What will come of Donna Shalala stock scandal
Florida Democrat will likely face a fine, retain her seat on critical oversight commission
Rep. Donna E. Shalala still has bipartisan backing for her appointment to a bicameral commission overseeing hundreds of billions in coronavirus relief despite not complying with federal law to report her stock sales.
The Florida Democrat is almost certain to face a small fine for her transgression, according to House ethics rules, which assess members a $200 fee for the first late periodic transaction report filing. Although she can apply for a waiver to avoid the late fee, waivers are granted by the House Ethics Committee only in “extraordinary circumstances.”
Just days after Speaker Nancy Pelosi appointed Shalala to the Congressional Oversight Commission — an entity created as part of a recent multitrillion-dollar coronavirus relief package — the Miami Herald reported Shalala did not disclose her 2019 stock sales.
The House Ethics Committee, which did not comment, is unlikely to undertake an investigation into Shalala, unless evidence emerges that there was a willful intent not to file the reports. The reports are required by the 2012 STOCK Act for all trade executions of individual securities within 45 days of the trade.
The panel has previously stated that errors and omissions in annual financial reports — called financial disclosure statements — are common and not usually the subject of an investigation. Although periodic transaction reports are different from the annual reports alluded to by the committee, the principle of whether the panel will pursue an investigation is comparable.
“The fact of errors and omissions are typically not the subject of an investigation or Report by the Committee, but rather are disclosed publicly by the filing of the amendment itself,” according to the Ethics Committee.
Trades involving widely held investment funds, such as mutual funds or exchange-traded funds (ETFs), need not be included in periodic transaction report filings. If a member were to “knowingly and willfully” fail to file such a report, they could face a maximum penalty of up to one year in prison and a $59,000 fine.
There is no indication Shalala intentionally failed to file; her spokesperson, Carlos Condarco, said her financial adviser is in the hospital with COVID-19.
“The moment the Congresswoman was aware that she missed her disclosure deadlines, she contacted the House Ethics Committee and has been working with them to resolve this issue,” Condarco said.
Condarco said Shalala began selling off all her individual stocks prior to when she was sworn into Congress in January of 2019 in an effort to avoid conflicts of interest. She continued selling them off into her first year as a member.
“Because she was in the process of setting up a blind trust, there was an honest mistake about what disclosures were required” Condarco said, noting that Shalala’s attorney and financial adviser “just missed the deadline.”
Shalala, who previously worked in the Clinton administration as Health and Human Services secretary, served in government before the STOCK Act became law. Shortly after she was sworn into Congress, members were sent a memorandum from the Ethics Committee, explicitly stating the mandates they are subject to regarding financial disclosures, including periodic transaction reports.
Shalala failed to report “roughly a half-dozen transactions,” Condarco said.
According to her financial disclosure report — filed in May of 2019 — Shalala held stock in several companies that could benefit significantly from the COVID relief money she is overseeing, including Alaska Air Group, Inc., and Spirit Aerosystems Holdings, Inc. Because she has yet to file a periodic transaction report, it is impossible to independently verify that she has, in fact, sold these off. Shalala’s spokesperson said they are working to submit the reports “as soon as possible.”
Several senators have been under intense scrutiny for their stock trades after private congressional briefings and before the market precipitously fell from the coronavirus pandemic halting the economy. The reason these trades came to light is because Republican Sens. Richard M. Burr of North Carolina and Kelly Loeffler of Georgia filed their periodic transaction reports.
Advocacy groups, including the Project on Government Oversight and the left-leaning group Demand Progress, have called for Pelosi to withdraw her nomination of Shalala to the Congressional Oversight Commission. Americans for Public Trust, an ethics watchdog group that is led by a former National Republican Congressional Committee employee, filed a complaint with the Office of Congressional Ethics Thursday. Another right-leaning group, Foundation for Accountability and Civic Trust, also filed a complaint with OCE regarding Shalala.
Despite the calls for investigation and removal, House leadership — on both sides of the aisle — is standing by her.
“Congresswoman Shalala has the Speaker’s complete confidence as she works to hold the Administration accountable to the taxpayer through the CARES Congressional Oversight Commission,” Pelosi’s spokesperson, Drew Hammill, said.
Republican Leader Kevin McCarthy said Shalala and his pick, Arkansas Rep. French Hill, were both well-suited for their roles on the commission.
“Both of them, I believe, are very good appointments. Congresswoman Shalala was a former HHS secretary,” McCarthy said.
Shalala has no plan to remove herself from the commission, citing Pelosi’s support.
“The Speaker of the House has full faith and confidence in the Congresswoman’s ability to do the job,” Condarco said. “This controversy arose because she was trying to do the right thing and eliminate any suggestion of a conflict of interest. She’s embarrassed she missed this deadline, but she takes full responsibility for her actions.”