Democratic Rep. Tom Malinowski, who has sought to present himself as a champion for transparency, made about 90 stock transactions worth between $671,000 and $2.67 million in 2020, but a Business Insider expose revealed that in violation of federal law he failed to disclose those trades.
The Foundation for Accountability and Civic Trust (FACT) in July filed a second complaint with the Office of Congressional Ethics over Malinowski’s failure to timely disclose nine stock trades worth at least $186,000 in line with deadlines set under the Stock Trading on Congressional Knowledge (STOCK) Act.
The House Ethics Committee publicly acknowledged that it is reviewing whether Rep. Tom Malinowski (D-N.J.), one of the most vulnerable House Democrats heading into next year’s midterms, violated ethics rules and federal law.
They . They control the White House. But the Democrats have a razor-thin majority in the House of Representatives and a tie in the Senate, where they are trapped in webs formed from cumbersome and archaic legislative rules, which the GOP adeptly comes up with ways to bend whenever they cannot make the knots tighter.
Two ethics complaints were filed against Malinowski earlier this year after Business Insider reported that he failed to disclose stock transactions worth at least $671,000 in violation of a federal law designed to prevent insider trading by members of Congress. The Associated Press also found that Malinowski bought or sold as much as $1 million of stock in medical and tech companies with a stake in the handling of the COVID-19 pandemic.
Malinowski has since acknowledged the omissions, telling the AP that it was “a mistake that I own 100%.” He has also since placed his assets into a blind trust.
The Ethics Committee has not opened a formal investigation into Malinowski, but rather is reviewing a report from the Office of Congressional Ethics (OCE), an independent entity that probes allegations of misconduct and then makes referrals to the panel.
Only the House Ethics Committee, which is composed of an even number of Democrats and Republicans, can formally punish lawmakers found of wrongdoing.
“Rep. Malinowski continues to participate in this routine process in good faith, and remains committed to complete transparency with the public; going beyond the requirements for Members of Congress by placing his holdings in an Ethics Committee approved qualified blind trust,” Malinowski’s office said in a statement.
Malinowski, who has served in the House since 2019, only narrowly won reelection last year against his GOP challenger by just over 1 point. Malinowski flipped his district from a long-serving Republican incumbent during the 2018 midterm elections, in which Democrats won the House majority.
“The committee notes that the mere fact of a referral or an extension, and the mandatory disclosure of such an extension and the name of the subject of the matter, does not itself indicate that any violation has occurred, or reflect any judgment on behalf of the committee,” House Ethics Committee Chairman Ted Deutch (D-Fla.) and Rep. Jackie Walorski (Ind.), the panel’s top Republican, said in joint statements about Malinowski, Kelly, Hagedorn and Mooney.
Malinowski’s stock trades during 2020 included more than two dozen purchases and sales during the first several weeks of the COVID-19 pandemic. Malinowski failed to disclose those stock trades, as required under the terms of the federal STOCK Act, which mandates that members and employees of Congress report stock transactions within a 45-day period.
In light of recent reports, questions have been raised about the possibility that some elected officials may have used their access to non-public information to enrich themselves while the rest of us watched in fear as a deadly and mysterious pandemic unfolded before our eyes.
Suspiciously timed stock sales by multiple members of Congress across both chambers and both parties illustrate the weaknesses in the current legal framework regulating how high-ranking government officials manage their finances while privy to information most Americans don’t have.
Those rules should be strengthened so the public has faith that our leaders are using their positions to help us, not themselves.
Malinowski’s stock trade frequency peaked in March 2020, as the COVID-19 pandemic gripped the United States and caused the stock market to plummet. One stock sale in March 2020 involved the shares of a medical diagnostic company that manufactures COVID-19 tests, the spreadsheet indicates.
Taken together, Malinowski made at least $671,000 and as much as $2.76 million worth of trades during 2020, according to the spreadsheet. Members of Congress are only required to report the value of their stock assets in broad ranges, making a precise total elusive.
“Filing these disclosures late was an oversight that he is taking steps to correct,” said Colston Reid, Malinowski’s chief of staff.
Tom Rust, chief counsel for the House Committee on Ethics, which is in charge of investigating House members for potential violations of rules or statutes, declined to comment Wednesday.
During 2020, Malinowski made about 90 financial trades, most of which were individual stocks, and federal records indicate that the congressman also made dozens of other stock trades during 2019, but failed to publicly disclose them within the legally required 30-to-45-day disclosure window — or ever file periodic transaction reports for them.
Malinowski disclosed those 2019 stock trades in August 2020 as part of an annual personal financial disclosure report that all members of Congress must file.
Malinowski, who served as assistant secretary of state for democracy, human rights, and labor during the Obama administration, defeated incumbent Republican Rep. Leonard Lance in 2018 to first win office.
The nonpartisan Cook Political Report last year rated Malinowski’s New Jersey 7th District among the most competitive House districts in the nation, and in November, Malinowski ultimately defeated Republican challenger Thomas Kean Jr. by just 5,311 votes out of the nearly 434,000 cast.
Malinowski has in part built his career in elected politics on a platform of open government and financial transparency.
His 2020 campaign platform notes that the congressman “championed comprehensive reforms to limit the role of money in politics and increase transparency to ensure regular people — not corporations or special interests — have the strongest voices in Washington.”
And since entering Congress in 2019, Malinowski has sponsored several bills regarding financial transparency and political money.
One required public companies to obtain shareholder authorization before making certain political expenditures. Another called for creating a public database to make transportation funding more transparent. A third targeted the finances of so-called “Scam PACs” — political committees that spend most of their money on non-political activities.
Members of Congress should be prohibited from owning publicly traded securities while in office, say Donna M. Nagy, Indiana University Maurer School of Law professor, and Richard W. Painter, University of Minnesota Law School professor and former chief White House ethics lawyer under President George W. Bush.
Passing a law requiring divestiture should be a number one priority under the Biden administration said two leading government reform advocates, in a letter to congressional leaders in December.
From its founding, the U.S. federal government has been a potential gold mine for nonpublic market-moving information. By selectively disclosing this information to securities traders, federal officials can substantially privilege certain wealthy or otherwise well-connected investors over ordinary investors in the securities market.
The trading profits that can be derived from the use of this material nonpublic government information are often tremendous.
Other senators, including Richard Burr (R-NC), Dianne Feinstein (D-Calif.), Jim Inhofe (R-Okla.), Kelly Loeffler (R-Ga.), and David Perdue (R-Ga.) were scrutinized for stock trading at the beginning of the pandemic, a time when they had access to confidential briefings.
In 2012, before passage of the Stop Trading on Congressional Knowledge (STOCK) Act, the Senate considered a divestment requirement in an amendment co-sponsored by Sens. Sherrod Brown (D-Ohio) and Jeff Merkley (D-Ore.).
Their amendment was defeated in part because divestment was viewed as unnecessary in light of the act’s mandate for more timely reporting of securities purchases and sales.
One problem with congressional stock holdings is conflict of interest. A criminal statute, 18 U.S.C. § 208, prohibits financial conflicts of interest for every executive branch official other than the president and vice president.
The statute makes it a crime for a federal official to participate personally and substantially in any particular matter that has a direct and predictable effect on the financial interest of the official or a spouse or minor child.
But that law does not apply to members of Congress or their staff.
“The disclosure laws are put in place for a reason and they are essential for a government to operate in an ethical and transparent manner. Timely and accurate filings are the only way for citizens to determine whether the Member they elected is engaging in self- enrichment. The Office of Congressional Ethics and the House Ethics Committee need to investigate Representative Malinowski immediately and impose the proper sanctions for all ongoing violations,” said Kendra Arnold, executive director of FACT.
A full copy of the complaint can be found by clicking here.
If members made transactions on the basis of non-public information they had access to as members of Congress, they would certainly be in violation of insider trading laws as well as the Stop Trading on Congressional Knowledge Act, or the STOCK Act.
It was concern over this exact kind of public corruption that led to the passage of the act in 2012, supported by healthy bipartisan margins in both the House and Senate.
The STOCK Act was and is a solid attempt at enhancing accountability by explicitly extending the legal prohibition on insider trading to members of Congress and requiring members to disclose any securities transactions within 30 to 45 days, which are to be posted publicly on the websites of the House or Senate.
High-level executive branch officials are also required to make similar disclosures, which are managed by the Office of Government Ethics. We know all this because we worked closely with Members of Congress and other advocates to pass the law in 2012, and attended the White House Rose Garden ceremony for its signing.
Malinowski immigrated from Poland to the United States when he was six years old and while he was Assistant Secretary of State, he used a trip to Warsaw to visit his childhood home in Brwinow near Warsaw.