It’s All About the Money: Insider Trading Continues to Mar Any Trust in Texas Politicians and Gov’t

Taylor: Shame continues for Texas members of Congress engaged in stock trading

JAN 25, 2023 | REPUBLISHED BY LIT: JAN 29, 2023

I’m continuing to name and shame members of Congress from Texas who trade individual stocks — mostly because it’s such an obvious avenue for insider-type trading, either because of special access to information or through special regulatory duties, subpoena power or committee assignments.

It’s gross and it should be banned.

Almost all white-collar professionals subject themselves to conflict-of-interest rules that limit their investment behavior — lawyers, researchers, consultants, bankers, brokers, professors, and nonprofit board members and executives.

Not only do they want to ensure their professional decisions are not self-dealing, they also want to remove the possible perception that they are. Two regional presidents and one vice chairman of the Federal Reserve resigned from their jobs early last year after trading individual stocks, as they should have.

Perception matters as much as reality. We would expect the same or a higher standard from members of Congress, but in fact, there is no such standard. No law forbids a member of the Financial Services Committee from trading individual bank stocks, for example, which is absurd.

If you want to follow along congressional stock trading from home, I recommend the searchable database on capitoltrades.com.

NANCY PELOSI

In January 2022 it looked like we had momentum toward banning individual stock trading by members of Congress, as longtime holdout and then-House Speaker Nancy Pelosi finally agreed to bring a bill to that effect. Alas, the clock ran out on her speakership.

KEVIN MCCARTHY

Newly elected House Speaker Kevin McCarthy previously promised to ban congressional stock trading, so with hope eternal and a burst of optimism, I will continue to raise the issue.

Side note: I’ll bet that McCarthy is gone as House Speaker before he passes a bill to ban congressional trading of individual stocks.

MICHAEL MCCAUL

Rep. Michael McCaul, R-Austin, is by far the most active stock-trading member of Congress in Texas, as well as the most active stock trader in the United States in 2022, according to financial site Unusual Whales.

Throughout 2022, McCaul reported about 100 stock transactions per month, totaling millions of dollars, for an estimated annual total of $176 million in share value.

His family’s fortune — derived from his marriage to the daughter of the founder of Clear Channel Communications (now known as iHeart Media) — was estimated in 2011 at just under $300 million.

He continued reporting this stock-trading pace in November and December, with 84 and 126 trades, respectively.

If McCaul had clear conflicts of interest in his trading, it would be hard to discern amid all of the noise of his transactions. But he shouldn’t make us doubt him. His family fortune should be invested in a blind trust.

PAT FALLON

Rep. Patrick Fallon’s, R-North Texas, individual 2022 stock trading involved buying shares of Twitter in January 2022 and then selling those shares as part of the company’s going-private transaction at the end of October 2022.

ELON MUSK

In the six months between the Elon Musk-announced intention to acquire Twitter and the close of the transaction, various branches of the federal government investigated Twitter, including the Securities and Exchange Commission and Federal Trade Commission.

PEITER ZATKO

Whistleblower Peiter Zatko, former chief technologist for Twitter, testified before the Senate Judiciary Committee in September 2022.

It’s just this sort of regulatory power and interaction that should make individual stock trading by members of Congress forbidden.

Incidentally, Unusual Whales reports that Fallon’s Twitter trade gave him the best performing results of any member of Congress in 2022, beating the S&P 500 by 51.6 percent.

MICHAEL BURGESS

Rep. Michael Burgess, R-Denton, continued to pursue a combination of stock trades and option trades.

He sold up to $50,000 of Morgan Stanley shares.

In November, he also pursued a buy and call-write strategy on Disney, meaning he bought up to $50,000 of shares, then sold a one-month call option on up to $15,000 of Disney.

Three times he also sold up to $15,000 of one-month calls on medical devices company Stryker, a stock he actively traded earlier in the year.

Please don’t try this buy and call-write strategy at home, not because it’s so clever and complicated but rather because it’s just not a good personal finance practice.

Whichever broker sold him on this idea is making money, though I doubt Burgess will do so using this strategy in the long run.

I’m embarrassed for him.

LLOYD DOGGETT

Rep. Lloyd Doggett, D-Austin, continued the programmatic trading he’s done all year, buying a limited list of repeating large-cap retail names in $1,000 to $5,000 increments each month: Home Depot, IBM, Johnson & Johnson, PPG Industries and Coca Cola.

DAN CRENSHAW

Rep. Dan Crenshaw, R-Harris County, had the most notable cowboy-trading style of all Texas representatives in 2022, buying and selling in short time frames and preferring turbo-charged tech stocks and a three-times levered bank-shares exchange-traded fund called Direxion Financial Bull.

He bought shares in that ETF again in October, as well as tech companies Amazon, Apple, Meta and Google; Wynn, the casino company; and an oil ETF, in sizes ranging from $1,000 to $15,000.

It’s all very on-brand for him, and a casino company is the cherry on top.

Giddy-up, Dan.

VAN TAYLOR

Rep. Van Taylor, R-Plano, was not up for re-election in 2022, so his stock sales and disclosures occurred after the November election, and when he was scheduled to leave office.

He reported sales of up to $10 million in oil and gas companies Exxon and Occidental Petroleum, and up to $250,000 of Bristol Myers Squibb and $500,000 of Moodys, as well as smaller positions in Eli Lilly and Santos.

I mostly mention Taylor for two noteworthy facts.

Although we are not related and I don’t recall ever speaking directly with him, I did go to college with him, and we shared a government class for one semester.

After serving two terms in office in March 2022, he declined to continue in his Republican primary runoff.

Taylor admitted to an affair with Tania Joya, the “ISIS Bride,” so-named because she had previously been married to American-born jihadist John Georgelas, who joined the Islamic State.

Joya claimed the affair with Taylor lasted nine months after they met during a “deprogramming” session for jihadists and that she had received from Taylor at least $5,000 to pay off her credit card bills.

Taylor apologized to his family, served out his term, and sold lots of public company shares in November after the election. Based on his stock trading disclosures, he won’t be short for money in retirement from Congress.

VINCENTE GONZALEZ

And finally, Rep. Vicente Gonzalez, D-McAllen, traded earlier in 2022, but he has not done so since I last wrote about this topic in October. Good job, Vicente.

PETE SESSIONS

Meanwhile, Rep. Pete Sessions, R-Waco, only traded U.S. Treasury bonds since October, a security I don’t consider subject to insider trading — unless we get further into the congressionally created fake crisis of the debt ceiling.

Taylor: Congressional stock trading — Can we get our elected representative to stop doing this?

NOV 9, 2022 | REPUBLISHED BY LIT: JAN 29, 2023

All I want for Christmas is a ban on members of Congress trading individual stocks.

STOCK ACT

In 2012, Congress passed the STOCK Act, short for Stop Trading on Congressional Knowledge, which requires disclosure of securities trading with some extremely minor penalties for noncompliance.

Based on those disclosures and other reporting, I created a spreadsheet of trading by Texas’ congressional delegation this year through September. I’ll get into that in a moment.

In the meantime, it’s important to understand that the correct amount of individual stock trading by members of Congress is zero.

A member of Congress seeking to invest in markets should put such investments in a blind trust or a diversified portfolio of stock mutual funds, preferably not focused on a specific sector.

This is because members of Congress have access to information that the rest of us do not, as well as public platforms and the ability to cast votes affecting industries and companies.

We should be certain that their support or opposition to industries, companies, regulations and government spending come from a sincere belief rather than financial self-interest.

So here’s what the Texas delegation has been up to this year:

Eight members of Congress have bought or sold individual stocks so far in 2022.

A New York Times report on trades from 2019 to 2021 also supplements my descriptions.

MICHAEL MCCAUL

Among the Texas delegation, Rep. Michael McCaul, R-Austin, is by far the most active, buying and selling millions of dollars of shares every month through hundreds of trades per month.

His stock portfolio activity makes him, in industry parlance, “a whale.”

McCaul is the son-in-law of the founder of Clear Channel Communications, now named iHeartMedia, with a net worth 10 years ago estimated at $300 million.

The New York Times reports that from 2020 to 2021, McCaul family members bought and sold stock in IBM, which has major contracts with the Department of Homeland Security, while McCaul served on the Homeland Security Committee.

Family members also traded millions of dollars of shares in UPS Inc. and Meta Platform Inc. at a time those companies were testifying before congressional committees on which he served.

PETE SESSIONS

Rep. Pete Sessions, R-Waco, has been the next most active this year, trading 31 times this year in amounts ranging from $1,000 to $50,000 at a time in 28 companies.

In previous years, the Times reports that Sessions made trades in Bank of Nova Scotia and JPMorgan Chase after he was appointed to the House Financial Services Committee.

MICHAEL BURGESS

Rep. Michael Burgess, R-Denton, traded 22 times on seven securities, in increments of $1,000 to $50,000.

The majority of his focus was on 12 trades involving Stryker Corp., a medical device company.

His preferred strategy appears to be a call-write strategy, in which he sells one-month call options. This would mean he ended up selling shares in Stryker when the stock goes up over a short period of time.

He also traded shares in Microsoft, Disney, Amazon, Ford, Abbott Laboratories and Berkshire Hathaway in 2022.

In previous years, the Times reported that eight of his nine individual trades were in companies related to the House Energy and Commerce subcommittees, on which Burgess serves.

VINCENTE GONZALEZ

Rep. Vicente Gonzalez, D-McAllen, bought $100,000 to $250,000 of Tesla stock in May 2022.

PATRICK FALLON

Rep. Patrick Fallon, R-North Texas, bought $65,000 to $150,000 of Twitter shares in January and sold $250,000 to $500,000 of Verizon shares that same month.

A report by Business Insider found that Fallon had 118 late disclosures in violation of the STOCK Act, making him unusually noncompliant with the 2012 law.

The Times reported that in previous years Fallon bought and sold stock in Amazon, Microsoft and Boeing while serving as a member of the House Armed Services Committee. All three companies had important business with the Department of Defense.

LLOYD DOGGETT

Rep. Lloyd Doggett, D-Austin, has the most programmatic style, making purchases of $1,000 to $15,000 every month from February through October this year in a repeating list of six companies: Proctor and Gamble, IBM, Home Depot, Coca Cola, Johnson & Johnson and PPG Industries.

AUGUST PFLUGER

Rep. August Pfluger, R-San Angelo, sold Microsoft and bought Warner Brothers and Liberty Media in April 2022, in amounts totaling $50,000 or less. He incurred 12 STOCK Act violations for late disclosures in past years, according to Business Insider.

DAN CRENSHAW

And finally, Rep. Dan Crenshaw, R-Harris County, traded in January 2022 with the most apparently “cowboy” trading style.

Based on sales reported in 2022, Crenshaw punted on the bankrupt meme-stock of Hertz.

He bought and then sold Rivian Motors within a week, just as the shares were crashing, while also selling Tesla, Boeing, Southwest Airlines and — most interestingly — a three-times leveraged exchange-traded fund on bank shares.

Amounts ranged from $1,000 to $15,000. Dan, please step away from your Robinhood trading app before you do yourself more harm.

Crenshaw had eight STOCK Act violations, according to Business Insider.

The Times reported that in previous years he sold shares in Kinder Morgan while he was a member of the Energy and Commerce subcommittee on Environment and Climate Change.

He had also bought shares in Boeing while he was a member of the committee that oversees the Homeland Security Department.

LIZZIE FLETCHER

Although Rep. Lizzie Fletcher, D-Houston, has not made stock trades this year and has since decided to cease individual stock trading, the Times reports in previous years that she bought and sold stocks including in Carnival Corp. and FedEx while she was a member of the Transportation and Infrastructure Committee.

JOHN CORNYN

Meanwhile, in the other legislative chamber, Sen. John Cornyn, R-Texas, according to his 2022 financial disclosure statement for calendar year 2021, does not appear to own individual stocks, but rather owns diversified mutual funds — a better choice.

TED CRUZ

Sen. Ted Cruz, R-Texas, according to his 2022 financial disclosure statement for calendar year 2021, owns individual positions in energy companies Exxon, One Gas and EPD totaling $165,000 to $400,000.

He reported buying up to $50,000 of a “Bitcoin exchange platform” in January.

He also owns diversified mutual funds, as well as up to $5 million of stock in Goldman Sachs, where his wife has long worked.

Back to the main point of why members of Congress should never trade individual stocks.

It is not enough to think that 95 percent of congressional votes are honest or that 95 percent of Congress members are honest. The existence of the bad 5 percent — I am making up this number; hopefully, it is less than 1 percent — puts the entire rest of Congress into question.

It should be deeply in the interest of all members of Congress to reduce financial suspicion about their motivations.

They should want to ban stock trading by other members of Congress to protect their own reputations.

KEVIN MCCARTHY

The good news is that House Minority Leader Kevin McCarthy, R-Calif., who is likely to be the next House speaker, has expressed support for a ban on individual stock trading by members of Congress.

NANCY PELOSI

The issue had languished for a long time without House Speaker Nancy Pelosi’s support, which some cynically thought was because her husband — Paul Pelosi, recently in the news as the victim of a home-invasion and attack — was a large and active investor in individual stocks.

She came around to support the issue by early 2022, but she did not bring a bill on a stock trading ban to a vote before the Nov. 8 election.

The bad news is that incoming reformers like McCarthy tend to forget about nitpicky ethics rules like stock-trading bans once they are in power. Financial ethics are not a red meat-and-potatoes type of issue likely to stir the Republican base.

But it’s my kind of issue.

Texans should demand that their members of Congress not only stop trading in ways that raise red flags, but also vote to eliminate conflicts of interest — and appearances of conflicts — whenever possible.