The lax ethics rules of Congress allow senators and representatives to trade corporate stocks, even in industries they oversee through their committees.
For a member of Congress looking to bank some personal gains, they could try to duck accusations of conflicts of interest by only transacting in companies outside of their committee jurisdiction, or perhaps by sticking to blue-chip stocks. Or, as in the case of second-term Sen. Richard Blumenthal (D-Conn.), their household could do the opposite and purchase stock in federal contractors that fall squarely under the jurisdiction of their subcommittee assignments.
Blumenthal comes in near the top of lists of the richest members of Congress, with a household net worth of up to $71 million as of 2017 disclosures, according to an estimate from the Center for Responsive Politics (CRP). The former U.S. attorney for Connecticut, Blumenthal in 1982 married Cynthia Malkin, daughter of New York City real estate mogul Peter Malkin.
In June, a periodic transaction report filed with the Senate Office of Public Records showed that Blumenthal’s spouse had invested up to $350,000 in Decision Sciences International Corporation, which makes infrastructure equipment like maritime cargo screening systems. Blumenthal is the third-ranking Democrat on the Senate Commerce Subcommittee on Surface Transportation, Maritime, Freight, and Ports, which has oversight over surface transportation and maritime policy.
Decision Sciences, based in San Diego and Washington D.C., describes itself as “the only company in the world delivering a solution that can… satisfy the 100% scanning requirement recommended by the U.S. 9/11 Commission and later enacted into law by the U.S. Congress.”
Decision Sciences might not be as much of a household name as, for example, ExxonMobil or Honeywell. Former Republican Senator Kelly Loeffler dumped up to $500,000 of stock in the oil giant and up to $250,000 of stock in the aerospace conglomerate before the stock market plunged in February, after receiving private briefings on the extent of the coronavirus pandemic. But from his subcommittee, Blumenthal is in a position to help his household’s investment.
In 2016, Blumenthal called for tighter security screening and advanced technology throughout transit and maritime channels to protect against terrorism. In the four years prior, Decision Sciences had brought in nearly $3.2 million in federal contracts from the Department of Homeland Security, according to data from USASpending.gov. Earlier in 2016, the company says it was awarded a Department of Defense contract valued at up to $5.26 million. Decision Sciences spent $820,000 on federal lobbying during the previous Congress, according to CRP, with its top bills of interest being the Securing America’s Ports Act, which was signed into law in early January by President Biden, and the annual Department of Homeland Security Appropriations Act.
Blumenthal’s spouse’s major investment moves don’t end there. On Dec. 30, 2020, Malkin purchased an investment of up to $2.25 million in the hedge fund Aravt Global Partners, LP, according to a periodic transaction report filed on Feb. 1 with the Senate. Aravt’s approximately $873 million in assets under management reportedly include several telecom and IT stocks, led by Charter Communications, PayPal, and Microsoft. Blumenthal is also the third-ranking Democratic member of the Commerce Committee’s Subcommittee on Communications, Media and Broadband, which has jurisdiction over the internet, cable, oversight of the Federal Communications Commission, and more.
The website Pensions & Investments shed some light on Aravt Global in 2014, when the fund was just ramping up: “The founder is Wui Yen Liow, former managing director and hedge fund sector head at Ziff Brothers Investments LLC, New York, a family office that is winding down its U.S. business.”
A spokesperson for Sen. Blumenthal told Sludge that the assets belong exclusively to his wife and that the couple complies with all Senate ethics requirements. They said, “Senator Blumenthal has no involvement in or knowledge of these investment decisions, which are made by an independent adviser.”
But congressional watchdogs have pointed out that there’s no realistic way of being certain of the moment that Blumenthal might have come into knowledge of his wife’s investment in the months afterward. Or, to illustrate the problem another way: if last year, as the extent of the pandemic became clear, Kelly Loeffler’s CEO husband Jeffrey C. Sprecher had sold off millions of dollars in shares starting on the same day that the Senate held a private all-members session on Covid-19, would the appearance of insider trading be adequately addressed?
Inside Congress, there has been a push by a handful of Democratic lawmakers to bar members of Congress from owning individual stocks, first introduced as the Ban Conflicted Trading Act in Dec. 2018, reintroduced in 2019, and again this month. Some Democrats recently tried to have stock trading bans added to H.R. 1, but the House Rules Committee did not allow those amendments to receive votes.
By diving into Congress’ disclosure forms the year before last, Sludge found that 51 senators and their spouses in the last Congress had as much as $96 million personally invested in corporate stocks across five key sectors including energy, finance, and defense, mostly in public companies. While insider trading is prohibited by the 2012 STOCK Act, there are no rules requiring members to proactively state how they plan to avoid trading based on material nonpublic information, and there has been little enforcement by the Office of Government Ethics or the SEC. A newly proposed bill, the STOCK Act 2.0, seeks to bring greater transparency to the current stock transactions of members.
Blumenthal, who is seeking re-election next year, is the Senate sponsor of a bipartisan bill that’s already been approved over in the House Science Committee that would support early career researchers at universities and industrial research labs with a $250 million two-year pilot program, which could be beneficial to industrial manufacturers like aerospace company TransDigm Group or Google, both of whose stock is held by Aravt Global.
Asked if Sen. Blumenthal had a position to share on the Ban Conflicted Trading Act in the current Congress, his spokesperson wrote that he is considering it among other additional steps to bolster government ethics rules.
For more STOCK TICKER stories uncovering congressional investments, check out the Sludge newsletter.