"The Frog Can Swim Just Fine"

A new report from the National Academy of Public Administration calls for Congress to immediately suspend the online reporting requirements of the STOCK Act, which is set to go into effect on April 15. The law calls for public disclosures of stock purchases within 45 days of a trade exceeding $1,000 and applies to 28,000 senior executives, including the president, Congress, and various elected and non-elected officials across the federal government. The law included an amendment for the creation of an online, searchable database of trades.

The report claims that disclosing the financial trades of senior government executives and members of Congress would leave them exposed to extortion, blackmail, and identity theft. It claims that the reporting requirements are akin to "boiling a frog" and would constitute a threat to national security and endanger top officials. Furthermore, it claims the requirements would make it difficult to attract talent to senior executive positions and pose unnecessary risks to those involved. The report cites concerns from officials in the department of Defense and State. You can access the original report on the NAPA website here (link opens a PDF file).

Rep. Tim Walz (D-Minn.) was a co-author of the House version of the bill with Rep. Louise Slaughter (D-N.Y.). Walz spoke with us as part of our STOCK Act series last year, and he wrote an editorial for the Fool. This morning, he told me: "Government reform is a journey, not a destination. The main purpose of the STOCK Act is to ensure our elected officials play by the same rules as everyone else, and I believe it accomplishes that goal." He continued: "As with any law, it's important to get the implementation of it right, and over the coming weeks I'll examine ways we can work to improve the bill."

But one of the main concerns of the report, that such disclosure would leave senior executives vulnerable to identity theft, may not be a very strong one. Steve Weisman is a senior lecturer at Bentley University and the author of 50 Ways to Protect Your Identity in the Digital Age. He says the report is exaggerating the potential risk.

"Identity theft is certainly serious, and it's true that the more information you have about someone, the easier it is to make them a victim of identity theft," Weisman says. "But the information that would need to be disclosed to make them easy prey to identity thieves, like a mother's maiden name or previous addresses, wouldn't be in these reports. In the criticisms that I found in the report, that it could lead to identity theft, I never found how."

During our investigation into the STOCK Act, we analyzed years' worth of trades made by members of Congress and cross-referenced them by committee. We didn't have to file a Freedom of Information Act request or obtain special permission. We were able to access them through the Center for Open Politics' website OpenSecrets.org. Granted, the spreadsheets weren't pretty, and more than one set of eyes crossed attempting to decipher them. But we had the information, we published it, and no one was kidnapped or blackmailed as a result (to our knowledge.)

This reporting makes that information more accessible -- not because we Fools are a threat to national security or wanting to blackmail our officials, but because we, as citizens, as investors, and as voters, deserve to know that our elected officials are voting in the interests of their constituents, and not their wallets. The database is an important piece of the STOCK Act, a bill that had its heart chipped away by amendments, exceptions, and provisions over the course of its journey. From a provision for the political-intelligence industry to an exclusion of mutual funds from reporting requirements, the law that was passed was a mere shadow of its intended form. To strip away the database is to eliminate a very key piece of enforcement: public pressure. The reason, to protect senior officials from identity theft, simply isn't a valid one.

Says Weisman: "I think the frog would be able to swim just fine with the temperature of the water from these disclosures."

Editor's note: This article has been updated with a new link to the NAPA report.


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  • Report this Comment On April 03, 2013, at 2:57 PM, Darwood11 wrote:

    If the public officials don't like this requirement for transparency, then they should go for private sector jobs.

  • Report this Comment On April 03, 2013, at 4:31 PM, KayakerRW wrote:

    As evidence that we need more transparency regarding politicians, elected officials, and corporations, just witness recent revelations about Virginia’s governor and attorney general regarding Star Scientific.

    I’ve included a few excerpts from two articles and a summary of a third along with links.

    What’s the Deal With Star Scientific, McDonnell and Cuccinelli?

    Posted on March 31, 2013 by Peter Galuszka

    Star [Scientific] was sued last week by a former shareholder, Francis J. Reuter, who claims that Star misled investors about research involving the dietary supplements and the fact that the firm has been subpoenaed by the U.S. Attorney’s Office for Eastern Virginia.

    In 2010, Cuccinelli bought 5,060 shares of Star stock at $1.98 and later increased his holdings by more than 3,500 shares at $2.79 a share. He sold 1,500 shares at $4.70 a share last year, the Post says, making a $7,000 profit.

    Cuccinelli, however, failed to disclose his financial interests in Star for more than a year. An aide told the Post that the attorney general did not realize that his financial interest in the firm had passed the $10,000 threshold needed for reporting, but has since updated his disclosure. Records also show that Cuccinelli stayed at Williams’ house, used a lake home and a boat owned by Williams, was given a trip to Kentucky valued at $3,200 and a box of “food supplement” valued at $6,700.

    http://www.baconsrebellion.com/2013/03/whats-the-deal-with-s...

    Tax suit raises conflict questions for Cuccinelli

    By ASSOCIATED PRESS | 3/22/13 8:17 AM EDT

    RICHMOND, Va. (AP) - A lawsuit against the state of Virginia by a nutritional supplement maker whose stock comprises Attorney General Ken Cuccinelli's total investment portfolio is raising questions about the Republican's potential conflicts of interest.

    Henrico-based Star Scientific Inc. sued Virginia's Department of Taxation in Mecklenberg Circuit Court in July 2011 over a $700,000 tax dispute with the state. A deputy attorney general filed an answer to the complaint the following month. There have been no new motions, pleadings, filings or hearings in the case since.

    University of Richmond law school professor Carl Tobias said 19 months is a long time for a case to lie dormant in court without any action.

    "Usually one side or the other will move things along in cases like that," he said.

    It's not unprecedented, however, and doesn't, by itself, indicate an impropriety, Tobias said. "I would think that maybe they're negotiating a settlement to it," he said.

    Paul Campsen, a private attorney in Norfolk for whom tax litigation is a specialty, said he seldom sees tax cases languish the way the Star Scientific lawsuit has. If plaintiffs don't push them along, then the government to which the disputed tax bill is due usually moves more quickly to recover its money.

    http://www.politico.com/story/2013/03/tax-suit-raises-confli...

    In addition to its close ties with Cuccinelli, Star Scientific’s chief executive Jonnie Williams provided a $15,000 meal for the wedding of Gov. McDonnell’s daughter. The gift was not disclosed by McDonnell, who claimed it was a gift to his daughter, not to him. In most middle class families, the parents of the bride pay for the wedding banquet, but perhaps upper income Virginia Republicans require their daughters to pay for it to hold down wedding costs.

    Just 3 days before the wedding, McDonnell’s wife spoke at a seminar in Florida for investors interested in anatabine, an important chemical in the dietary supplement, Anatabloc that was being introduced by Star Scientific. Although the science behind the product is unproven, Maureen McDonnell supported the product.

    For more information, see the Washington Post article:

    http://www.washingtonpost.com/local/dc-politics/va-gov-mcdon...

  • Report this Comment On April 03, 2013, at 7:31 PM, TulipSpeculator1 wrote:

    Everyone who wants to insider trade should go to the private sector. At least then taxpayers wouldn't have to pay them a salary while they do it.

  • Report this Comment On April 09, 2013, at 5:01 PM, Gordogato wrote:

    I see your points about transparency. Congress? Of course. Cabinet level officials? Sure. But is it necessary to do this to all of those 28,000 government managers, most of whom are average, middle-class, career employees? Who are they that they need their every financial transaction posted on a website available for data mining fishing expeditions by the world? For the vast majority of those 28,000 managers, the existing system of government-stored reports that the public can request by FOIA works fine.

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