The Wall Street Journal reported today about a staffer in Harry Reid’s office who nearly doubled his $3,500 investment in a renewable energy firm in 2008. Sen. Reid helped pass legislation that benefitted the firm.
Reid’s spokesman tried to defend the staffer, Reid’s top energy policy adviser, by asserting that he had no influence over tax incentives for renewable energy firms.
Under federal securities law, of course, it is not important whether the staffer had any influence over legislation, Sen. Reid or anyone or anything else.
If it can be shown that the staffer breached a duty of confidentiality in using “inside information” as the basis for buying and selling the stock, then he may very well be guilty of the crime of insider trading.
In May 2009, the Associated Press reported,
Federal prosecutors and the FBI have been investigating possible illegal insider trading by two Securities and Exchange Commission enforcement attorneys who were in a position to receive sensitive information about agency probes of public companies.
Similarly, if the staffer had material information that the public didn’t have and he took advantage of it in the buying and selling of securities, he could have committed a serious crime — as well as anyone he may have tipped off.
Reid’s staffer has denied wrongdoing, but that should not be dispositive.
The Department of Justice, FBI and U.S. Securities and Exchange Commission ought to be investigating the staffer as well as any other potential insider trading violations described in the WSJ article.
At the very least, the staffer should be afforded the same opportunity as Martha Stewart to chat with federal investigators — that worked out so well for her.
Don’t expect this to happen, however, as Sen. Reid and other members of Congress will no doubt quietly work to quash any investigation.