This is the first entry in in the Progressive Assault blog about investments - and it concerns a series of investments that stink - that stink like a rotten fish, or more aptly, like a rotten politician. I believe that stink is from the investments that Georgia Senator Kelly Loeffler and her husband pulled by making investments (and lots of profits) on what was private, inside information that she received in a secret Senate briefing on the coronavirus.
Georgia Senator and Atlanta Dream co-owner Kelly Loeffler. Image: Twitter/@The Hill.
In the past members of congress were not specifically prohibited from using nonpublic information gained in hearings for financial gain. And not surprisingly many of them got rich. But that was all changed by the 2012 Stock Act. This expressly prohibited anyone in congress from using private, nondisclosed information from making any kind of personal gain. This was designed and passed specifically to stop members of congress from trading on inside information not available to the public.
Even out here in California progressives have probably heard of Kelly Loeffler. She is the junior senator of Georgia, the women that the Georgia Governor Brian Kemp appointed to replace former Senator Johnny Isakson after he resigned due to health issues.
She is also the owner of the Atlanta Dream basketball team, a constant critic of Black Lives Matter as well as her own team (whenever they express their support for BLM), an ardent supporter of Donald Trump and a thorough reactionary conservative. Here is how she described herself in an ad that appeared in the Atlanta Journal-Constitution newspaper, as reported by Craig Bluestein on December 4, 2019, “I haven’t spent my life trying to get to Washington. But here’s what folks are going to find out about me: I’m a lifelong conservative. Pro-Second Amendment. Pro- military. Pro-wall and pro-Trump…. I will make no apologies for my conservative values and will proudly support President’s conservative judges.”
Progressives should pay close attention to two things in the above quote from Loeffler: that she did not spend her entire life trying to get into Washington and that she is a supporter of Donald Trump.
Indeed, Loeffler has not been trying to get into Washington. Instead, she has spent most of her working life in the field of finance and investments. And this fact is the key to building the argument that she and her husband are guilty of insider trading.
Before making the case for Loeffler and her husband profiting from investments made on inside information it is necessary to explain a little bit about the politics of Loeffler’s appointment to interim senator.
When Johnny Isakson announced that he would resign due to poor health Georgia Governor Brian Kemp decided to appoint Kelly Loeffler, a long time businesswoman with no political experience, to replace him. And for a very important reason.
Kemp has been worried that Republicans have been losing support among suburban women in his state, and evidently believed that appointing Kelly Loeffler would help them shore up support with this crucial block of voters (pretty hilarious when you consider that Loeffler and her husband are multimillionaires, live in a house that is reported to cost 10 million dollars and has no children - not really someone that can relate to ordinary women living in the suburbs). And even though Donald Trump, the great Lord of the Manor for conservatives, supported Doug Collins, the appointment went to Loeffler.
I believe that Kelly Loeffler used undisclosed, nonpublic information that she received from the testimony given to the Senate Intelligence Committee to buy and sell stocks and other instruments that enriched both her and her husband. Hugely, as Donald Trump would say.
In January 2020, Kelly Loeffler took her seat as the junior Senator from Georgia. She was placed on the Senate Intelligence Committee and was present on January 24th when the committee heard testimony from top public health officials, among them the Director of the Centers for Disease Control and Prevention (CDCP) Robert Redfield and Dr. Anthony Fauci.
In late March and early April federal authorities investigate the sale of stock made by four people, Senators Richard Burr, R-NC; Kelly Loeffler, R-GA; Dianne Feinstein, D-CA, and James Inhofe, R-OK for possible violations of insider trading. The investigation, based on each Senator’s financial disclosure form, centered on huge sales of stock following soon or closely after the January 24th.
https://www.newsobserver.com/opinion/article241334586.html
By the end of May only Richard Burr remained under investigation. A Senate Ethics Committee, chaired and run by Republicans, cleared all of the others of ethical wrongdoing.
Burr certainly has the most outwardly suspicious behavior to explain. And the case against Feinstein and Inhofe were certainly weak - especially so for Feinstein whoes investments were run through a blind trust.
But Loeffler is a different case. I have been a stockbroker and financial advisor for almost thirty years. And her explanations sound phony as hell.. Like I said, she stinks like a rotten fish.
To make the case against Loeffler it helps to review a timeline of her actions and statements. After that he will be easier to pick apart the defense of her financial transactions and her political attacks.
January 6 - January 24: Loeffler is seated as Senator from Georgia. She does no buying or selling of stock at all during this time.
January 24: The Senate Intelligence Committee meets to hear testimony on the coronavirus problem.
January 24 - February 14: Kelly Loeffler and/or husband begin selling off stock. As reported by Fortune Magazine on March 24, 2020, Loeffler and her husband began by selling 27 stocks on January 24, according to her financial disclosure form, including Auto Zone and Ross Stores, worth millions of dollars. Citation Altogether, the stock sales made jointly by Loeffler and her husband were worth $1,275,000 and $3,100,000. WP
January 26: Senate minority leader Chuck Schumer, alarmed by the increase of the coronavirus, calls on the Department of Health and Human Services to declare a coronavirus public health emergency to free up $85 million in funding for federal agencies. Schumer states, “Should the outbreak get worse they are going to need immediate access to critical federal funds that they can’t access.” Politico
February 12: The Dow Jones Industrial Average closes at its highest-ever point. (WP3/20/20)
February 14: Loeffler buys Citrix, a company that provides web-based services including teleconferencing, and Oracle. WP
February 14: According to financial disclosure form Loeffler sold off between 200,001 and $500,000 in Exxon stock from joint account with husband. USA Today, in an article covering Loeffler’s sales writes, “The value of Exxon’s stock has also been affected by the virus and has seen it’s value at least halved since the beginning of the year.” (Senators sold stocks just before coronavirus sunk market: here’s what we know”, Nicholas Wu, USA Today, March 20, 2020
February 20 - 21: Bloomberg Magazine reported on April 2, that Loeffler along with her husband bought a series of options on stocks. Bloomberg with the details, “There was a different series of transactions that allowed them to take the money upfront while betting the stock prices even if crushed in the near term, would rebound later this year. The strategy, involving the sale of put options, is commonly used by hedged funds to take advantage of fluctuating markets.”
February 24 - March 13: Loeffler and her husband continue buying and selling. Bloomberg reported that detailed disclosure show that she and her husband bought stocks worth $590,557 between February 24 and March 13, and sold stocks worth 845,557 from Feb. 20 to March 9.
February 26: Loeffler and her husband sell $3.5 million of Intercontinental Exchange stock at an average price of $93.42. They also sold 15.3 million worth of ICE shares on March 11, when the stock traded around $87.
February 28: Loeffler, in a tweet, attacks Democrats by saying that they have dangerously and intentionally mislead the American public on coronavirus readiness and praises Donald Trump and his administration for doing a great job of keeping America safe and healthy. Attempts to downplay the seriousness of the coronavirus will simultaneously praising Donald Trump’s ability to handle it. WP
March 10: Loeffler expresses her confidence and admiration in how Donald Trump is handling the coronavirus problem by tweeting, “Concerned about #coronavirus? Remember this: The consumer is strong, the economy is strong, & jobs are growing, which puts us in the best economic position to tackle #COVID19 & keep Americans safe.”
March 11: Loeffler continues to support Trump while attacking Democrats in another tweet, “As Democrats continue to play politics with the #coronavirus, the White House is working to actually help the American people. Proud to work with @realdonaldtrump’s administration to protect the American public during this public health emergency.” (Washington Post)
March 12: Loeffler sells $46,027 worth of stock in an online travel company in the day leading up to President Trump’s ban on most European travel to the United States… She purchased the shares of Booking Holdings Co. along with her husband on March 6, the day that Loeffler traveled with Trump to the Centers for Disease Control and Prevention in Atlanta for an update on the coronavirus response… The shares were sold on March 10 and 11. (Bloomberg) (Note: Trump issued the travel ban on March 12.)
March 19: Loeffler defends herself against criticism of her stock sales by tweeting, “This is a ridiculous and baseless attack. I do not make investment decisions for my portfolio. Investment decisions are made by multiple third-party advisors without my or my husband’s knowledge or involvement.”
March 20: Loeffler again protest her innocence by tweeting, “I just want to set the record straight there that certainly I had no involvement.” This was made in specific reference to the millions of dollars in stock sales made in February after receiving private congressional briefings on the coronavirus outbreaks in January. (Timeline Washington Post)
March 23: Loeffler and her husband decide to liquidate their stock position and options holding (CNBC, Dan Mangan and Thomas Franck, CNBC, April 8, 2020)
May 26: Justice department clears three of the four senators suspected of insider trading (Loeffler, Feinstein and Inhofe) while leaving open the continued investigation of Richard Burr. Loeffler spokesman issues as statement, “Today’s clear exoneration of Senator Loeffler by the Department of Justice affirms what Senator Loeffler has said all along - she did nothing wrong.” (Justice Department clears 3 senators in stock sales investigation, but Burr’s case appears to be on going, Kristine Phillips, USA Today, May 26, 2020.)
While the investigation into Richard Burr continues the DOJ found no insider trading done by James Inhofe and Dianne Feinstein.
Inhofe maintained that he wasn’t even at the coronavirus briefing to hear the information, and in fact, did little trading at all. Feinstein uses a blind trust for her investments and husband does his separately and on his own. Neither Inhofe nor Feinstein is a sophisticated investor, has much real world experience with investments or finance and neither owns a stock exchange.
But that still leaves Kelly Loeffler. The Trump promoting, multimillionaire, appointee senator from Georgia is privileged to receive a highly confidential briefing on the exploding coronavirus problem then immediately starts a flurry of buying and selling stocks and other financial instruments. But she is innocent and looks squeaky clean after some or another form of investigation by the Trump Justice Department.
Kelly Loeffler, and the supposed DOJ investigation that cleared her, smell like rotten fish - or more like a rotten politician. I think that she is guilty of insider trading.
What exactly is insider trading?
On Wall Street we usually understand insider trading to mean that you have some specific and material information about a company or event, not available to the general public, that you use to gain an unfair advantage in buying or selling stocks (or other things). The advantage lies in the insider trader using the information to buy something before the public wants to buy it (causing the price to rise) or selling something before the public wants to dump it (causing the price to drop).
In the years I have been a financial advisor I have seen some classic cases of Wall Street brokers using insider information to make some huge (and very illegal) profits. In fact, even a small amount of inside information can produce gigantic gains. Especially in stock investments, even a scrap of information can be a huge advantage.
Here’s how we can build the case that Kelly Loeffler used secret information from the Senate Intelligence Committee’s coronavirus briefing to make profitable stock market trades.
-Loeffler can not be trusted to be ethical when she already has a serious conflict of interest in her senate duties.
Loffler preens that she maintains the highest standards of conduct in her political and business life. A public spokesperson even told the Atlanta Journal Constitution emphatically that Loeffler, “Holds herself to high standards of ethics and transparency, including acting in accordance with both the letter and the spirit of the law, which she has done at every step at her time in the senate and in her lengthy career in financial services.” (Forbes, 4/12020)
But Loeffler does not hesitate to pursue her senate career in such a way that creates a huge conflict of interest. Because she is perfectly fine with sitting on the Senate Agriculture Committee. Why is this a conflict of interest?
The Senate Agriculture Committee has jurisdiction over the CFTC, the Commodities Futures Trading Commission. The the CFTC has jurisdiction over Intercontinental Exchange. And the Intercontinental Exchange is owned by Kelly Loeffler husband, Jeffrey Sprecher. In fact, Sprecher is the chairman and CEO of Intercontinental Exchange, as well as being the chairman and owner of the New York Stock Exchange.
Intercontinental company is a kind of clearing house for the buying, selling, and settlement of payments in the trading of commodities (hog bellies, natural gas, etc.). This is a huge business and Intercontinental is an important part of it. And that brings it under the oversight of the CFTC, which regulates the commodities business and all companies involved in it to make sure that the trading is competitive and efficient and that investors are protected against manipulation, abuse and fraud.
Anything that Loeffler does to regulate the CFTC automatically affects her husband’s very big and lucrative business. Loeffler’s work on the agriculture committee is to regulate the CFTC, which means she is also regulating how and what her husband can do to make money from trading commodities. Did I mention that this is a huge business and makes its members a lot of money?
A truly ethical person would never allow herself to be in this position. But Kelly Loeffler is not ethical person.
-Loeffler and her husband are wealthy, financially sophisticated, and exceptionally well placed to carry out insider trading.
Kelly Loeffler is the richest person in the U.S. senate (which is saying a lot) and politically well placed to know information that other people don’t know or to hear to hear about it first. Her seat on the Senate Agriculture Committee gives her inside information on the regulatory body that overseas her husband’s businesses. Her husband is not only a multimillionaire but the owner of both the Intercontinental Exchange and the New York Stock Exchange. Which is to say that he is probably aware and conversant with every important issue affecting investments in stock, commodities, options and many other financial instruments.
Kelly Loeffler has worked in the financial services industry for more than 25 years, she worked to help her husband build Intercontinental Exchange, bought in as part owner of the Atlanta Dream, and was the head of Bakkt, a bitcoin-focused company that is a subsidiary of her husband’s company, Intercontinental Exchange. Interestingly enough, Loeffler was to receive a going away present of $9 million in the form of stock, options and other instruments from Bakkt. However, when she prematurely left the company on December 20 she was set to forfeit those benefits. That was part of her contract. However, ICE (and maybe her own husband) arbitrarily changed the terms of the agreement and she managed to snag $7.8 million. I guess it does pay to have friends in high places. (Bitcoindesk, May 7, 2020)
Loeffler and her husband have, by experience and association, an unparalleled ability and opportunity to guess what impact a piece of news would have on virtually any all kinds of investments. And they would certainly have the associations and contacts to easily, quickly, and quietly transmit even tiny, but very meaningful, pieces of information on to those who could use it on their behalf. They are surrounded by financial people all the time. Just a word or a few words at a cocktail party and the savvy financial guys know what to do.
Keep in mind that Loeffler’s main defense against insider trading is that she doesn’t make investment decisions herself, but rather relies outside financial advisors to manage her portfolio (the names of which, she refuses to disclose). But, as I will argue a little further, if you disclose to someone, even very obliquely, a piece, even a tidbit, of important nonpublic information, you are guilty of insider trading. And Loeffler and her husband are surrounded by investments professionals all the time.
-The timing of Loeffler’s trades is suspicious as hell, and demands very close scrutiny.
Kelly Loeffler has publicly protested that she disclosed no nonpublic information that she got from the January 24th Senate Intelligence briefing. But I have never heard, from her, her husband, an official from the Department of Justice or a member of the Senate Ethics committee, any explanation for the incredibly suspicious timing of her investment trades.
When it comes to trading (especially insider trading) timing is everything. Information moves quickly, and professional traders are always looking ahead to try and anticipate what the next move is going to be in the market. Profits are always made by moving in advance of news (that is, news that the public knows) and not from afterward. If you buy before the crowd, their purchases can raise the price of your stock tremendously and allow you to sell at a huge profit. If you sell before the crowd moves you can lock in a good profit and miss the drop. And the sales of the crowd afterward (the dumb money, as they say on Wall Street) lets you buy back the stock on which you just took a profit and buy it back cheaply. That way you can do it again.
Between the time that she took her seat in the Senate, January 6, and the day of the coronavirus briefing, January 24, Loeffler did no trades at all.
But then… but then… on January 24, and continuing on until February 12, she and her husband sold off 27 stocks, including AutoZone and Ross Stores. And these sales were worth millions of dollars.
No activity at all between January 6 and January 24. And then on the day of the briefing Someone wakes up and starts selling millions of dollars!? And in companies that would likely would be hurt by the coronavirus.
Remember what was reported by Bloomberg news: on January 24 Loeffler and her husband began selling stocks that were worth more between $1.2 million and $3.1 million (over several months). Even for someone of the Loeffler’s wealth, that is a lot of trades and a lot of money.
Those first stock transactions turned out to be very helpful to the cause of Kelly Loeffler’s pocketbook. Of the stocks that were initially sold on January 24, the sale of AutoZone was done at about $1,140.23/sh (if she bought the stock at the close of trading that day), and the sale of the Ross Stores was done at about $115.76/sh (again, the closing price). The price that Loeffler was able to get for AutoZone was very close to the high point of the year, and not long before that price took a severe drop. The sell of her shares in Ross Stores, at $115.76/sh was very close to the high point of the year, which was about $123/24/sh. The stock has not yet returned to that level since then. Suddenly selling high and avoiding a big drop. This is what catches the attention of the Security and Exchange Commission if you do it on Wall Street.
Whoever was doing those sales, and on whatever information she/they possessed, the timing continued to be very profitable for the Loeffler bank account. Only 16 trading days after the first round of trades someone started dumping the $200,000 to $500,000 worth of stock in Exxon. Again, good timing. At the time of sale, February 14 Exxon’s shares closed at $60.65/sh. After that time the price of the stock lost almost exactly half its value, dropped pretty quickly until it hit a low point of $31.45/sh on March 23. The price of the stock has yet to regain its February 14th price point. The fortuitous sales of those shares saved someone a hell of a lot of money!!
Not all of the early, quickly done stock transactions were sales, of course. Loeffler and her husband look to have profited handsomely by buying stock. Here, or course, I refer to her buy of Citrix, done on February 14, the very same day as the sell of Exxon stock. Evidently, someone was very busy.
The choice of Citrix was an insightful move on somebody’s part, as the company provides web-based services. This would be a nice stock to own if you had reason to believe that a lot of people were suddenly going to staying out of the office and instead using teleconferencing services. Which Citrix provides.
-Loeffler actively minimized the danger and impact of the coronavirus threat while making millions of dollars in stock and option trades.
Inside information is useful to the extent that you have it, others don’t, and you can employ it to keep ahead of other investors. During the time the Kelly Loeffler and her husband were trading millions of dollars in stock she was actively trying to minimize the threat of the coronavirus to distract people from thinking about it.
Refer to the statements made by Loeffler on February 28, March 10 and March 11. Each one was calculated to reassure everyone that Trump and the Republicans had the situation well in hand and there was nothing to worry about. And in her March 11 tweet she made it clear that the real villains were the Democrats who were playing politics with the virus.
Did Loeffler know from the January 24 briefing that the coronavirus dangerous and then purposefully send out reassuring message so that she could run her investments before other people caught on and started dumping stocks?
A good
Citations
“4 Senators sold stock after getting coronavirus threat briefing in January” David Kocieniewski, Fortune Magazine March 24,
“How damning are Richard Burr’s and Kelly Loeffler’s coronavirus stock trades? Let’s break it down.” Aaron Blake, The Washington Post March 20, 2020
“From distraction to disaster: How Coronavirus crept up on Washington” Natasha Bertrand and Maggie Severns, Politico, March 30, 2020
“Georgia Senator sold travel shares ahead of Trump flight ban,” Greg Farrell and Billy House, Bloomberg, April 2, 2020, updated April 3, 2020
Sen. Loeffler, CEO husband reportedly made options trades often used as hedges against volatility Thomas Franck, CNBC Markets April 3, 2020
“Weeks before Virus Panice, Intelligence Chairman Privately Raised Alarm, Sold Stocks” Tim Mak, NPR 3/19/2020