor with the Southern District of New York. “The legal question here is whether they’ll skate by because of the technical requirements of the statutes.”

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Two Republican Senators have received the brunt of the criticism: Sen. Richard Burr of North Carolina, and Sen. Kelly Loeffler of Georgia. Both have denied wrongdoing.

Burr says he dumped up to $1.7 million in stock in mid-February based entirely on what he saw on television, and not the briefings he received as chairman of the powerful Senate Intelligence Committee. Loeffler, whose husband chairs the New York Stock Exchange, saved up to $1.5 million by selling after a Jan. 24 Senate Health Committee briefing. She says she relied on independent advisors and wasn’t personally involved in the trading decisions.

While at least four other senators and a scattering of House members and Congressional aides also adjusted their portfolios right before the crash, prosecutors will have to overcome special hurdles to even verify the facts about what really happened.

“It’s difficult to investigate sitting members: I’ve done it,” said Kevin Muhlendorf, who helped run fraud investigations at the Department of Justice and worked for the enforcement division of the Securities and Exchange Commission. “You have to jump through a lot of extra hoops.”

Protections for Congress

The Constitution provides one protective shield to members of Congress in what’s known as the speech and debate clause.

The text says that “for any Speech or Debate in either House,” members of Congress “shall not be questioned in any other Place.”

Broadly speaking, the clause has been interpreted to provide a degree of criminal and civil immunity for lawmakers when they’re engaging in official “legislative acts.” The rule has been used by members as a basis for refusing to answer subpoenas for information, and prosecutors must be careful that any evidence used to buttress their case avoids that prohibition.

“The speech or debate clause has been ridden pretty hard by defense attorneys representing members of the House or Senate,” said Robert Walker, former chief counsel of the Senate and House ethics committees and a former federal prosecutor. That “makes it very difficult to build a case against a member of Congress.”

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