Are there really no suspicious trades in Congress?

In an interview published on November 27, 2024, Representative Dan Crenshaw caused something of a social media storm when he claimed that there are no discernible cases of suspicious Congressional trades once Nancy Pelosi is disregarded.

Many who have been following the trades made by members of America’s two houses of parliament were quick to disagree, pointing out that examples are numerous and frequently egregious – though, just as in the case of Former Speaker Pelosi – very difficult to decisively prove.

The claims were, in part, made to downplay the importance of the proposed bans or limitations on Congressional trading:

Anyway, um, are there’s a couple cases like in wherein Nancy Pelosi has some very, uh, suspicious timing of her trades. Yeah, that, that has happened, aye, but nobody else can point any other um examples out.  So sure, yeah why not don’t let us trade stocks? How about how about, how about we’ll just keep whipping ourselves let’s, how about we don’t make any money either, how about like just cut our paychecks?

Crenshaw’s net worth is estimated at about $1.5 million.

Seeking to discover – or at least approach – the truth of the matter, Finbold examined some of the most recent and interesting trades made by U.S. politicians and tried to discern why they might be considered suspicious.

Are all Congressional trades suspicious?

While perhaps a strange place to begin, it is important to determine why Congressional trades can arguably be deemed suspicious automatically and why the current regulatory framework to prevent abuses is insufficient.

The first piece of evidence, though circumstantial, comes in the name and goal of the main piece of legislation tackling the issue of trading within the Senate and the House of Representatives: Stop Trading on Congressional Knowledge (STOCK) Act of 2012.

Specifically, the name and the introduction of the act carry the unmistakable yet unprovable implication that it was designed to tackle a very real issue of politicians choosing their investments based on non-public information.

‘Rules for thee, not for me’

Even then, the law appears to have done little more than provide the many Congressional copy-trading strategies. Indeed, the fines for violating the law are minuscule – usually cited as $200 and frequently waves – while the violators are seldom investigated and even when there is a probe, as in 2020, the suspects get cleared.

In September and October 2024, there were two prominent examples of Congresspeople committing egregious violations of the STOCKS Act. As Finbold reported on September 8, Representative John James from Michigan disclosed dozens of nearly year-old trades, thus significantly exceeding the 45-day deadline.

Representative Darrell Issa of California did the exact same thing at the end of the same month and the beginning of the next, reporting a large number of massive trades. Still, Issa’s example is arguably worse, as, in some cases, his disclosures were 500 days late.

There are no reports indicating either politician is being investigated or will face a serious penalty for breaking the law.

What makes specific Congressional trades suspicious?

Looking at specific trades, a common pattern is seen with suspicious investments: a Congressperson will buy the shares of an obscure small or mid-cap company that operates in an industry they oversee and is frequently based in the politician’s state. 

Sometimes, the cherry on top is the company being granted a government contract soon after the trade.

Numerous examples of trades roughly following the pattern have been reported in 2024, with at least three stirring controversy in recent months.

Representative Debbie Wasserman-Schultz – who sits on the Subcommittee on Environment, Manufacturing, and Critical Minerals – made a significant investment in August in a low-profile company called Hecla Mining Company (NYSE: HL). Within a month and a half, she could boast about a 40% profit.

On November 12, Senator Tina Smith – a Senate Committee on Health member – purchased up to $100,000 worth of shares of a medical device company, Tactile Systems (NASDAQ: TCDM), after a year-long hiatus. Within two weeks, the investment made her up to $25,000.

Finally, on November 27, FInbold reported about a May investment in DT Midstream (NYSE: DTM), a little-known natural gas company, executed by Representative Maria Elvira Salazar. 

The trade was suspicious for returning 73% within just 7 months and because the Congresswoman serves on the House Committee on Foreign Affairs – a beneficial role for anyone trading shares susceptible to geopolitical pressures.

Featured image via Shutterstock