‘Substantial reason to believe’ Reps. Fallon and Rutherford violated STOCK Act, ethics office finds
Members are required to report their securities trades over $1,000 within 45 days
There is “substantial reason to believe” Reps. Pat Fallon, R-Texas, and John Rutherford, R-Fla., both violated the STOCK Act by failing to properly report their stock trades, according to reports by the Office of Congressional Ethics.
Under the STOCK Act, members are required to report their securities trades over $1,000 within 45 days of the execution on forms called periodic transaction reports, also known as PTRs. The penalty for late transactions is $200. These rules are in place to provide transparency around lawmakers' trades, and to deter them from using nonpublic information gleaned from their jobs to make trades that enrich themselves.
Robust reporting by Insider Inc. on members failing to file periodic transaction reports has grabbed the attention of Capitol Hill over the past year. OCE investigating such matters shows an appetite for congressional watchdogs to examine STOCK Act violations. Whether the Ethics Committee will take action is unclear. Whether lawmakers will tighten restrictions on member stock trading also remains nebulous.
Fallon’s periodic transaction reports “evidence a pattern of late disclosure of reportable transactions, which continued even after he was on notice of his STOCK Act filing obligations,” the OCE report said. Between January and December 2021, Fallon failed to disclose in a timely manner 122 transactions at a value between $9 million and $21 million, the OCE found.
Fallon, a first-term lawmaker, filed his first periodic transaction report on June 17, 2021, a filing that had 93 transactions between January and April of that year for a value range of $7.8 million to $17.5 million.
“All of these transactions were disclosed late under the STOCK Act’s filing deadlines, and the majority of the trades were reported outside the Committee’s grace period, meaning they warranted a fine payment,” the OCE report said.
A second late filing, dated July 2, included 26 disclosures between $1.2 million and $3.1 million. Two of those disclosures should have triggered a fine, the OCE said.
Fallon on Aug. 15 paid fines for the late filings: one check for $200 and another check for $400. Because Fallon didn’t cooperate with the OCE review, the office couldn’t ask him how the fines were calculated and assessed by the House Ethics Committee, the report said.
Fallon also filed periodic transaction reports with late disclosures on Aug. 18 and Dec. 29 of 2021, the OCE said.
The report says, “evidence collected by the OCE suggests that Rep. Fallon knew, or should have known, about his PTR filing obligations by February 2021.”
The OCE recommends the House Ethics Committee should subpoena the uncooperative Fallon, according to the report.
"In sum, this was an entirely inadvertent oversight by a brand-new Member of Congress. As soon as he was aware of the issue, he conducted the due diligence required to completely and accurately correct the record by reporting the late transactions," Kate Belinski, a lawyer for Fallon, said in a letter to the Ethics Committee.
Rutherford 'on notice'
Rutherford, who was sworn into Congress in 2017, routinely trades securities in IRA accounts and his periodic transaction reports “evidence a pattern of late disclosure of reportable transactions made in these accounts, which continued even after he was on notice of his STOCK Act filing obligations,” the OCE said.
He did not file his first periodic transaction report until Aug. 20, 2018, despite making reportable trades starting in July 2017. That report had 136 late reportable disclosures between $631,000 and $3.2 million. Of those, 134 transactions should have triggered a fine, the OCE found.
Rutherford continued to make late disclosures on Aug. 9, 2019; Dec. 18, 2019; May 1, 2020; July 29, 2020; Oct. 20, 2020; Feb. 2, 2021; and on Nov. 19, 2021. In total, between his swearing in and December 2021, Rutherford disclosed 157 late reported transactions valued between $652,000 and $3.5 million, the OCE found.
Rutherford provided OCE with an $800 receipt of payment for “Ethics fees” from the House Office of the Clerk.
The OCE suggests the House Ethics Committee subpoena Rutherford and Jen Bradley, chief of staff for Rutherford. Both of them declined to provide requested information to the OCE, the report said.
"In sum, this was an entirely inadvertent oversight by the Congressman and his Chief of Staff, and all transactions have now been fully and accurately reported. He paid all fines owed and put a new system in place for future PTR tracking and filing," Belinski, who also represents Rutherford, wrote to the Ethics panel.
Knotted on Jacobs
A report concerning allegations of Rep. Chris Jacobs, R-N.Y. not filing timely stock trade reports was left unresolved by the OCE because of a tie vote. As a result, a truncated one-page report was released.
The House Ethics Committee, which has the ability to impose discipline and issue subpoenas, is investigating all three matters.
"Congressman Jacobs takes compliance and transparency seriously, and as such, proactively filed the PTRs in question and worked with the House Ethics Committee to pay the applicable fine. The Congressman looks forward to the Committee meeting in person in order to complete their review and resolve this matter," Christian Chase, a spokesperson for Jacobs, said in an emailed statement.