Thousands of Federal Officials Have Owned Stock in Companies They Govern

A new investigation has revealed that thousands of federal officers in the executive branch of the presidential administrations have reported trading stocks in companies they supervise, potentially creating thousands of conflicts of interest.

The Wall Street JournalOver 31,000 financial disclosure forms, dated between 2016-2021, were analysed. They contained information on more than 315,000 trades in stocks and bonds by officials and their immediate family. These documents showed that more than 2,600 top federal officials from 50 agencies had disclosed their ownership of stock in companies who have lobbied for the agency they work in. The report revealed that this is more than one fifth of senior federal executive branch officers.

These trades represent many potential conflicts of interest — and explicit conflicts of interest that agency officials seem to have simply swept aside and “waived the rules” for, the report says. These stock holdings indicate that officials not only have financial interests in the companies they regulate but may also be trading stocks at opportune moments.

Nearly three out of three Environmental Protection Agency (EPA), officials reported having investments in companies lobbying for the agency. They held up to $2 million in shares each year in fossil fuel companies between 2016 and 2021. Donald Trump official Michael Molina, for instance, a senior adviser to the deputy EPA administrator, had owned oil and gas stocks that could have benefited from Trump’s policies favoring fossil fuel companies.

In another potential conflict of interest, Food and Drug Administration (FDA) official Malcolm Bertoni owned a number of stocks in food and drug companies that he said the agency gave him permission to own — despite those companies being on the agency’s no-buy list. In the study years, defense secretary office officials owned an average of $1.2 to $3.4 million in defense contractors and defense companies.

These trades were executed at a suspicious time, which could suggest insider trading. The report revealed that more 60 officials had traded stocks with companies just before their agencies announced sanctions against them. Greg Zacharias (Department of Defense) had purchased stock five times in Lockheed Martin just before the Pentagon gave it a new $1Billion contract.

It’s possible that many of these trades were legal, even if there are conflicts of interest. While officials aren’t allowed to do work that could affect their personal finances, laws around trading are regularly unenforced — and the laws are often weak enough that officials can work around them.

Many of these potentially conflicted trades “clearly violate the spirit behind the law, which is to maintain the public’s confidence in the integrity of the government,” ethics lawyer and former general counsel for the U.S. Office of Government EthicsDon Fox said The Wall Street Journal.

The report comes at a time when government officials’ ability to trade stocks is under scrutiny. Democrats and Republicans have been pushing for a ban on Congress members’ ability to trade stocks for months, and many of the officials whose stock trades were analyzed by the report It may be banned from trading stocks under Democrats’ latest bill, introduced by Democratic leaders late last month.

Experts in ethics say that high-ranking lawmakers and officials should be prohibited from trading stocks. This is to prevent conflicts of interest and restore trust in government agencies. Advocates for a stock ban argue that the issue of banning executives and judiciary branch officials trading stocks should be considered separately and not included in the same proposal for Congress members. This is because Democratic leaders included a wide range of officials in their bill to gain opposition from Republicans and possibly endanger its passage.