[Vision2020] Another Horribly Diseased Whore

[Art Deco]

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   Rep. Bachus faces insider-trading investigation By Scott
Higham<http://www.washingtonpost.com/scott-higham/2011/03/02/ABt0vmP_page.html>and
Dan Keating, Thursday,
February 9, 6:30 PM

The Office of Congressional Ethics is investigating the* chairman of the
House Financial Services Committee* over possible violations of
insider-trading laws, according to sources familiar with the case.

Rep. Spencer Bachus (R-Ala.), who holds one of the most influential
positions in the House, has been a frequent trader on Capitol Hill, buying
stock options while overseeing the nation’s banking and financial services
industries.

The Office of Congressional Ethics, an independent investigative agency,
opened its probe late last year after focusing on numerous suspicious
trades on Bachus’s annual financial disclosure forms, the sources said. OCE
investigators have notified Bachus that he is under investigation and that
they have found probable cause to believe that insider-trading violations
have occurred.

The case is the first of its kind involving a member of Congress. It comes
at a time of intense public scrutiny of congressional ethics, with the
House passing legislation Thursday to tighten rules against insider trading
by lawmakers. The impetus for the legislation, a version of which passed in
the Senate a week earlier, came from a “60 Minutes” report and a book
mentioning Bachus’s trades, “Throw Them All
Out,”<http://www.amazon.com/gp/product/0547573146?ie=UTF8&tag=washpost-books-20&linkCode=xm2&camp=1789&creativeASIN=0547573146>by
Peter Schweizer.

“The Office of Congressional Ethics has requested information and I welcome
this opportunity to present the facts and set the record straight,” Bachus
said in a statement issued Thursday by his spokesman, Tim Johnson.

Omar Ashmawy, OCE staff director and chief counsel, declined to comment.
“The office does not confirm or deny whether an investigation is taking
place.” Chief counsel for the House Ethics Committee, Dan Schwager, also
declined to discuss the case. “The committee doesn’t comment on specific
matters or allegations,” he said.

OCE investigators are examining whether Bachus violated Securities and
Exchange Commission laws that prohibit individuals from trading stocks and
options based on “material, non-public” inside information, said the
sources, who spoke on the condition of anonymity because of the sensitivity
of the matter. The office also is investigating whether Bachus violated
congressional rules that prohibit members of Congress from using their
public positions for private gain.

In recent years, Bachus has made numerous trades, some of them coinciding
with major policy announcements by the federal government and industries
under his congressional oversight, according to a review of his financial
disclosure forms by The Washington Post.

Most of his investments are for less than $10,000, and almost all involve
options rather than stock purchases. The options allowed Bachus to buy or
sell stocks at certain prices in the future — betting that the value of
those stocks will rise or fall.

A Fidelity brokerage statement Bachus submitted for 2008 shows that he made
$30,474 in short-term investments, many of them bought and sold in a matter
of days, sometimes during the same day.

The former member of the House Transportation and Infrastructure Committee
made several options bets on railroads. While President George W. Bush’s
fiscal stimulus bill was being crafted in summer 2008, Bachus bet that the
stock of Burlington Northern Railroad would rise, and he cashed out that
July for a $16,588 profit. In August, he made the same bet but lost $2,900.

On Sept. 18, 2008, at the height of the economic meltdown, Bachus
participated in a closed-door briefing with then-Treasury Secretary Hank
Paulson and Federal Reserve Chairman Ben S. Bernanke. At the time, he was
the highest-ranking Republican member of the Financial Services Committee.
According to a book Paulson would later write, the topic of the meeting was
the high likelihood of decline across the entire economy if drastic steps
were not taken.

The next day, Sept. 19, Bachus bought “short” options, betting on a broad
decline in the nation’s financial markets, and collected a profit of
$5,715. Also that day, he cashed out options in which he had bet that
General Electric stock would rise, and collected a $12,713 profit, before
GE’s stock price started to tumble, The Post found.

The short options betting on an economic downturn were reported in “Throw
Them All Out,” which was the basis of the “60 Minutes” story, which aired
Nov. 13. Bachus criticized the reports, calling allegations that he engaged
in insider trading “absolutely false.”

But the book inaccurately said Bachus bet on GE’s price to fall rather than
rise. Schweizer acknowledged his mistake but said it made no difference to
his larger point.

In a letter to the publisher, Bachus attacked the book for the mistake
about GE. “The book is absolutely false and factually inaccurate when it
states that I ‘shorted General Electric options’ and did so ‘four times in
a single day.’ ”

He also said there was no inside information provided in the briefing by
Paulson and Bernanke.

“The idea that I or anyone else needed this meeting to know our financial
markets were in trouble is just laughable,” he wrote in the letter. “You
would have to be living under a rock not to know by September 18, 2008 that
the economy was in bad shape.”

He said a press conference held immediately after the briefing revealed
what was discussed.

“This meeting was so ‘secretive’ that members of the press knew about it
beforehand, were waiting outside the door, and a press conference was held
immediately after the meeting to inform the public about what we
discussed,” he wrote.

In October, Bachus bet on the market going up, but this time he lost
$21,558.

Bachus said he gave up his “hobby” of trading when he became chairman of
the Financial Services Committee after the Republican takeover of the House
in November 2010. Although he has sometimes made money on trades, his
financial disclosures indicate that his net worth has been cut in half
during his time in Congress, declining from up to $2.3 million in 1995 to
up to $1.1 million at the start of this year.

Bachus was elected in 1992. Before coming to Congress, he served in the
Alabama Senate and worked as a lawyer. He is originally from Birmingham and
lives south of the city in Vestavia Hills.

The Senate passed its version of the STOCK Act last week. The legislation
will make it easier for SEC officials to prosecute insider-trading cases
against members of Congress, their staff and top officials in the executive
branch. It will also require them to disclose all stock trades every 30
days.

Earlier stories in The Post and the Wall Street Journal described the lack
of stringent rules governing Congress and the conflicts presented by assets
owned and traded by lawmakers and their public roles. Post stories detailed
the reporting weaknesses in the disclosure system, which cannot be
electronically searched. The STOCK Act requires electronic filing of
disclosure forms.

Differences between the measures will be taken up in a conference
committee.

The Office of Congressional Ethics was created in March 2009 in response to
public criticism that the House Ethics Committee was failing to properly
police its members.

The OCE conducts independent investigations into allegations of misconduct
against members, officers and staff. However, its powers are limited. It
cannot compel a member to cooperate with an investigation, and it does not
have subpoena powers.

Once the office completes its investigations, the results are forwarded to
the ethics committee. That committee has the final say on whether a
violation has taken place and what sanctions, if any, should be imposed.

* *

* *

Staff writers David S. Fallis, Paul Kane and Kimberly Kindy and staff
researcher Lucy Shackelford contributed to this report.


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