Fact Check: Beasley says 64 lawmakers 'have broken a law to stop insider stock trading'
It’s time for our weekly fact check of North Carolina politics. This week, we’re again looking at a claim made in this year’s U.S. Senate race. Democratic nominee and former State Supreme Court Chief Justice Cheri Beasley made this claim in a recent campaign ad:
Cheri Beasley: Sixty-four members of Congress, Republicans and Democrats, have broken a law to stop insider stock trading. Yet, Washington refuses to do anything about it.
64 members of Congress – Republicans and Democrats – have broken a law intended to stop insider stock trading.— Cheri Beasley (@CheriBeasleyNC) August 2, 2022
It’s time we ban members of Congress from trading stocks, because Senators should be working for you – not themselves. pic.twitter.com/hB3jDDKvGR
To find out if that's true, "Morning Edition" host Marshall Terry talks to Paul Specht of WRAL.
Marshall Terry: To begin with Paul, what law is Beasley referring to here?
Paul Specht: Beasley is referring to something called the STOCK Act, and that's meant to stop insider trading. In fact, it's short for Stop Trading on Congressional Knowledge Act of 2012. And what it does is require members of Congress to file reports within 30 to 45 days of themselves or their spouse or the dependent child making a financial transaction like a stock trade.
Terry: OK, so is Beasley right when she said 64 members of Congress have broken that law?
Specht: Well, her ad cites an article by Business Insider, and they're tracking members of Congress that have failed to report these disclosures within that 45 days. Almost every expert we spoke with said it is fair for Beasley to say these lawmakers are breaking the law if they file reports late.
Business Insider has tracked 71 members of Congress who have filed late, and their article includes sort of a range of violations. There are some people who were a couple of days late reporting and then there are more egregious cases by comparison of people not reporting for months, even over a year.
Terry: Were any of those cases insider trading?
Specht: Very, very few. And so many of the insider trading allegations are actually handled by the Department of Justice and the SEC. So this list mostly includes people who failed to properly report the financial trades and in almost no cases is there ever any severe punishment just for filing late.
Terry: Beasley’s ad doesn’t mention her opponent, Republican Congressman Ted Budd. Was he one of the members of Congress who filed late?
Specht: No, he's not. There are a couple of North Carolina representatives, though. The first being Madison Cawthorn. He's been late filing reports.
But the one that sticks out is Democrat Kathy Manning, who's from Greensboro. It mentions her failing to report trades on time, sometimes months late. Her office just sent us a statement saying that Manning has her financial investments handled by a third party and that she worked to rectify it as soon as she learned that an error had been made.
Terry: One of the experts you spoke with said: By filing late, some lawmakers can avoid the political consequence of public scrutiny. What does that mean exactly?
Specht: There's a lot of criticism of the current penalties for filing late. The first fee is $200 and then it escalates from there based on how late the report is and how many stock trades were involved. People say that that's not strong enough.
So oftentimes the assumption is that if it's going to look bad for them, they would rather wait to file than face public backlash. And one expert I spoke with, his name was Kendrick Payne. He's with the Campaign Legal Center. And he brought up the case of Richard Burr and Senator Rand Paul.
Richard Burr, obviously, is from North Carolina. Rand Paul from Kentucky. Burr filed his stock trades back in February or March 2020, where it was revealed that he dumped some stock just before the pandemic really took hold. And he was under investigation by the DOJ for that. They've dropped their case, but he faced a lot of backlash and frankly, still does.
But then you look at the case of Senator Rand Paul. His wife bought stock in a company that makes an antiviral drug used to treat COVID-19. And it happened. She bought it in February of 2020, again right before the pandemic started. Well, Rand Paul did not disclose that transaction until August 2021, according to The Washington Post. So this expert said, look, you know, Richard Burr complied with the law and faced a ton of heat. And then you have Rand Paul. He largely avoided that backlash because he waited 16 months to report.
Terry: Now you’ve been using the words “fee” and “penalty” interchangeably.” But they aren’t Is it a fee or a penalty? Why isn’t it a penalty instead of a fee?
Specht: It's a fee. And speaking with people who are familiar with that process, the House Ethics Committee, said it referred to it as a fee. And other experts are quick to point out this is not something that goes on anyone's criminal record. It doesn't even really register on a civil level either. This is an administrative fee. And so, yes, it's in statute. But this is something that rarely, if ever, reaches a level of criminality, at least if you just file late.
Terry: How did you rate this claim by Cheri Beasley?
Specht: In the end, we rated this half true. It's true that these members of Congress are violating a law in STOCK Act, but it sort of glosses over the fact that most lawmakers are accused of filing late reports. You know, the law is designed to stop insider trading, but most are not accused of that and they are subject to fees. So it's a little misleading to say that Washington isn't doing anything about it. There is a system in place that obviously Congress members have to pay if they violate it. So that's why we rated it half true.