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INSIDER TRADING AND CONGRESSIONAL 

ACCOUNTABILITY 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

DECEMBER 1, 2011 

Available via the World Wide Web: http://www.fdsys.gov/ 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

TROY H. CRIBB, Senior Counsel 

JONATHAN M. KRADEN, Counsel 

NICOLAS A. ROSSI, Minority Staff Director 

MARK B. LEDUC, Minority General Counsel 

LORINDA B. HARRIS, Minority Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk 

LAURA W. KILBRIDE, Hearing Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Lieberman ........................................................................................... 1 

Senator Collins ................................................................................................. 3 

Senator Brown .................................................................................................. 22 

Senator Begich .................................................................................................. 25 

Senator Tester .................................................................................................. 27 

Senator McCaskill ............................................................................................ 31 

Prepared statements: 

Senator Lieberman ........................................................................................... 39 

Senator Collins ................................................................................................. 41 

WITNESSES 

THURSDAY, DECEMBER 1, 2011 

Hon. Kirsten E. Gillibrand, a U.S. Senator from the State of New York ........... 4 

Hon. Scott P. Brown, a U.S. Senator from the State of Massachusetts .............. 6 

Melanie Sloan, Executive Director, Citizens for Responsibility and Ethics 

in Washington ...................................................................................................... 9 

Donna M. Nagy, C. Ben Dutton Professor of Law, Indiana University Maurer 

School of Law ........................................................................................................ 11 

Donald C. Langevoort, Thomas Aquinas Reynolds Professor of Law, Georgetown University Law Center ............................................................................... 12 

John C. Coffee Jr., Adolf A. Berle Professor of Law, Columbia University 

Law School ............................................................................................................ 14 

Robert L. Walker, Counsel, Wiley Rein LLP ......................................................... 16 

ALPHABETICAL LIST OF WITNESSES

Brown, Hon. Scott P.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 45 

Coffee Jr., John C.: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 139 

Gillibrand, Hon. Kirsten E.: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 43 

Langevoort, Donald C.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 126 

Nagy, Donna M.: 

Testimony .......................................................................................................... 11 

Prepared statement with an attachment ....................................................... 54 

Sloan, Melanie: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 48 

Walker, Robert L.: 

Testimony .......................................................................................................... 16 

Prepared statement .......................................................................................... 155 

APPENDIX 

Robert Khuzami, Director, Division of Enforcement, U.S. Securities and Exchange Commission, prepared statement .......................................................... 164 

Page

IV 

Bob Edgar, President and Chief Executive Officer, Common Cause, prepared 

statement .............................................................................................................. 172 

David Arkush, Director, Public Citizen, prepared statement .............................. 174 

(1) 

INSIDER TRADING AND CONGRESSIONAL 

ACCOUNTABILITY 

THURSDAY, DECEMBER 1, 2011 

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 2:34 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman, Chairman of the Committee, presiding. 

Present: Senators Lieberman, Carper, McCaskill, Tester, Begich, 

Collins, Coburn, Brown, and Johnson. 

OPENING STATEMENT OF CHAIRMAN LIEBERMAN 

Chairman LIEBERMAN. The hearing will come to order. Good 

afternoon. A recent book by Peter Schweizer and a story based on 

it on ‘‘60 Minutes’’ have raised the very serious question of whether 

Members of Congress have been using ‘‘insider information’’ to 

make investments that enable them to make money they could not 

have made if they were not Members of Congress. 

The Members of Congress who have been specifically accused 

have denied the allegations. Our purpose here this afternoon is not 

to determine the guilt or innocence of individual cases. Our purpose is to determine whether the existing law is sufficient to prevent and punish congressional insider trading. 

Perceptions are very important in public service. That means 

that if the law seems to allow Members of Congress to take advantage of their public position for personal gain, the trust that needs 

to exist between the American people and our government will be 

further eroded than it already is. 

So what is the state of the law governing insider trading by 

Members of Congress? 

It will surprise most people to learn that there is no explicit prohibition in our laws against insider trading by anyone, including 

Members of Congress. That is to say, the term ‘‘insider trading’’ is 

not mentioned or defined in statute. All the investigations and 

prosecutions of insider trading over the years by the U.S. Securities 

and Exchange Commission (SEC) or the Department of Justice 

(DOJ) have been carried out pursuant to the broad anti-fraud provisions of the Securities Exchange Act of 1934, which makes it unlawful, in Section 10(b), to ‘‘use or employ, in connection with the 

purchase or sale of any security—any manipulative or deceptive device or contrivance in contravention of such rules’’—this sounds 

like it was written not in 1934 but in 1734—‘‘and regulations as 

2 

1The prepared statement of Mr. Khuzami appears in the Appendix on page 164. 

the Commission may prescribe as necessary or appropriate in the 

public interest for the protection of investors.’’ 

The specific rules making insider trading illegal are found in a 

large body of SEC regulatory activities pursuant to Section 10(b), 

that broad anti-fraud statute I just read, and court decisions interpreting those activities. The rules against insider trading now 

clearly encompass not just corporate ‘‘insiders’’ but others who have 

bought and sold securities based on material, nonpublic information they obtained and used in violation of a duty of trust. 

Now, I gather that some have said that Congress has exempted 

itself from these insider trading rules, but that is not true. In fact, 

in a statement submitted to our Committee for the record for this 

hearing, Robert Khuzami,1 Director of the Division of Enforcement 

at the U.S. Securities and Exchange Commission, makes clear that 

the Commission has authority to prosecute such wrongful conduct, 

declaring that ‘‘trading by congressional Members or their staffs is 

not exempt from the Federal securities laws, including the insider 

trading prohibitions.’’ 

This afternoon, we are going to hear testimony that a Member 

of Congress or a congressional staffer who buys or sells stock based 

on inside information they obtain as a result of their job not only 

violates congressional ethics rules, but violates the securities laws 

as well. 

On the other hand, we are going to hear testimony that the law 

is not as clear as it needs to be and that Congress should specifically proscribe congressional insider trading. 

I am with the second school of thought. In my opinion, whether 

or not there is currently clear and conclusive evidence that Members of Congress or staff members have benefited financially from 

insider information and whether or not the SEC believes it can act 

against Members of Congress for insider trading under its existing 

authority, there ought to be a law that explicitly deters such unethical, illegal behavior by Members of Congress and punishes it when 

it happens. 

Our goal today is to sort out the facts and determine precisely 

what legal reforms are needed to ensure that regulators and law 

enforcers have the tools they need to bring to justice Members of 

Congress and our staffs who defy the public trust by using insider 

information for personal gain. 

Our first witnesses today, who we will call on in a short while, 

will be Senator Kirsten Gillibrand of New York and Senator Scott 

Brown of Massachusetts, a valued Member of this Committee, both 

of whom have taken the lead in the Senate in introducing legislation to deal with this problem, and that legislation has been referred to our Committee, which is why we are convening this hearing today. 

The point that we are focused on today is narrow, but it touches 

on much broader values and realities. The fact is that the American people’s faith in their elected representatives is the cornerstone around which our democratic republic was built. When that 

faith ebbs, as it now has, to historic lows, we must increase our efforts to ensure that the people who did us the honor of sending us 

3 

to Washington to represent them are confident that our only business is their business. 

I have been reading a lot about George Washington lately, and 

as is so often the case, he said something long ago—in fact, on the 

first day of our new government—that seems relevant to our hearing today, ‘‘The foundations of our national policy will be laid in the 

pure and immutable principles of private morality, and the preeminence of free government [will] be exemplified by all the attributes which can win the affections of its citizens and command 

the respect of the world.’’ 

Adopting a new law that explicitly makes insider trading by 

Members of Congress illegal would strengthen the ‘‘foundations of 

our national policy,’’ in Washington’s words, and I hope in a small 

way will help to repair the breach that exists today between our 

government and our people. 

Senator Collins. 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman. Unfortunately, I do 

not have an eloquent quote to begin my statement to take up 

where you left off today, but I do want to thank you for holding 

this hearing to examine whether or not current laws are adequate 

to prevent Members of Congress from engaging in insider trading. 

I very much appreciate your inviting our two colleagues Senator 

Brown and Senator Gillibrand to describe the bills that they have 

proposed to address this concern. I am a cosponsor of Senator 

Brown’s bill, which is known as the Stop Trading on Congressional 

Knowledge (STOCK) Act, and I look forward to learning more 

about Senator Gillibrand’s bill today. This hearing is an important 

step in our efforts to ensure that Members of Congress are not 

profiting from trading on insider information. 

Recent press reports on ‘‘60 Minutes’’ and elsewhere demonstrate 

why this Committee must explore the application of existing laws 

to Congress and identify what actions may need to be taken to 

close possible loopholes that undermine the public’s confidence in 

this institution. 

Elected office is a place for public service, not private gain. As 

demonstrated by recent press stories, however, there are questions 

about whether lawmakers have been exempt—either legally or 

practically—from the reach of our laws prohibiting insider trading. 

The recent allegations come at a time when the public’s faith in 

Congress is already extremely low. A recent Gallup poll shows that 

69 percent of the American public has little or no confidence in 

Congress. Other polls show that Americans rate Members of Congress at or near the bottom of the list when it comes to perceived 

honesty and ethical standards. 

This erosion of public trust is not confined to Congress, but 

taints the public’s entire view of our Federal system. Why does this 

matter? Well, with so many critical challenges facing our country, 

if the American public does not believe that the decisions that we 

are making are in their interests rather than our interests, it will 

be next to impossible to tackle the truly significant problems that 

we face. And we must address the concerns that underpin the 

4 

1The prepared statement of Senator Gillibrand appears in the Appendix on page 43. 

public’s skepticism. We need to assure the American people that we 

are putting their interests above our own. 

Seven years ago, economist Alan Ziobrowski published a study 

that showed that the stock portfolios held by U.S. Senators in the 

mid-1990s outperformed the market by nearly 12 percent per year. 

Mr. Ziobrowski concluded from his data that Senators have ‘‘a definite informational advantage over other investors,’’ though he also 

was careful to point out that his results ‘‘should not be used to 

infer illegal activity.’’ In his words, ‘‘Current law does not prohibit 

Senators from trading stock on the basis of information acquired in 

the course of performing their normal senatorial functions.’’ 

A more recent study by the professor showed similar, albeit less 

dramatic, investment returns for stock portfolios held by Members 

of the House between 1985 and 2001. At the same time, however, 

not all experts who have examined these data share the professor’s 

conclusions or his legal interpretations. 

So the purpose of today’s hearing is to analyze the need for 

greater clarity in the scope of the insider trading laws. I am eager 

to hear the views and recommendations of the witnesses on the legislation presented by our colleagues to close any loopholes and also 

to explore whether this is simply a matter of insufficient enforcement under the existing fraud laws. 

Whatever the problem is, one thing is certain. We should not be 

shielding Congress from laws that apply to other Americans. 

Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thanks very much, Senator Collins. 

Senator Gillibrand and Senator Brown, thanks for your leadership here. You really seized the moment and, as soon as this problem became evident, took real leadership. And it is because you 

have introduced the bills that we are here. We take your legislative 

proposals very seriously, and it is Senator Collins’ intent and mine 

to move to a markup as soon as we can. So we welcome you here 

today. 

It is always a difficult question when you have two Senators who 

you call on first. We have researched this matter, and it turns out 

that Senator Gillibrand, by a small amount, has more seniority, although it is clear that Senator Brown is much older. [Laughter.] 

Senator COLLINS. And he is a Member of our Committee. [Laughter.] 

Chairman LIEBERMAN. Touche. Senator Gillibrand, go ahead. 

TESTIMONY OF HON. KIRSTEN E. GILLIBRAND,1 A U.S. 

SENATOR FROM THE STATE OF NEW YORK 

Senator GILLIBRAND. Thank you, Mr. Chairman. I am very grateful for your leadership. Senator Collins, thank you for your leadership. I appreciate your holding this extremely important hearing 

and inviting me to offer my testimony this afternoon. Your strong 

leadership together is a shining example of how important it is to 

shine light on an issue as important as fundamental fairness, and 

it is a very important step forward on the path to restoring Americans’ faith in our government, just as you said, Mr. Chairman. 

5 

Like millions of Americans all across the country, I was very surprised to learn that insider trading by Members of Congress, their 

families, or their staff using non-public information gained through 

their congressional work is not clearly and expressly prohibited by 

law or by the rules of Congress. 

The American people need to know that their elected leaders 

play by the exact same rules that they play by. They also deserve 

the right to know that their lawmakers’ only interest is in what is 

best for the country, not what is best for their own financial interests. 

Members of Congress, their families, and their staff should not 

be able to gain personal profits from information to which they 

have access that everyday middle-class American families do not. 

I simply believe that this is not right. Nobody should be above the 

rules. 

I have introduced a bipartisan bill in the Senate with 15 of our 

colleagues. Senators Rubio, Snowe, Johanns, Tester, Stabenow, 

McCaskill, Klobuchar, Durbin, Blumenthal, Bill Nelson, Reed, 

Cardin, Kerry, Sherrod Brown, and Baucus have all offered this 

bill to close the loophole. 

This STOCK Act legislation is very similar to the legislation that 

was first introduced in the House by Congresswoman Louise 

Slaughter and Congressman Tim Walz. So I want to thank them 

for their longstanding commitment to this issue and to the advocacy on it. I also want to recognize my colleague Senator Scott 

Brown for requesting today’s hearing and for his very strong work 

on this issue as well. 

Our bill, which has received the support of at least seven goodgovernment groups, covers basic important principles: 

First, it says that Members of Congress, their families, and their 

staff should be barred from buying or selling securities on the basis 

of knowledge gained through their congressional service or from 

using that knowledge to tip off anyone else. The SEC and the U.S. 

Commodity Futures Trading Commission must be empowered to 

investigate these cases. To provide additional teeth, such acts 

should also be a violation of Congress’ own rules to make clear that 

the activity is not only illegal but inappropriate for Members of 

Congress. 

Members should be required to disclose major transactions of 

$1,000 or more within 90 days, providing dramatically improved 

oversight and accountability from the current annual reporting requirements. 

Last, individuals doing political intelligence work—contacting 

Members of Congress, their staffs, and other individuals to gain information to help with investment decisions—should have to register as lobbyists to provide additional oversight of this industry. 

There are those who do not want us to succeed and pass this 

common-sense legislation the American people expect. Some critics 

will say that the bill is unnecessary or already covered under current statutes. I have spoken with experts tasked in the past with 

investigations of this nature, and they strongly disagree. We must 

make it unambiguous that this kind of behavior is illegal. 

Others may say that the legislation is too weak, so let me be very 

clear. Our mission here is to pass a strong bill with teeth in it that 

6 

1The prepared statement of Senator Brown appears in the Appendix on page 45. 

will make any and all insider trading clearly illegal and a violation 

of our congressional rules for all Members of Congress, their entire 

families, and their staff. As we move forward, there will be technical changes in the language to improve the bill and to ensure 

that the final product meets this goal. Anything less is unacceptable. 

As my home State newspaper the Buffalo News recently noted, 

‘‘The STOCK Act would ensure that it is the people’s business 

being attended to.’’ This is a step that we must take to begin to 

restore America’s trust in this very broken Congress. 

Thank you again, Senators Lieberman and Collins. I am very 

grateful that you held the hearing today. 

Chairman LIEBERMAN. Thanks, Senator Gillibrand. 

Senator Brown, in fact, as our colleague said, requested this 

hearing and asked us to do it as soon as we could, which is why 

we are here today. 

Senator Brown, it is all yours. 

TESTIMONY OF HON. SCOTT P. BROWN,1 A U.S. SENATOR FROM 

THE STATE OF MASSACHUSETTS 

Senator BROWN. Thank you, Mr. Chairman and Senator Collins. 

Being new here, until the ‘‘60 Minutes’’ piece came out, I had no 

knowledge that something like this was even allowed. And as a result of that, I wanted to do something about it to try to make a 

difference. 

There was a ‘‘60 Minutes’’ piece that featured a segment about 

Members of Congress and their alleged insider trading advantage, 

which garnered widespread public attention, as you referenced. 

You know, it is interesting. When you even have to hear about 

things like this that happen apparently in Washington, there is 

clearly something wrong. And you referenced it, Mr. Chairman. 

There is a breakdown of trust. We need to re-establish that connection and let people know that we are subjected to the same laws 

and rules that they are. We should not pass laws and then not 

have to adhere to them. And the American people’s trust in Congress is at an all-time low, and that is disturbing. 

It is more important than ever to have Members of Congress affirm that we live by those very same laws that we pass for everyone else in our country. We should be held to the same and, quite 

frankly, I think a higher standard than the members of the general 

public and should not be able to profit based on nonpublic information. 

That is why I introduced the STOCK Act of 2011, and I greatly 

appreciate your jumping on it. It does not surprise me at all that 

both of you would move quickly to address something that affects 

our body in such a dramatic way. This obviously affects Members 

and employees of Congress as well as the Executive Branch employees from using nonpublic information obtained through their 

public service for the purposes of investing or otherwise making a 

personal financial gain. 

Consider this: A Member of Congress hears during a meeting 

that a program will be cut or something dramatic is going to hapVerDate Nov 24 2008 11:03 May 14, 2012 Jkt 072559 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 P:\DOCS\72559.TXT SAFFAIRS PsN: PAT
7 

pen, and then he either buys or sells his stock to score a profit or 

avoid losses when the news breaks. And under current law, the 

Congressman would likely walk away with a fatter investment account. For everyone else, it would mean jail time, and that is not 

right. 

Some scholars argue that the current law already applies to 

Members of Congress, as you referenced in your opening statement, 

and that we do not need it, but I disagree. If it is in effect, then 

why have they not done something about these sorts of things? 

There has not been one prosecution. If the SEC has all this power, 

why have they not used it? 

The mere existence of this debate is enough to show that we 

must clearly define the blanket affirmative duty that we have as 

Members of Congress to the American people pertaining to confidential nonpublic information. Not defining this duty will leave 

an absolute gap—and it is clear that it has left a gap—of uncertainty that invites abuse, intentional or otherwise, and contributes 

to a breakdown of trust among the American people. And that is 

just not right. 

This legislation is directly aimed at correcting this problem that 

academics such as Professors Alan Ziobrowski and Stephen Bainbridge have identified. In his work, Professor Ziobrowski found that 

Members of Congress’ investments may have benefited from an informational advantage over members of the general public. And in 

his recent book, ‘‘Throw Them All Out,’’ author Peter Schweizer, a 

fellow at the Hoover Institute, reports that Members of Congress 

are making a killing in real estate by approving the use of Federal 

funds for projects that will enhance the value of buildings or lands 

that they actually own. And that is not right. 

As Members of Congress, we all know we have access to information that the public does not—through classified briefings, closed 

conference reports, and personal conversations with government officials. All of these sources can give us nonpublic information that 

we could find of significant value and trade accordingly. Not only 

do we have that access, we create information and policy as well, 

and we can influence things that way. 

When we act on legislation or negotiate legislative language, frequently that legislation has real financial consequences to many 

different industries in this country. And because we have that access and we create information, we absolutely must not betray the 

public’s trust in everything that we do for our own personal gain. 

I believe—and I know you two do, and everybody on this Committee does—that diminishing public trust is why you called the 

hearing today. I suspect we will hear from witnesses today who say 

that the existing laws and rules are sufficient—Senator Gillibrand 

referenced it; you did, Mr. Chairman—and I respectfully disagree. 

I say, ‘‘Like really?’’ Then, once again, why are we here? Why was 

the piece run? Why has something not been done? Basic questions. 

There has been no successful prosecutions of Members or their 

staff, and I believe the uncertainty that exists around the legal 

framework provides an excuse for enforcement officials and agencies to avoid the politically difficult task of policing Congress, especially when we control the purse strings of many of those agencies. 

We must absolutely close this loophole. 

8 

I believe that the vast majority of the Members and staff of Congress are here to serve their constituents’ best interests. They are 

people of good will, and they are not here to line their pockets. But 

by explicitly prohibiting the use of material nonpublic information 

for personal gain, we will vastly increase the transparency that everyone always talks about here, but sometimes it just does not get 

done. 

The legislation I have introduced is similar to the bipartisan legislation that has been introduced in the House for many years now. 

Back in the 109th Congress, I know that Congresswoman Slaughter and Chairman Brian Baird actually filed the STOCK Act, and 

now Congresswoman Slaughter and Congressman Walz have continued their effort in this regard, and it is getting more and more 

support. So I want to thank them for their efforts. 

The media attention has obviously brought a good eye to this, 

and the American people are watching what we do. They watch 

more than ever, especially with all the new media opportunities out 

there. 

I am not afraid of acting in the public’s interest, and that is why 

I introduced this legislation. It is critically needed. And there are 

differences between our two bills. Mine does not amend the ethics 

rules. It does not need a 67-vote threshold. It needs 51 votes. It 

makes it a lot easier to get it through. We can do the Senate resolution side by side. 

I would suggest and request that you take the best of both bills, 

put them together, have us all join together in a clearly bipartisan, 

bicameral manner, and get this thing done. The American people 

deserve it. We will see if politics will play a role in it or not. And 

it is up to us. 

So I look forward to sitting in that Committee chair on the dais 

and asking some questions. Thank you. 

Chairman LIEBERMAN. Thanks very much, Senator Brown, and 

thanks for your closing comments about the process. I will note for 

the record that Senator Gillibrand was nodding her head affirmatively, which is that there are some differences between your two 

bills, but there are many more similarities. And I hope that the two 

of you will be able to work with Senator Collins and me to come 

up with a joint bill. We may want to separate them. As you said, 

we will probably want to have a separate resolution on the Senate 

rules so that it will be separate from the legislative proposal. I am 

going to set a standard that may be hard to meet, but if we work 

intensely, it would be great if we could bring this before a markup 

of the full Committee in December before we break for the holidays. We tentatively have scheduled a markup for December 14, so 

let us set that as the goal and, informed by the second panel, see 

if we can put this together. 

Thank you both very much. 

Senator GILLIBRAND. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. We will now call the second panel: 

Melanie Sloan, Executive Director of Citizens for Responsibility 

and Ethics in Washington; Donna M. Nagy, Professor of Law at Indiana University Maurer School of Law; Donald G. Langevoort, 

Professor of Law at Georgetown University Law Center; John Coffee, Professor of Law at Columbia Law School. I am having flashVerDate Nov 24 2008 11:03 May 14, 2012 Jkt 072559 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 P:\DOCS\72559.TXT SAFFAIRS PsN: PAT
9 

1The prepared statement of Ms. Sloan appears in the Appendix on page 48. 

backs to those terrible days at law school. But, remember, here I 

am the one who asks the questions. [Laughter.] 

It was not that way in law school. 

And, finally, Robert Walker, Counsel at Wiley Rein and former 

Chief Counsel and Staff Director of both the Senate and House 

Ethics Committees. 

Thanks to all of you for being here on relatively short notice. You 

bring in various ways a wealth of experience and information. 

Ms. Sloan, we will begin with you. Your organization has one of 

the best acronyms in Washington—CREW, Citizens for Responsibility and Ethics in Washington. I know you have worked together 

with a number of other public interest groups that advocate legislation to deal with this insider trading problem. Please proceed. 

TESTIMONY OF MELANIE SLOAN,1 EXECUTIVE DIRECTOR, 

CITIZENS FOR RESPONSIBILITY AND ETHICS IN WASHINGTON 

Ms. SLOAN. Chairman Lieberman, Senator Collins, and other 

Members of the Committee, thank you for inviting me here today 

to join such a distinguished panel. 

No disrespect to any of you intended personally, but the fact is 

America does not trust you. A full 46 percent of Americans believe 

Congress is corrupt. Stories like the one on ‘‘60 Minutes’’ a few 

weeks ago become such big news because they confirm what so 

many people already believe: That many of your colleagues use 

their positions not for the public good but to feather their own 

nests. 

My organization, CREW, has focused on misconduct of Members 

of Congress for many years. We have seen and complained of numerous legislators abusing their positions to earmark projects to 

increase the value of their personal real estate holdings, buying 

into companies that soon thereafter surged in value, urging agencies to take actions to financially benefit themselves or family 

members, pushing through legislation in apparent exchange for 

campaign contributions, and, finally, even trading on inside information. 

As others have said, at no time in history has the public’s view 

of Congress been quite so dismal. The jobless rate is sky high, and 

a wide swath of the country is suffering severe economic hardship, 

but Members of Congress have never been richer. Sixty-six percent 

of Senators and 41 percent of House Members are millionaires. 

Members have significant stock portfolios, but only some maintain 

their assets in blind trusts. Whether or not it is accurate, there is 

a widespread public perception that Members of Congress are abusing their positions to enhance their personal wealth. 

Members are also willing to accept benefits, like generous pensions and health care coverage, that most Americans only dream 

about, while at the same time Congress exempts itself from laws 

like those governing whistleblower protections, workplace safety, 

and perhaps insider trading that are applied to everybody else. 

Notably, presidential appointees requiring Senate confirmation 

often have been required by the Senate to divest themselves of interests in companies they will oversee as part of the Executive 

10 

Branch. But Senators are under no such restrictions. For example, 

the Washington Post found between 2004 and 2009, 19 of the 28 

Senators on the Armed Services Committee held assets in companies that did business with the Pentagon. The Senate has refused 

to require Senators to file campaign finance reports electronically, 

all the better to stop the media and watchdogs from comparing 

campaign contributions with legislative actions. And Congress, particularly the House counsel’s office, has been advancing a very aggressive interpretation of the Speech or Debate Clause that allows 

Members who have engaged in serious crimes like bribery to go 

unpunished. 

Congress frequently refuses to enforce even its own limited ethics 

rules, failing to police the conduct of Members except when it is so 

egregious it becomes fodder for sensational, wall-to-wall, 24-hour 

news coverage. 

I am not an expert on securities law, so I will leave it to all these 

other esteemed panelists who are leaders in this field to discuss 

whether and to what extent insider trading laws already on the 

books apply to you. But given that there has been no prosecution 

of a Member of Congress for insider trading and only one Member 

of the House way back in 1976 has ever been disciplined for any 

even remotely related conduct, it is imperative that Congress pass 

a STOCK Act soon. Members of Congress need to demonstrate to 

America that you take our concerns about your ethics seriously. 

Undoubtedly, there are cases in which the Speech or Debate 

Clause of the Constitution might prevent a prosecution such as 

where a Member traded on confidential information received pursuant to a committee inquiry. As a result, not only should the STOCK 

Act provide a role for the SEC and the Department of Justice in 

addressing such conduct, but the House and Senate should also 

amend their standing rules to make clear that such conduct is prohibited and subject to specific disciplinary action, perhaps including 

a financial penalty of three times the amount of a profit obtained 

or a loss avoided. 

Disclosures of trades also must be a key component of any legislation. The 90 days permitted under the bills that we have seen is 

far too long and should be cut back dramatically. After all, electronic confirmations of trades are often instantaneous, making such 

significant time delays unnecessary. 

Members of Congress should post information about trades in an 

electronic searchable database. Further, as with personal financial 

disclosure reports, the willful failure to disclose such information 

should be punishable under the False Statements Act. 

The bottom line is that Americans are becoming increasingly 

frustrated with a Congress viewed as part of the 1 percent and 

more concerned with preserving that status than in working to improve the standard of living of the remaining 99 percent. Passing 

a STOCK Act would be a good first step toward changing that 

image. 

Thank you. 

Chairman LIEBERMAN. Thank you, Ms. Sloan. And now Professor 

Nagy from Indiana University Maurer School of Law. 

11 

1The prepared statement of Ms. Nagy with an attachment appears in the Appendix on page 

54. 

TESTIMONY OF DONNA M. NAGY,1 C. BEN DUTTON PROFESSOR 

OF LAW, INDIANA UNIVERSITY MAURER SCHOOL OF LAW 

Ms. NAGY. Chairman Lieberman, Senator Collins, and Members 

of the Committee, I am honored with the invitation to testify. My 

name is Donna Nagy, and I am the C. Ben Dutton Professor of Law 

at Indiana University Maurer School of Law. In my 17 years as a 

professor, I have co-authored a treatise on insider trading, and I 

have written many articles, including one published last May, on 

the precise topic of today’s hearing. 

The articles sought to debunk what at the time was becoming an 

urban myth: That Congress had exempted itself or was somehow 

immune from the existing law that prohibits insider trading. Congress in no way has sought to immunize or exempt itself. Beyond 

that, the article concludes that congressional insider trading is already illegal under existing law. 

Based on my research, I would expect a court to hold a Member 

of Congress liable for any securities trading that is based on material nonpublic information obtained through congressional service if 

the SEC or DOJ successfully proved the facts alleged. I acknowledge, however, that many distinguished securities law scholars see 

shades of gray, and some believe a court would rule likely the other 

way. 

The controversy surrounding the application of existing law to 

Congress stems from the fact that Congress has never enacted a 

securities statute that explicitly prohibits anyone from insider trading. A STOCK Act would only address one manifestation of this 

much larger malady. 

In the absence of an express statutory prohibition, the offense of 

insider trading has been prosecuted as a violation of Section 10(b) 

of the Exchange Act and Rule 10b–5. These provisions prohibit 

fraud ‘‘in connection with the purchase or sale of any security.’’ The 

Department of Justice also prosecutes insider trading as a criminal 

violation of either Rule 10b–5 or the Federal mail and wire fraud 

statutes. Thus, in the vast majority of instances, insider trading is 

illegal only insofar as it can be deemed an act of fraud. 

Because the term ‘‘fraud’’ is not defined in these statutes, the formidable task of determining illegal insider trading has defaulted to 

the Supreme Court and lower Federal courts. And in literally hundreds of cases, courts have imposed liability where the traders were 

decidedly not insiders of the issuer whose securities were traded. 

For example, courts routinely impose liability in so-called outsider trading cases involving family members who trade on information entrusted to them by spouses or relatives. 

Other outsider cases would include Federal and State officials 

who trade on information obtained through government service, including a Food and Drug Administration chemist who pled guilty 

last month and now awaits a likely prison sentence. 

In misappropriation cases such as these, as in all insider trading 

cases, the liability linchpin is a securities trader who has breached 

a fiduciary-like duty of trust and confidence by secretly profiting 

12 

1The prepared statement of Mr. Langevoort appears in the Appendix on page 126. 

from the use of material nonpublic information that rightfully belongs to somebody else. 

The Constitution refers repeatedly to public offices being ‘‘of 

trust.’’ Members also take an oath of office to faithfully discharge 

their duties. So there should be little doubt that Members’ undisclosed, self-serving use of congressional knowledge constitutes a 

misappropriation that would defraud the United States and the 

general public, among others. 

For a court to conclude otherwise, it essentially would have to 

view nonpublic congressional knowledge as a perk of office belonging to an individual Member to do with as he or she wished. Such 

a view would be strikingly inconsistent with the tenets of representative democracy. 

I recognize that a Member of Congress has never been prosecuted for insider trading based on nonpublic congressional knowledge. But the DOJ has used the Federal mail and wire fraud statutes to successfully prosecute congressional officials for defrauding 

the United States and the public through the undisclosed misappropriation of congressional funds and tangible property. And 

the Supreme Court has dictated that material nonpublic information constitutes intangible property. 

In sum, congressional insider trading violates the broad antifraud provisions in Rule 10b–5 and the mail and wire statutes. 

My final point relates to one possible consequence of a STOCK 

Act. I applaud and endorse the motivation behind the proposed legislation, but I am concerned that in the absence of a modification 

to its wording, a STOCK Act could be viewed as the only insider 

trading law that applies to Congress. This risk is troubling because 

the proposed legislation fails to reach a host of possible insider 

trading scenarios that would almost certainly fall within existing 

law. 

Thank you very much for giving me this opportunity to share my 

thoughts. 

Chairman LIEBERMAN. Thanks very much, Professor. That was 

very helpful, and we will come back with some questions. 

Next, Professor Donald Langevoort, Professor of Law at Georgetown University Law Center. Thanks very much for being here. 

TESTIMONY OF DONALD C. LANGEVOORT,1 THOMAS AQUINAS 

REYNOLDS PROFESSOR OF LAW, GEORGETOWN UNIVERSITY 

LAW CENTER 

Mr. LANGEVOORT. Thank you, Chairman Lieberman, Senator Collins, and Members of the Committee. My testimony today strongly 

supports legislative efforts to explicitly proscribe insider trading by 

Members of Congress and their staffs, as intended by the various 

STOCK Act bills recently introduced in the House and Senate. 

There is no current exemption from the main thrust of U.S. insider trading law for either Members or staff, and many forms of 

trading or tipping by such persons are adequately proscribed under 

existing legal authority. Indeed, as Professor Nagy has just told 

you, it is possible that courts would rule that current insider trading law adequately proscribes all abusive trading in securities on 

13 

Capitol Hill. I hope they would. But there is sufficient doubt, especially in light of how courts recently have been reading Section 

10(b) and Rule 10b–5. 

The primary weapon against insider trading cases like this—the 

misappropriation theory—requires a showing that the trader was 

in a fiduciary-like relationship to the true owner of the information 

and deceptively stole information entrusted to them. As applied to 

legislative activities on Capitol Hill, this theft of someone else’s secrets concept does not fit neatly. 

Yet the idea that Members of Congress or their staffs can freely 

step ahead of ordinary investors to profit from information acquired 

as a result of their legislative roles is disturbing, to say the least. 

Congress should, therefore, act to eliminate any doubt and state 

clearly that both trading and tipping apply to Members and staff. 

An insider trading case against a Member or even a powerful 

staff person will always be a matter of great political sensitivity, 

likely to be brought only to the extent that the case factually and 

legally is very strong. The external pressures to bring such cases, 

or not bring them, will inevitably be great when any suspicions 

arise. Leaving any ambiguity as to the question of whether, and to 

what extent, insider trading on Capitol Hill is unlawful is hardly 

an encouragement to those matters that deserve to be courageously 

investigated and pursued. 

It would be extremely unfortunate were the SEC or prosecutors 

to bring an action and have the Member or staff person raise the 

defense, which they surely would, that service in Congress carries 

with it no fiduciary-like duty with respect to government confidences. That would be the last headline Congress should want to 

see. 

While I fully support the intent behind the STOCK Act bills, the 

legislative language must be carefully crafted to assure that legislation does not create the very problem it seeks to address: The 

perception that Congress has exempted itself from insider trading 

law. If read as an exclusive statement of Congress’ insider trading 

restrictions, it is at times too narrow, at times overbroad. 

I am more than happy to work with the Committee and its staff 

to resolve these problems, which I do not believe at all reflects the 

true intent of the drafters. Thank you. 

Chairman LIEBERMAN. Thank you, Professor. Let me immediately accept your offer of assistance. 

We have a purpose, I think, most of us on the Committee, but 

this is a field of law with a lot of precedent and a lot of complications. So in trying to fix this problem, we do not want to create 

other problems or create other appearances, as you said. So I look 

forward to the question-and-answer period. 

Next, John C. Coffee Jr., is a Professor of Law at Columbia Law 

School. We have quite a distinguished panel here. Thank you for 

being here. 

14 

1The prepared statement of Mr. Coffee appears in the Appendix on page 139. 

TESTIMONY OF JOHN C. COFFEE JR.,1 ADOLF A. BERLE 

PROFESSOR OF LAW, COLUMBIA UNIVERSITY LAW SCHOOL 

Mr. COFFEE. Thank you, Chairman Lieberman, Senator Collins, 

and other Members of the Committee. I am delighted to be here because I agree almost completely with my predecessor, Professor 

Langevoort. I am going to edit out much of what I was going to say 

in support of what he was saying and make just four points. 

Point one, I believe Congress should act, but narrowly, and I 

want to underline the words ‘‘but narrowly.’’ While reasonable people and reasonable professors can disagree—and reasonable professors almost always do disagree—I think there are clearly enough 

ambiguities in this field that you need legislative action. 

Senator Brown asked this point earlier: Why has there not been 

enforcement? I think even very responsible U.S. Attorneys would 

not prosecute criminally, would not indict, if there is any uncertainty in the law. You do not indict in a case where the law is 50/ 

50, so that is a reason they may have restrained their hands in 

cases where they could have gone forward. So that is point one, 

that there is ambiguity, and I think you should act, and Professor 

Langevoort already said that. 

Point two, which he alluded to, but I want to say it a little bit 

more fully, the proposed legislation has language that does not 

quite work. I want to say this respectfully, but one of the key concepts in both the proposed bills is that the information that you receive has to relate to pending or proposed legislation before there 

is liability. Unfortunately, that is not the most common case that 

we are likely to see. I can imagine a Department of Defense official 

calling a congressman and saying, ‘‘You know that bill you have 

been pushing us for 2 years to pass to give that defense contract 

to that contractor in your district? That defense contract will be announced tomorrow for $5 billion.’’ There is no legislation there. 

There is nothing that under the existing language would make that 

criminal. Frankly, congressmen spend much of their time exercising oversight, and that oversight function does not fall within 

the pending or proposed legislation. That is flaw one. 

Flaw two, there is a reference that you cannot trade in securities 

of an issuer. Well, frankly, the most likely trading that you are 

likely to see would be in options or futures or stock index products, 

which are not securities of an issuer. They are issued by financial 

dealers in the market. They are not particular companies you are 

buying into. You have to play with that language. 

I think there is a difference in the two bills with regard to 

whether tipping—as opposed to yourself receiving information—by 

the congressman is covered. I think that should be reconciled. 

There are several places where you need to talk a little bit about 

directly or indirectly because there could be a chain of four or five 

people, and there could be a distance between the congressman and 

the tippee. I think you want to cover those situations. These are 

all small points that I will not go further into. 

Let me go to my third point. Doing less is more. Rather than attempting to write a detailed code that would codify terms that have 

well-recognized judicial meanings, like ‘‘material’’ and ‘‘nonpublic,’’ 

15 

it might be better to write a very simple one-sentence statute. For 

example, such a one-sentence statute could say, ‘‘A Member of Congress is a fiduciary with respect to all material nonpublic information that such person acquires in the performance of such person’s 

duties or that such person receives because of his or her status as 

a Member of Congress.’’ 

That one sentence does it, and it does not require you to define 

terms like ‘‘material’’ or ‘‘nonpublic.’’ You would just say that in interpreting this statute, the courts should use the existing meaning 

under the Federal securities laws of these terms. 

If you attempt to do more, ambitious as it is, and have a universal legislative statute, Congress has tried that before and it has 

proven to be a disaster. I testified in this field 30 years ago, in the 

1970s and 1980s, and Congress wisely backed off from writing a 

universal statute and just changed the penalties and insider trading sanctions. I think that is wiser because if you adopt legislation 

with new terms, the Federal courts will spend 10 to 15 years resolving what those new terms mean. There will be conflicts in the 

circuit. None of us needs that confusion. 

Also, if you try to adopt comprehensive legislation, I am afraid 

that every special interest group in the United States will want a 

safe harbor for what they do, and you will find that the statute will 

go from short to page after page of proposed safe harbors. You do 

not need to do any of that to deal with the real problem that concerns you, which is Members of Congress. So I think you should 

keep it short and simple. 

Last point: Members of Congress will face some illiquidity if such 

a statute is adopted. That is a necessary cost. But I want to advise 

you that I do not think the problem of illiquidity is as great as you 

might think. There are some special rules that the SEC already 

has, most notably Rule 10b5–1, that permits anyone, including 

Members of Congress, to adopt what is called a Rule 10b5–1 trading plan. This is different than a blind trust. You can give very detailed instructions to a fiduciary, a broker or a bank, advising the 

broker or bank exactly what you want done if stock prices fall, if 

different things happen. I think that would solve most of these 

problems. In addition, you could even instruct the SEC to give noaction letters to you. And, finally, I think that you can rely on the 

advice of counsel that if you get an opinion from a lawyer with experience in the securities laws that you are not engaged in using 

material nonpublic information, I believe that no enforcer will proceed against you where you have a reliable defense-of-counsel defense. Thank you. 

Chairman LIEBERMAN. Well, thank you. Again, very helpful. We 

are not accustomed to drafting legislation as brief as you suggest, 

but it is a very constructive recommendation. 

Robert Walker, as I mentioned at the outset, comes to us with 

the unusual and very helpful experience of having been Chief 

Counsel and Staff Director of both the Senate and House Ethics 

Committees. Thanks for being here. 

16 

1The prepared statement of Mr. Walker appears in the Appendix on page 155. 

TESTIMONY OF ROBERT L. WALKER,1 COUNSEL, WILEY REIN 

LLP 

Mr. WALKER. Thank you, Chairman Lieberman, and thank you, 

Senator Collins and Members of the Committee. Thanks for the opportunity to address the important issue of insider trading and congressional accountability. 

I am not here to advocate against or for any version of the 

STOCK Act. I will say, however, that in my view current Federal 

insider trading prohibitions do apply fully to Members and employees of Congress under the misappropriation theory. And I will also 

say in my view as a former Federal prosecutor, the law is more 

than 50/50 on that. 

There are substantial proof problems in making out an insider 

trading case in the congressional context, however; in particular, 

proof that information traded upon was truly nonpublic may be an 

obstacle, probably would be an obstacle, given the continual swirl 

of information in and around the Capitol. 

There is also a unique complicating factor to prosecuting insider 

trading cases, at least some insider trading cases, in the congressional context. As already alluded to, under the Speech or Debate 

Clause of the Constitution, certain congressional actions and activities cannot be cited or used as proof in legal actions against Members brought outside of Congress. But even the most sweeping conceivable legislation against congressional insider trading could not 

trump constitutional speech or debate privilege. 

Within Congress itself, existing standards of conduct do capture 

and do provide the basis for sanctioning a congressional individual 

for profiting from securities trades based on material nonpublic information gained through his or her official position. Most directly, 

paragraph 8 of the Code of Ethics for Government Service states 

that a person in Federal Government service should ‘‘never use any 

information coming to him confidentially in the performance of governmental duties as a means for making private profit.’’ 

Insider trading based on confidential congressional information 

would be a clear violation of this provision, and the mechanism for 

enforcement would be the congressional ethics process. Having said 

this, it cannot be said as clearly exactly what information would be 

considered confidential within Congress for purposes of enforcement of this code provision. 

Under the rules of the House and Senate, there is no blanket 

duty of confidentiality on the part of Members and staff. Senate 

rules, for example, basically leave it to each committee and office 

to determine what information before them is confidential. But relatively few committees of the Senate or of the House actually have 

specific rules imposing duties of confidentiality on their Members 

and staffs. So paragraph 8 of the Code of Ethics does not provide 

a systematic tool for addressing allegations of congressional insider 

trading. Use of this provision for pursuing insider trading allegations within Congress requires a case-by-case analysis. 

The current focus on insider trading in Congress does provide the 

opportunity for the Senate and the House and each of the commitVerDate Nov 24 2008 11:03 May 14, 2012 Jkt 072559 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 P:\DOCS\72559.TXT SAFFAIRS PsN: PAT
17 

tees to take a hard look at their rules with respect to the definition, 

scope, and duties relating to confidential information. 

Apart from paragraph 8 of the Code of Ethics, allegations of insider trading in Congress may be addressed under the fail-safe 

standard of conduct, which enjoins Members and staff never to engage in conduct that may reflect discredit on the House or Senate. 

If credible allegations of securities trading by a Member or employee based on material nonpublic information were to come before the Senate Ethics Committee, the House Ethics Committee, or 

the House Office of Congressional Ethics, and these allegations 

were more than mere insinuation, the allegations would be pursued 

by the Ethics Committee as potentially conduct reflecting discredit 

on the institution, and they would be so pursued and investigated, 

regardless of whether any other specific law or rule were applicable. 

Finally, let me turn to the issue of whether Members of Congress 

may trade in or hold securities of companies or industries that fall 

within the jurisdiction of their committee assignments. As you 

know, recusal and divestment are viewed in Congress as extraordinary and disfavored remedies to potential conflicts of interest. 

The preferred approach to monitoring and policing potential conflicts in the Legislative Branch is through public financial disclosure. The provisions of the proposed STOCK Acts that would require public disclosure of securities transactions within 90 days are 

consistent with and would extend this approach. There would, of 

course, be a compliance burden on Members and staff, but there 

would also be a substantial increase in the accessible pool of information based upon which a Member’s constituents could form their 

own ultimately conclusive and unappealable judgments as to the 

appropriateness of the Member’s financial transactions and as to 

the propriety overall of the Member’s conduct. Thank you. 

Chairman LIEBERMAN. Thank you, Mr. Walker. 

We will go forward with questioning now, and we will have 7- 

minute rounds for each Senator. 

Based on the research that I did before I came into the hearing 

today, I reached a tentative conclusion, informed by the SEC testimony filed with the Committee today, that under existing law the 

SEC would have the authority to pursue and prosecute Members 

of Congress or staff for insider trading. 

Based on the testimony that the witnesses have given, I think 

now I come to a different kind of conclusion, which is that there 

is genuine ambiguity in the law. My original feeling was that we 

should legislate to make clear that Members of Congress are included within laws against insider trading because, obviously, as 

we have said earlier, insider trading is not mentioned or defined 

in the existing state of the law. You have to take a two- or threestep jump to get there. 

But now you convinced me that there is ambiguity that has to 

be resolved, and if I am hearing you correctly, particularly Professor Langevoort and Professor Coffee, it goes particularly to this 

question of fiduciary duty. And as I understand it, as you mentioned, Professor Nagy, the Supreme Court really has set the law 

here because it has required the interpretation on up, a person can 

be found to have committed insider trading if the person trades on 

18 

the basis of material nonpublic information, but only if the person 

is breaching a fiduciary duty, which, as I understand it, normally 

is to shareholders or the source of the nonpublic information. 

So the normal reaction—but the normal reaction does not necessarily prevail in courts of law, in other words, there is a separate 

vocabulary—would be, ‘‘Well of course, Members of Congress have 

a fiduciary duty.’’ We have a duty to our constituents and to the 

law. But your testimony leads me to now feel that is ambiguous because Members of Congress and our staffs are in such a different 

relationship to this nonpublic material information. 

So I want to ask Professors Langevoort and Coffee, and Professor 

Nagy, too, to weigh in on the nature of the duty that must be established. Is it a fiduciary duty? If so, how do we define it? Or is 

it a broader duty of trust and confidence, which is the kind of language that we normally would use or that we think we have. Professor Langevoort, please go first. 

Mr. LANGEVOORT. The courts are still working out the answer to 

that question. The Supreme Court established the misappropriation theory in the context of a case involving a partner in a law 

firm who misappropriated information belonging to the law firm 

and the firm’s client. That is a quintessential fiduciary relationship. A firm has a clear-cut right to sue a partner for breach of fiduciary duties, such as duties of loyalty and care. 

As you move away from settings in which there is an employer, 

a boss, a principal who would be able to file a breach of fiduciary 

duty action against the person in question, the ability to make the 

argument that the misappropriation theory clearly applies grows 

weaker. 

As I said, I would hope that a court would make that leap, but 

I am not confident. 

Chairman LIEBERMAN. Yes. Professor Coffee. 

Mr. COFFEE. Let me just add a word on that same line. In an 

en banc decision of the Second Circuit—and ‘‘en banc’’ means every 

judge on that circuit participated—they ruled that husbands and 

wives are not fiduciaries to each other. That will really surprise 

you. What more sensitive relationship is there than husband and 

wife? But they were not fiduciaries because the Second Circuit 

ruled that to be a fiduciary, there has to be a relationship with discretionary authority on one side and dependency on the other, and 

the more it was equal, it was not a relationship that was fiduciary 

in character. 

Now, the SEC partially overruled that with respect to husbands 

and wives, but that definition that a fiduciary relationship only exists when there is discretionary authority on one side and dependency on the other is a very high standard that neither Professor 

Langevoort nor I want to see applied. No one wants to see it applied. But that is why there is this ambiguity, and we think that 

because there is ambiguity, there is no downside in passing this 

legislation and considerable upside. 

Chairman LIEBERMAN. Right. So if I remember your one-sentence 

proposal, it dealt exclusively with this question. Am I right? 

Mr. COFFEE. Simply, you are a fiduciary with information you receive in the course of your work or your status in Congress. The 

advantage of that is only that if you start defining in legislation 

19 

what ‘‘material’’ and ‘‘nonpublic’’ means, there are going to be efforts by defense counsel to say that is different and it was not satisfied in this case. 

Chairman LIEBERMAN. Yes. So it would not be enough, for instance, if we avoided the issue of fiduciary duty altogether, for 

whatever reason, and simply declared in law that Members of Congress may not trade on the basis of material nonpublic information, 

which they obtained only because they were Members of Congress? 

Mr. COFFEE. You could possibly do it that way, but what you just 

said would not cover the tipping problem. You want to cover both 

the tipper and the tippee who is a Member of Congress. 

Chairman LIEBERMAN. Professor Nagy, do you want to get into 

this? 

Ms. NAGY. Yes, I do. Thank you, Mr. Chairman. 

With respect to the Chestman decision that Professor Coffee just 

mentioned, the Securities and Exchange Commission has made 

perfectly clear its view that the Second Circuit unduly narrowed 

what the Supreme Court had set out in its Chiarella, Dirks, and 

O’Hagan decisions as the requisite relationship of trust and confidence. And in direct response to the Chestman decision, the Securities and Exchange Commission promulgated Rule 10(b)5–2. Professor Coffee mentioned one aspect of that rule: It creates a rebuttable presumption that family members—parents, children, siblings, and spouses—owe duties of trust and confidence to each 

other. But the rule has two other provisions, and one references 

‘‘histories, patterns, and practices of exchanging confidences’’ that 

create the requisite duty of trust and confidence. 

One other point: If courts routinely were applying the now-discredited Chestman analysis to the insider trading prosecutions 

brought by the Securities and Exchange Commission or the Department of Justice, we would see far fewer government victories and 

far fewer settlements. There have been outsider cases including one 

involving a nonmartial relationship where one partner misappropriated information from the other. Although clearly not a spousal 

relationship, the result was a criminal sentence for the boyfriend 

who had misappropriated from his attorney girlfriend. 

Certainly the Chestman standard—a very high standard for a fiduciary relationship—would not have supported a criminal sentence in that case. According to the SEC, a relationship of trust 

and confidence is what triggers the requisite disclosure duty. 

I would ask you to imagine a situation where a district court is 

faced with this a case involving a Senator or Representative. If a 

district court were to conclude that a Member of Congress does not 

owe a duty of trust and confidence to the United States and to the 

American people, I would be mightily surprised. We could all anticipate what the headlines the next morning would be on that ruling. To avoid all that, a district judge would likely find the requisite duty of trust and confidence under existing law. 

Chairman LIEBERMAN. Very interesting. Obviously this is important because we want to get this done, but we are not, if I can use 

a metaphor from a different area of activity, painting on a blank 

canvas. There is a lot on the canvas in existing law and Supreme 

Court rulings. 

20 

The other conclusion I have, Senator Collins, is more personal. 

I have actually understood what the three law professors have said 

today, which says to me that I am more prepared to go to law 

school now than I was when I went. [Laughter.] 

Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

Professor Coffee, you made a very important point that Members 

of Congress do more than just legislate. We act as advocates for our 

constituents. We endorse public funding for them through grants or 

contracts. We seek expert advice on public policy in order to reach 

the right decisions. I am thinking of how many of us during the 

financial crisis in the fall of 2008 reached out to financial experts 

for advice. 

So I think this is a more complicated issue than it first appears 

to make sure that when we do act, we are not having a chilling impact on the responsibilities of Members of Congress to their constituents. 

So with that preface in mind, let me suggest a completely different way of looking at this issue, and you actually started to 

touch on it in your testimony, Professor Coffee. Instead of trying 

to put into law a ban that works to prevent what we would all 

think was improper and should-be-illegal behavior, what if we said 

that Members of Congress cannot trade in individual stocks themselves but must either limit their investments to mutual funds or 

do as you suggest and adopt a mechanism approved by the SEC to 

allow trading pursuant to a written plan that gives detailed instructions to a person overseeing the investments, but the Member 

does not make the trades, or set up a blind trust if they have 

enough assets to have blind trusts? What if we got at it from that 

perspective? What would be your opinion of that? I am going to ask 

the whole panel this question. 

Mr. COFFEE. Well, I think that kind of Rule 10b–5 plan is a 

means of protection. I think many Congressmen would find it an 

imposition if they were told that they had to use blind trusts or 

Rule 10b–5 plans, even when they had no information at all. They 

might in some cases do this as a matter of pure precaution, but I 

think they would find it an unnecessary bit of overbroad regulation 

to say you cannot trade at all because you are a Congressman. 

I think if you recognize that you are going to regularly come in 

contact with material information, you would be well advised to use 

a Rule 10b–5 plan, but the reason you are using it really is that 

it might be criminal if you traded in your own name based on your 

own decisions. So I think these two things fit together. You have 

the prohibition, and then you have safe harbors. The safe harbor 

would be a Rule 10b–5 plan or an opinion of counsel, which I think 

can often be obtained in many situations quite quickly. So I think 

you need both of them together. 

Senator COLLINS. Does anyone disagree with the professor or 

want to add anything to that issue? Professor Langevoort. 

Mr. LANGEVOORT. Let me add something besides the reference to 

Rule 10b5–1. You mentioned at the outset of your question the possibility of moving Members of Congress away from single stocks to 

other forms of financial instruments. That is very difficult because 

we have discovered that insider trading is possible with respect to 

21 

nearly every form of financial instrument, including mutual funds, 

of which we are aware. 

With respect to Rule 10b5–1, it is important to know that is simply a rule—and Congress would have to face up to this if it were 

to go that route—that says as long as you execute those instructions at a time when you did not possess material nonpublic information, then the fact that the trade was executed after you came 

into possession of such information does not make you liable. It 

simply moves the time where we are looking at what did the person know, when did they know it, and that does not make all that 

many hard issues go away. 

Senator COLLINS. Professor Nagy, I would like your comment, 

but I want to get to a different issue for you, so if you could answer 

that quickly so that I have time for a second issue for you. 

Ms. NAGY. I think blind trusts might well be an effective response to much of the difficulty here. I will leave it at that. 

Senator COLLINS. Mr. Walker. 

Mr. WALKER. You are right, Senator Collins. Blind trusts are 

really a mechanism basically only for people who have substantial 

assets because there are administrative costs, and they are not 

blind as to what you put into them initially. They are only blind 

really if you put in cash or after a period of time if the assets have 

been sold down to a particular level, you are notified that you do 

not have those anymore. But they are really not blind as to what 

you put into them. 

And as to limiting investment opportunities for Members and 

staff, I would be concerned that you would be perhaps making it 

harder to attract the best and the brightest or really even the pretty good and the fairly smart into government service. [Laughter.] 

Senator COLLINS. Well, I will try not to be offended by that as 

a person with no assets and who could never qualify for a blind 

trust. 

Mr. WALKER. I do not mean the blind trust aspect. I mean limiting stock trades. 

Senator COLLINS. No. I understand. 

Professor Nagy, you testified that you feel confident that congressional insider trading is already illegal under existing law. Even if 

you are correct, is there an advantage to Congress making it crystal clear by passing such a law? I mean, I realize we have to be 

careful how we draft it. 

Ms. NAGY. One potential disadvantage, though I concede this 

could be cured by careful drafting, is that by legislating directly, 

some courts could infer a congressional intent that the STOCK Act 

is the only insider trading law that applies to Members of Congress. As Professor Langevoort testified, that can be cured by a 

simple statement that the STOCK Act builds on top of existing law. 

Rule 10b–5 and the Federal mail and wire fraud statutes would be 

there then as the floor, and the STOCK Act would come on top. So 

I think that potential risk could be eliminated, and I would be 

happy to help in that effort. 

There is, though, another risk that I think we should think 

through relating to public perception. As I mentioned, the controversy surrounding the application of the Federal securities laws 

to Members of Congress stems from the fact that Congress has 

22 

never enacted an express statutory prohibition of insider trading 

for anybody. And so everybody now must navigate through what 

has often been described as ‘‘a maze’’ of court decisions. 

The boyfriend has to decide whether he can trade on information 

or whether he would be breaching a duty of trust and confidence 

owed to his girlfriend. Sometimes that analysis is hopelessly confusing. If an express statutory prohibition applies to Congress and 

Federal employees, when all the dust settles from all of this, everyday, ordinary people might well begin saying, ‘‘Why do they get an 

express prohibition and we have to suffer through the maze of 

what it means to defraud in connection with the purchase or sale 

of securities?’’ I think that is a troubling risk that might not be all 

that apparent now. 

Senator COLLINS. A valid point, and in the next round or for the 

record, a question that I want you to be thinking of is whether we 

should have a law, if we are going to venture into this area, that 

applies explicitly to the Executive Branch officials as well since, 

frankly, I think a Treasury Secretary has access to far more confidential nonpublic information than any Member of Congress. 

Chairman LIEBERMAN. Thanks, Senator Collins. 

In order of appearance, we will go to Senator Brown, Senator 

Begich, and then Senator Tester. Senator Brown. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Thank you, Mr. Chairman. 

I appreciate all the examples about boyfriends, girlfriends, and 

relationships. We are not talking about that. We are talking very 

specifically about Members of Congress. If I am in a top-secret 

meeting and I find that we are going to drop a weapons system and 

by doing that the company stock is going to go down dramatically, 

and I walk outside and I pick up the phone and I say, ‘‘Hey, sell 

XYZ Company’s stock,’’ that is what we are talking about. We are 

not talking about all the classroom examples that you are using. 

We are talking very specifically about real-time, real-world situations that have been brought to our attention. 

I went to law school, too, and it reminds me of a law school class. 

And, quite frankly, I want to start to do something because you indicated that the courts still have not decided what to do. Well, if 

not now, when? I mean, that is why we are here. That is why the 

Chairman and the Ranking Member asked for this very important 

hearing. 

I want to go to Ms. Sloan first since you have been kind of left 

out of all the fun. If you are looking at this type of situation, would 

you think it would be a good idea in our ethics disclosures to just 

be more specific in maybe a more periodic update as to the stocks 

we own, the stocks we trade, when we bought them, when we sold 

them, and the exact amount of monies we purchased and sold them 

for? That way, anybody who is in the media or the government 

agencies looking at it will say, oh, well, Senator So-and-so is on the 

Armed Services Committee, and he or she bought X amount of military arms stock when he or she found out that the contract was 

going to be terminated. That is, I think, certainly the initial information that would be used to establish that prima facie case potenVerDate Nov 24 2008 11:03 May 14, 2012 Jkt 072559 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 P:\DOCS\72559.TXT SAFFAIRS PsN: PAT
23 

tially on saying that there is an issue we need to look into. Do you 

think that is a good suggestion? 

Ms. SLOAN. I do think that disclosure is a great way to go because I think there would be a lot of repercussions if you have 

quick disclosure. Again, I think 90 days is far too long, but I think 

there are people who will be looking at these kinds of trades very 

frequently, especially if they are searchable on an electronic database. 

I do want to point out that in the example that you gave where 

you learned something in a committee and you immediately went 

out and made a call, that is exactly the kind of conduct that the 

Speech or Debate Clause would make very difficult to prosecute because it is something that you learned in a legislative committee. 

So no grand jury and no prosecutor would be able to use that information that you had obtained in a committee either to obtain an 

indictment or at trial. So it is a tricky situation. 

Senator BROWN. That is why we are here. I mean, the bottom 

line is I think the fiduciary responsibility is to the American people. I mean, that is the relationship that we have. 

Professor Langevoort, the Supreme Court has articulated a severely restrained approach to applying the insider trading laws, 

saying it is within Congress’ power, not the courts, to expand Rule 

10b–5, as I think you have touched upon. If we choose to do nothing today or in the very near future, would Congress be sending 

a pretty strong message to the Supreme Court that we do not want 

to clearly articulate the rule to hold Members of Congress liable for 

trading on this material nonpublic information? 

Mr. LANGEVOORT. You are absolutely right, Senator. The Supreme Court in a number of cases, admitted largely involving private securities litigation, has said repeatedly it is Congress’ job to 

push on the statute, to expand it—not the Court’s job—in the absence of clarity. That is the language that worries me the most in 

terms of a court coming out the other way. 

I think you can accomplish a lot by that explicit statement. 

Senator BROWN. Thank you. 

Ms. Sloan, back to you. As you are aware, no Members of Congress have been successfully prosecuted for insider trading. Would 

strengthening the Senate ethics rules be a sufficient deterrent? 

And would this reform help rebuild the confidence that Members 

are, in fact, held to the same standard and face the same consequences as everyone else? 

Ms. SLOAN. No. I think people have very little confidence in the 

Ethics Committees in the House and Senate. They have done a 

pretty lousy job over the past years. They very rarely hold Members’ feet to the fire except in particularly egregious cases that 

have received a lot of press attention. CREW has filed many complaints for which we have not even received responses 3 years 

later. So that is not a solution. I think you need a dual solution: 

Going to the Ethics Committee if the Speech or Debate Clause is 

going to kill your prosecution, but also having a very clear prohibition and ability of prosecutors to go after you. 

Senator BROWN. Professor Coffee, in its written testimony, the 

SEC indicates that it has all the tools it needs, but yet we have 

never seen any prosecution, as we referenced, of any Members of 

24 

Congress or staff for insider trading. And given that the SEC recently lost a string of insider trading cases, as you state in your 

written testimony, why would the SEC not want a legal standard 

that creates without a doubt a crystal clear framework for the SEC 

to prosecute Members and staff who trade on material nonpublic 

information? 

Mr. COFFEE. They should want that, and I think both Professor 

Langevoort and I are clearly saying, we agree with you, that Congress should legislate. We are just talking about little tweaks in 

what the language should be. 

Senator BROWN. Mr. Walker, if the existing Senate ethics rules 

provide a framework, as I think maybe you have indicated, for 

prosecuting Members who trade on material nonpublic information, 

why have we not seen any prosecutions then? 

Mr. WALKER. Well, first of all, I do want to say that there is the 

Ziobrowski study that suggests that this practice of insider trading 

is somehow endemic in Congress. There is the Eggers and 

Hainmueller study that I think says otherwise and says that, in 

fact, Members’ portfolios perform below the market, and particularly when you look at the average Member’s portfolio, they do not 

exceed the market, and they do not meet market performance. And 

so I think the question of why have there not been prosecutions is 

based on the premise that somehow this is happening everywhere. 

Another aspect of the answer is that the Ethics Committees do 

not have an audit function. They do not go from office to office to 

investigate what people are doing that has not otherwise been reported either to them either through a complaint or through the 

media. And so it is not a matter of complaints and allegations coming before the committees that they are not paying attention to. It 

just is not that. 

Senator BROWN. Thank you. I have one more question for Professor Langevoort and Professor Coffee. Some scholars have suggested that clearly defining a duty for Members of Congress would 

be an easy solution that could be done through a Senate resolution. 

Do you agree with that? 

Mr. COFFEE. I think that passing a statute along the lines you 

have suggested, with possible tweaks in the language, would be an 

effective solution. 

Senator BROWN. A Senate resolution? 

Mr. COFFEE. Oh, no. I meant legislation. I misunderstood you. 

Senator BROWN. No. Just a Senate resolution. 

Mr. COFFEE. That is like a motherhood salute. I do not think it 

accomplishes that much. 

Senator BROWN. I agree. Thank you. 

Mr. LANGEVOORT. It takes you one step forward, but only one 

small step. 

Senator BROWN. Well, listen, I appreciate all of your testimony. 

Mr. Chairman, I appreciate you and Senator Collins for bringing 

this forward, and I and my staff will make ourselves available to 

meet that deadline of December 14. 

Chairman LIEBERMAN. Thanks, Senator Brown. Thanks very 

much for your work, and we look forward to working with you to 

move this quickly. 

Senator Begich. 

25 

OPENING STATEMENT OF SENATOR BEGICH 

Senator BEGICH. Thank you very much, Mr. Chairman and Senator Collins, for having this hearing. 

I remember when I was on the Anchorage Assembly, we had to 

write the ethics code, and at the end of the day, I really came to 

the conclusion that you are ethical or you are not. You can provide 

all the rules you want, but if you are going to cheat, you are going 

to cheat. And so keeping that in mind, one of the views that I have 

is disclosure, disclosure, disclosure. 

For example, you can go on my Web site and find every single 

disclosure form I have ever filled out since 1988 in any office, any 

public facility that I have participated in. 

Mr. Coffee, I know it is hard for us to do simple things around 

here, but actually sometimes simpler is better. And I like your approach, and so I am going to ask some questions and get some comments from people. In the Senate, if I ask a constituent of mine in 

Alaska to get a copy of my disclosure form, thank God I have it 

online because they would have to come to Washington, DC, or 

have someone here come down to the clerk’s office and get a copy 

of it, copy it, and then get it to them in Alaska. 

Neither one of these bills requires an electronic searchable database. I agree with you that you can file these things very quickly, 

and I have done trades, that is all public disclosure, and that is 

why I disclose it. So I want your comment on either both of these 

bills or any legislation. Should it be required that any trade, any 

action be electronically available to anyone at any time via the 

Internet and searchable? I will just go down the list here. Then I 

have a different question for you, Mr. Coffee and Mr. Walker. 

Mr. WALKER. Well, in this day and age, other than perhaps a 

shortage of resources in the Office of Public Records that would be 

needed to manage it, it is not clear to me why there would not be 

and should not be online availability. 

Senator BEGICH. It actually costs us more to do what is going on 

now by hand processing when people send in their forms. Some of 

these people around here who are very wealthy—I am not one of 

them—have big, thick disclosure forms. 

Mr. WALKER. The fact of the matter is that there are nonprofit 

and outside groups that have put them online already, so the question is: Why should the Senate not put them online? 

Senator BEGICH. Correct. So you are a yes? 

Mr. WALKER. Yes. 

Mr. COFFEE. I am definitely a yes, and what you have just proposed is on page 14 of my testimony. 

Senator BEGICH. That is right. 

Mr. COFFEE. That it should go on a Web site so a journalist could 

immediately find this—— 

Senator BEGICH. Or a constituent. 

Mr. COFFEE. Constituents, too, but journalists would be—— 

Senator BEGICH. Because they are the best enforcers. 

Mr. COFFEE. Well, I think journalists are effective, too. 

Senator BEGICH. I have seen a lot of people lose offices because 

of ethical issues, but you are right, journalists add to it. 

26 

Mr. LANGEVOORT. Agreed, and if you are a high-ranking executive of a public corporation, today you have 48 hours electronically 

to file your trades. 

Senator BEGICH. That is right, which we require them to do. 

Mr. LANGEVOORT. Exactly. That is right. And that immediately 

becomes accessible. 

Senator BEGICH. You are making my point. 

Ms. NAGY. I am a yes as well. 

Ms. SLOAN. Yes, I agree. 

Senator BEGICH. That was a soft ball question, but the reason I 

asked this is because we—when I say ‘‘we,’’ I mean collectively 

here—are so resistant to this for some reason. So I am looking to 

the two Members here who are going to do the markup with the 

other Members sitting here, this is going to be an insistent theme 

on my part, and I will actually ask for an expansion not only of 

these forms but our disclosure forms because they have the annual 

reports of stock trades. And if someone wanted to search through 

that now, you cannot. It is the most ridiculous system I have ever 

seen. 

So, Mr. Chairman and Senator Collins, I am just putting that on 

the record here that if we do not do that, we will pass another law 

that will go off somewhere, and we will fill out forms that will be 

handwritten and sent in, and then the good-government groups, a 

constituent who is mad at you, and your opposition will be the 

searchable database people. So I appreciate that. 

Second, to Mr. Coffee, I like your idea about a one-liner, so I am 

going to turn to the rest of the four to ask them to comment on 

your idea. I am not an attorney. I did not go to law school. So no 

disrespect to all the folks here, but simple is better. The more detail, the more out clauses people have, in my view. I will not say 

what my brother says about the bigger the bill, the more times you 

will get—I will fill in the blank later. That is a little concern. 

So let me ask what people think of Mr. Coffee’s idea. 

Mr. WALKER. Well, if the idea you are talking about is a one-liner 

that says Members of Congress are fiduciaries with respect to information they learn in committees—— 

Mr. COFFEE. Not committees. Anyplace. 

Senator BEGICH. Anyplace. 

Mr. WALKER. Anyplace. I think you need to be careful, and you 

need to think about the potential consequences to what you do as 

Senators beyond financial transactions. 

For example, the Privacy Act does not apply to the Congress, and 

you are, therefore, able to do certain things with information that 

you receive from constituents and others that may not be consonant with the Privacy Act at any rate. So you have more freedom 

to use information than the Executive Branch. If you create a blanket fiduciary obligation with respect to congressional information, 

I think you do want to be concerned about how it could affect your 

representative functions and your oversight function and your function of communicating with others beyond the financial transaction 

area. 

Senator BEGICH. Fair enough. 

Mr. LANGEVOORT. I have not seen Professor Coffee’s precise language. I think I could do it in two sentences. But apropos of what 

27 

was just said, I think it has to relate specifically to what insider 

trading is, which is profiting from—— 

Senator BEGICH. Information. 

Mr. LANGEVOORT [continuing]. The existence of that information, 

without talking about all the other fiduciary possibilities that could 

be associated with that information. 

Senator BEGICH. That is good. I see Mr. Walker kind of nodding 

but not yet acknowledged, but good. 

Ms. NAGY. I would support one sentence. [Laughter.] 

Senator BEGICH. It is amazing how lawyers get down to one and 

two sentences. I am very excited right now. 

Ms. NAGY. I wholeheartedly agree that simple is better, and I 

would encourage avoiding the ‘‘fiduciary’’ concept altogether such 

that the sentence would be: ‘‘For purposes of Rule 10b–5’s misappropriation theory, a duty of trust and confidence exists whenever a person is a Member of Congress or a congressional employee 

and has learned that information through government service.’’ 

Congress could possibly authorize the Securities and Exchange 

Commission to add that subsection to existing Rule 10b5–2. 

Senator BEGICH. To existing rules, that is right. 

Ms. NAGY. Rule 10b5–2 now sets out three nonexclusive situations in which a trader is presumed to be in a relationship of trust 

and confidence with the source of the information. There is the 

family member prong; the ‘‘history, pattern, or practice’’ prong; and 

the ‘‘has promised to maintain information in confidence’’ prong. If 

Congress were to authorize the Securities and Exchange Commission to add a fourth sub-section, that would appropriately clarify 

existing law. But going back to my point to Senator Collins, it 

would also apply the same law to everybody else. I think that is 

a very important principle that should come out of any legislative 

action Congress takes in this matter. 

Ms. SLOAN. I have to defer to the law professors on the material 

about insider trading, but I would caution you that would not really solve your problem of the Speech or Debate Clause, which would 

not allow prosecution in an awful lot of these cases, so I still would 

go back to—as much as I do not love the Ethics Committees, sometimes they are really the only option left. 

Senator BEGICH. Very good. Thank you, Mr. Chairman and Senator Collins, for having this hearing. I am a big supporter of the 

concepts of this legislation. Again, disclosure to me is really critical, 

but also ease of use and accessibility are how we create more enforcement because the public and media become the enforcers in a 

lot of ways, so thank you very much. 

Chairman LIEBERMAN. Thank you, Senator Begich. Senator Tester. 

OPENING STATEMENT OF SENATOR TESTER 

Senator TESTER. Yes, thank you, Mr. Chairman. I assume, Senator Begich, you are on my bill to make sure that campaign disclosures are filed electronically? 

Senator BEGICH. I believe I am, and if I am not, I will be, I will 

tell you that. 

Senator TESTER. That sounds good. 

Senator BEGICH. I like it. 

28 

Senator TESTER. That is good. 

I, first of all, want to welcome all the panel members. I appreciate your perceptions and your comments. I can tell you that I am 

not as good as the Chairman. I did not understand everything you 

said. But that is OK. 

Chairman LIEBERMAN. I was not under oath. [Laughter.] 

Senator TESTER. That is good. And it is ironic because about 3 

or 4 hours ago, Mr. Coffee was in front of the Banking Committee, 

and if it was not you, it was your brother because you look a lot 

alike. And so this is a day of your testimony, and we appreciate all 

your testimony today. 

You know, what I did hear, as people talked about the STOCK 

Act, is that we need to be careful because there are potentially 

some unintended consequences whatever we do. And those unintended consequences may be something that really limit our ability 

to legislate and create policy and do the things that we need to do 

as Senators or House Members. 

So I want to approach it from a way similar to what was talked 

about earlier here today, and that is, from a transparency standpoint, if we did things like make financial disclosures transparent, 

if we did things like make our schedules transparent and online in 

searchable databases—all this stuff has to be done that way—if we 

required ethics audits of Senate and House offices. And then I got 

to thinking maybe there are some unintended consequences there. 

Can you think of anything that we do that should not be transparent? I believe in transparency. I believe in sunlight. I think that 

we should do the maximum to let everybody know what we are 

doing, which cleanses all the problems. I believe the forefathers 

were right when they said we need to have a citizen legislature. 

Is there any area that you can think of where transparency 

might be inappropriate? We will start with you, Ms. Sloan. 

Ms. SLOAN. No, I cannot see anywhere where transparency would 

be inappropriate. I think more transparency is required, and I also 

think the Ethics Committee needs to have the ability to audit 

Members routinely. They get all these financial disclosure forms, 

but all they do is make sure that they are filled out. There is no 

auditing to compare them with perhaps a tax return to see if they 

are, in fact, jibing together. And if we saw more of that, I think 

we might find some problems. 

I know that there was a situation in the House Ethics Committee, for example, where a Member had filled out a financial disclosure form in one way and a tax return indicated a far different 

scenario, and that Member resigned rather than face the consequences of that situation. 

Senator TESTER. Ms. Nagy. 

Ms. NAGY. I cannot think of a downside to transparency that 

would be specific enough to articulate at this time, so I would say 

I am in favor of transparency. 

Senator TESTER. Mr. Langevoort. 

Mr. LANGEVOORT. I agree also. If somebody is bent on acting 

unethically, they are going to violate the disclosure rules as well 

as the substantive rules. 

Senator TESTER. Fair point. 

29 

Mr. LANGEVOORT. Insider trading often takes the form not of 

transacting securities in your own account because it really is so 

transparent already, but establishing a friendship in a foreign 

country with a foreign bank account, laundering money, laundering 

ideas—— 

Senator TESTER. But if that was ever found out about one of us, 

we would be noodled. 

Mr. LANGEVOORT. I have seen clever enough insider trading 

schemes that very successfully avoid detection for a long period of 

time. All I am saying—I am trying to be responsive to your question—is if you try to expand transparency not simply to trades but 

to the communication of information to others, which is the route 

by which profit often comes, you will run into difficulties with respect to the work you do on the Hill. 

Senator TESTER. Fair point. Thanks. 

Mr. COFFEE. I think that some law professors smarter than me 

probably can think of some problem with transparency. The way to 

deal with that is to give the SEC exemptive authority. You could 

say, ‘‘We have this obligation, and if we find out there are problems, the SEC is given exemptive rulemaking authority to carve 

out safe harbors and exemptions.’’ 

Senator TESTER. Super. Mr. Walker. 

Mr. WALKER. Well, I want to put it on record that I am not 

smarter than Professor Coffee, but I do see some concerns with 

across-the-board transparency in everything that the Senate and 

Congress does, if that is what you are asking. 

Senator TESTER. That is what I am asking. 

Mr. WALKER. I mean, certainly there would be many executive 

closed sessions that could not be transparent. There would be many 

deliberations of Committee Members behind the scenes that probably ought not to be transparent. 

I think there is even less room today for negotiation and for 

tradeoffs between Members of different parties than there has been 

in the past, and there would be perhaps even less room if everything were transparent and if everything were televised. 

As far as an audit function for the Ethics Committee, I think it 

is a good idea in principle, but obviously it would require a vast 

increase in resources for the Ethics Committee, and whether or not 

in these days of tight budgets that would be possible is a real question. 

And, also, I would be concerned if all congressional communications with whomever were to be transparent, I do think there 

would be some serious chilling effects. 

Senator TESTER. Fair point by all. 

I do not think either one of these bills deals with personal real 

estate, which you brought up, Ms. Sloan, where a person would increase the value of their own personal real estate by advocating for 

policies that would help them in that, regardless of what that 

would be. 

It seems to me that is much easier to track down than insider 

trading. Is that a fair statement? I do not deal with insider trading 

so I have very little knowledge of it. I wish I had enough money 

to even buy stock, but I do not, but go ahead. 

30 

Ms. NAGY. Senator, one possible variation on that example would 

be insider trading in real estate: Taking material nonpublic information and using it in a real property purchase as opposed to a securities purchase. 

Senator TESTER. Or purchasing property and enhancing it with 

policies that you pass, whether it is—— 

Ms. NAGY. That is different—although that would be a conflict of 

interest problem. But it is not the same problem as using material 

nonpublic information that one learns in government service to actually purchase physical real estate. The use of information for a 

real estate purchase could be prosecuted under the Federal mail 

and wire fraud statutes much like insider trading in securities. 

There is precedent where a government official, actually a Chicago 

politician, used material nonpublic information that he came upon 

in connection with his alderman service, and he was prosecuted 

under the Federal mail and wire fraud statutes by the Department 

of Justice. 

Senator TESTER. And he used that information to buy land? 

Ms. NAGY. To buy, I believe, an interest in an apartment building that was going to receive a tax abatement. 

Senator TESTER. What about if you owned land and you advocated for an appropriation to build a highway over it or something 

along those lines that would add value to that property? 

Ms. NAGY. Well, and one could imagine a similar situation on the 

securities side where one takes a favorable legislative action to a 

company whose stock you own. And so, again, that could be a conflict of interest problem. 

Senator TESTER. But this bill would not cover that. 

Ms. NAGY. Not that I see. 

Senator TESTER. Very good. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Do you have more questions? 

Senator TESTER. Well, I have some more questions, but I think 

I hammered out what I needed to hammer out. 

I appreciate the panelists’ perspectives and thoughtfulness, and 

as we look forward—if I might just say something, Mr. Chairman. 

Chairman LIEBERMAN. Please. 

Senator TESTER. I think that it is very difficult to take a look at 

ourselves and say, ‘‘You know what? People think we are crooked,’’ 

when you do not think you are doing anything wrong and there is 

no intent, whether that is dealing with a policy with the farm program and talking to one of your neighbors about what you are 

working on, which may actually impact the price of wheat or futures, or something like that. 

On the other side of the coin, I think that it is critically important that we operate in a way that is totally clean—and if there 

is any way we can do that, we should make those policies, quite 

honestly, mandatory. And transparency is important, and I get 

your point, Mr. Walker. I do get your point. But as far as the forms 

we fill out, they ought to all be online, they ought to be in searchable databases. Our schedules ought to be online. We should be letting people know everything that they should reasonably know online in a way that they can access, not just online but all searchable. 

31 

So I think that we need to be aware of this. What do we have— 

an 8- or 9-percent rating? That is probably due to much more than 

this, but I do not think this helps a lick. And, by the way, if somebody in the Senate or somebody in the House does something 

crooked, it reflects on everybody, whether they are honest or not. 

And that is just the way it is. 

So I think we need to address it, but we need to address it in 

a common-sense way that really gets to the problem and does not 

create more problems than it fixes. 

Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thank you very much, Senator Tester. 

Senator McCaskill, welcome. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Thank you. I apologize. I have been presiding over the Senate, so I have not been able to be here. 

I think it is pretty important that we clarify that this law applies 

to Congress. I know that there is one of those good old-fashioned 

legal arguments that is great for hypotheticals in a law school 

classroom, but for purposes of clarifying to the public, regardless of 

what the SEC says, I think it would be very helpful for us to pass 

this legislation to make it crystal clear that the rules that apply 

in companies and to CEOs apply just as much to Members of Congress in terms of their ability to have and use information not 

available to the public. And you all may have covered this, and if 

you have, do not answer the question because I can move on to another one. 

Have you all characterized why you think it might be a challenge 

to prosecute these cases in Congress? Has that been covered? 

Ms. SLOAN. Senator, I think I talked a fair amount about the 

problems with the Speech or Debate Clause that will lead to some 

prosecutions being difficult, which is why I think in addition to 

Federal law you also need to make it clear that the Ethics Committee has enforcement over that, too. 

Mr. WALKER. And I think we addressed certain other practical 

problems as well in enforcement in the congressional context. 

Senator MCCASKILL. Well, as a former prosecutor, it seems to me 

that one of the things that makes it easier to prosecute these cases 

in Congress is that it is much clearer what is a public record and 

what is not. I think it is more murky in private companies what 

is in the public domain and what is not. Here we have hearings 

and the record is available to the public. We pass laws and the 

dates they are passed are available to the public, and then it is 

publicly available. There is a great deal of information that prosecutors could easily see whether or not this is something that 

someone who looked into it could find with some great deal of ease, 

or whether it would be more difficult. 

Would anybody disagree that these cases might be easier to prosecute because it is very hard to have inside information in Congress. I mean, this place is pretty open in terms of what gets out 

to the public. But even in a formal context, a great deal of our work 

is publicly done. 

Mr. WALKER. I would not disagree, Senator McCaskill, but I do 

think because so much is open in Congress that the issue of someVerDate Nov 24 2008 11:03 May 14, 2012 Jkt 072559 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 P:\DOCS\72559.TXT SAFFAIRS PsN: PAT
32 

thing being material nonpublic information would be an obstacle to 

overcome. And if that were alleged in any given case, I think you 

would find some pretty rigorous defenses and attempts to proof and 

probably successful proof that ultimately the information in question was public. 

Senator MCCASKILL. Right. I have five things that I have been 

told we need to do better in the legislation, and probably some of 

them have been mentioned, but I want to determine if there are 

disagreements on any of them. First, we need to expand the covered information because we need to also talk about regulatory action, grants—— 

Mr. COFFEE. Contracts. 

Senator MCCASKILL. Earmarks, contracts obviously. Second, 

shorten the time frame of disclosure, clearly that is important. I 

think 90 days is obviously way too long, and we do have a measure 

of transparency now that allowed some of the things to be written 

even though a lot of the things that were written were inaccurate. 

Certainly the fact that purchases were made and so forth was 

available to the public because of the rules we currently have. 

Third, expand the types of securities that are covered; fourth, explicitly state that the Members owe a duty; and finally, specifically 

lay out in the legislation that Members cannot give insider tips. 

Well, those are the five things that I think we need to put in the 

legislation, and I think we have a significant amount of problems 

out there with the public right now. I think, Mr. Chairman, the 

more quickly we can pass this legislation and demonstrate to the 

public that none of us has gone into this line of work because he 

thought he was going to receive a great deal of money for it. I am 

not arguing that there may have been some people who have used 

their positions inappropriately. Certainly there have been people 

who have gone to jail in Congress, but I think all of us want to 

make sure that the public knows that we are not using this position in any way to gain personally from it. And the more we can 

do to reassure them in that regard, the better. And I think we need 

to write this legislation in a way that does that. 

The last thing I would ask is about earmarks. Earmarks are a 

tricky area. We have a current moratorium on earmarks, and I am 

cosponsoring legislation for a permanent moratorium on earmarks. 

But I think that knowing that a Member would have the ability 

singlehandedly to put public money in a project certainly could lead 

to the kind of information that would allow someone to benefit 

from that knowledge since in a pure earmark, there is nobody that 

has any say as to whether it is good, bad, or indifferent, other than 

that individual member. 

Have any of you discussed how earmarks might also lend themselves to this kind of activity that the public would obviously disapprove of? 

Mr. COFFEE. I do not think we have discussed it, but I think, as 

I understand what you are saying, it would be a kind of material 

nonpublic information. If you know that you are going to earmark 

resources for a particular project and it is going to benefit particular companies and you buy that stock, that falls easily within 

the category of misusing material nonpublic information. 

33 

Senator MCCASKILL. There have been thousands of earmarks 

done for research and development into certain types of technology, 

and a great deal of that technology has worked itself into the marketplace. So I think that is one area that we need to make sure 

that we cover because that is the essence of insider information, 

since somebody singlehandedly can provide the resources to a company to make that research and development a reality. 

Ms. NAGY. I would certainly agree with respect to earmarks. As 

you listed the five fixes, I would encourage you to think of a sixth 

or add a sixth to the list: A clear statement that the legislation 

builds on the floor of existing law, so that it would not be read to 

displace Rule 10b–5 of the Federal securities laws and the mail and 

wire fraud statutes in connection with securities trading by government employees, congressional officials, and Members of Congress. 

Senator MCCASKILL. Because at the root of all this, these are 

good old-fashioned fraud cases, right? 

Ms. NAGY. Exactly. 

Senator MCCASKILL. Right. I think that would be important because we do not want to start a whole new book of precedent. Not 

that we do not want all the lawyers to stay busy, but—— 

Mr. COFFEE. In that light, it is rather important that you not try 

to redefine established terms like ‘‘material’’ or ‘‘nonpublic.’’ 

Senator MCCASKILL. Right. 

Mr. COFFEE. They are redefined in this legislation, and that 

would raise questions about whether for Congress it is a different 

kind of information than it is in ordinary cases. So if you say you 

are adopting the existing case law with respect to all of the terms 

that go into the prosecution and you have done that before, I think 

that gives greater certainty to the courts. 

Senator MCCASKILL. I think that is a great idea, and I will share 

that with the other cosponsors of the legislation because I think 

there are three or four of us who are working on this, and we will 

look for your input as we get it drafted and try to improve it and 

make it as strong as possible. We appreciate all of you being here 

today and helping us with this. We want to do this right. 

Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thank you, Senator McCaskill. I mentioned before you could be here that ideally we will get something 

drafted for which we can get a majority of the Committee before 

we depart in December. 

I have a couple more questions. I think we have gone over pretty 

well, and very helpfully to the Committee, what we should do in 

response to this problem in making clear in law unambiguously, if 

I may say so, that Members of Congress and our staffs are covered 

by insider trading laws. 

There are two other responses that are possible here. One deals 

with Senate ethics. I want to come back to that in a minute. But 

first I want to talk about disclosure, which you have also talked 

about, and this is more in the way of prevention, or of course, it 

may accelerate discovery of a problem. 

So I wanted to start with you, Ms. Sloan. Ideally, how would you 

alter the requirements in the Ethics in Government Act for disclosure? Senator Begich focused on electronic filing, and I think that 

is a very good idea. You talked a little bit about requiring that we 

34 

file more than once a year, presumably after transactions, so I 

wanted to invite you to spend a little more time on how you would 

ideally have us change the Ethics in Government Act with regard 

to filing. 

Ms. SLOAN. Well, the personal financial disclosure forms have 

very broad ranges of assets. 

Chairman LIEBERMAN. Right. 

Ms. SLOAN. And I think that they could be narrowed substantially. You would not actually have to, if you did not want to, 

change the Ethics in Government Act, which would, therefore, 

change the form for everybody. You could do that by House and 

Senate rules, if you chose to, so you would not have to go through 

that. 

Chairman LIEBERMAN. Right. 

Ms. SLOAN. But the ranges are so wide that it is often impossible 

to tell what a person’s assets really are and how much income they 

have had from those assets. In addition to that, I understand that 

they are burdensome, but they are filed once a year, and they are 

filed even then 6 months after the previous year ended. So they are 

pretty far down the line. 

Those forms, too, are not in a form that are searchable. I spoke 

with a reporter, for example, who wanted to see if Members had 

any specific asset, and you cannot search them for that kind of 

thing. And in this day and age, with the technology that is available, there is really no reason that these forms are not put on the 

Web quickly and in searchable form so that the information is easily accessible, so that if there is wrongdoing, it can be ferreted out 

quickly, and often just the court of public opinion will be helpful 

here. 

Chairman LIEBERMAN. I agree. So one alternative here, I presume—and let me ask you to respond to it—is that in addition to 

having us file the whole form more than once a year, there could 

be some requirement to file amendments after stock trades of a certain amount. Is that a possibility? 

Ms. SLOAN. I think you should probably have something separate 

for stocks so that you do that form once a year, but file something 

about the stocks. And I would say rather than this 90-day period 

that is included right now, I would get it down to something like 

10 days because, again, I do not think it needs to be so burdensome. Since this information comes in an electronic form as it is, 

there could easily be set up a database so that somebody only had 

to hit a button to transfer it into this bigger database that the Senate, for example, could maintain of all such information. So it does 

not really need to be burdensome once it is set up. And then also, 

as I said, I would make clear that lying on those kinds of forms 

or willfully failing to disclose that information would be a false 

statement, and those kinds of false statements are, by the way, 

much more easily prosecuted than anything else we have been 

talking about. 

Chairman LIEBERMAN. Before I move on to the ethics rules of the 

Senate, which would have to be changed by the Senate in this regard, do any of you have any other ideas on the panel about how 

we might alter the existing Senate and House disclosure rules to 

35 

prevent insider trading or at least to make it more discoverable 

more quickly if it occurs? 

Mr. WALKER. Well, I do agree that the provisions in the STOCK 

Act that would call for public disclosure of stock transactions within a specific period of time would go a long way to deterring insider 

trading where it may be occurring. I am not sure I agree with the 

10-day period for doing that, simply for the reason Ms. Sloan mentioned. Failure to provide full information could be prosecuted 

under the False Statements Act. I think 10 days is a very short 

window. Maybe 90 days is too long, but I do think that kind of 

more frequent periodic disclosure does make sense. 

Chairman LIEBERMAN. Let us just spend a moment—and it will 

be my last series of questions—about our ethics rules of the Senate 

and your concern, Ms. Sloan, about the impact of the Speech or Debate Clause of the Constitution on prosecution of Members of Congress for using insider information. How would you change our 

rules to deal with this problem? 

Mr. SLOAN. The Speech or Debate Clause only applies if a Member is being prosecuted, so it does not have any implications at all 

for the Ethics Committee, which is why that works better in some 

ways. 

Chairman LIEBERMAN. Right, for the Ethics Committee and for 

Congress itself, pursuant to the Constitution, in fact. 

Ms. SLOAN. Right, so while a prosecutor would not easily be able 

to obtain and sift through, for example, committee files to see if 

somebody really had inside information, the Ethics Committee absolutely could review that material. 

Chairman LIEBERMAN. Right. 

Ms. SLOAN. And so that is why it would be so significant to make 

sure that the Ethics Committee does have jurisdiction. But I think 

that the ethics rules are not clear enough, and the House Ethics 

Committee just 2 days ago issued guidance, but again, I think it 

is imperative to make it crystal clear and lay it out. 

And the other problem that we have seen is that the Ethics Committees are very soft, frankly, on Members of Congress. If somebody is only going to get a mild reprimand or a letter of admonition 

for having done something like this, really that does not hurt very 

much, and there is not a lot of disincentive. But if you included 

something specific, which you could, like some kind of financial 

penalty, such that money would have to be turned over to the 

Treasury in some significant amount—like three times the amount 

of the profit or loss—that, too, would be a disincentive. 

Chairman LIEBERMAN. So what you would do here is make clear 

in our rules that insider trading is a violation of the rules? Is it 

as simple as that? 

Ms. SLOAN. Yes, and that there are certain penalties that will attach. 

Chairman LIEBERMAN. Yes, understood. 

Ms. SLOAN. Right. 

Chairman LIEBERMAN. Mr. Walker, based on your experience, 

what do you think of this idea? 

Mr. WALKER. Well, as I said in my statement, I do think there 

are rules that address this. I think a big problem here in the Senate and in the House with respect to use of paragraph 8 of the 

36 

Code of Ethics of Government Service is that there just is not 

across the board from committee to committee and office to office 

specific obligations and rules and policies regarding what information is confidential. And I think getting at it at that level is important. I think there are rules in place. I think if there was a rule 

crafted that mentioned insider trading specifically as part of Rule 

37 on conflicts of interest, that would not be harmful, provided it 

was crafted in a way, as you are very carefully considering, that 

would not have other chilling effects. 

Let me just say that as to the notion of the Ethics Committees’ 

actions perhaps not having sufficient force, I would perhaps want 

to ask certain Members whose careers were ended by receiving letters of admonition whether they think that is a soft action. The 

Ethics Committees do pursue allegations that come before them. 

They are not criminal enforcement agencies, but I do think if you 

chose to strengthen the rules regarding insider trading within Congress, that would be a reasonable approach. 

Chairman LIEBERMAN. Good. A final question, bringing two parts 

of this together, if I may. Ms. Sloan just mentioned this fact. Two 

days ago, as you may know, the House Ethics Committee released 

a memo to all House Members and staff, stating in part, and I will 

quote here: ‘‘House rules prohibit Members and employees from entering into personal financial transactions to take advantage of any 

confidential information obtained through performing their official 

government duties.’’ 

I wonder to what extent, if any extent, that kind of statement by 

the House Ethics Committee establishes the necessary fiduciary 

duty that we have talked about as a condition of a successful insider trading case against a Member of Congress. 

Mr. COFFEE. I think you are going to get different responses from 

the three of us here because a fiduciary duty is a kind of property 

right. It is a relationship between the director and the company or 

the employee, master, principal, etc. An ethical duty is far more 

general reaching, ineffable. Look at it this way: The Boy Scout oath 

is an ethical duty. I do not think it gives rise to the kind of relationship that can support a criminal prosecution. There will be different views. 

Mr. LANGEVOORT. I share much of that view. I think to a judge 

predisposed to find a fiduciary duty on Capitol Hill, that simply 

adds to the case. 

Chairman LIEBERMAN. Yes. 

Mr. LANGEVOORT. To a judge not inclined, there are all the ways 

in the world to avoid it. 

Chairman LIEBERMAN. Not enough, so that disinclined judge 

would want to see the concept of fiduciary duty spelled out in law. 

Mr. LANGEVOORT. A clear statement, yes. 

Chairman LIEBERMAN. Yes. Professor Nagy. 

Ms. NAGY. Again, I would encourage the use of the term ‘‘trust 

and confidence’’ rather than ‘‘fiduciary duty’’ because the Supreme 

Court has made clear that one does not have to stand in an explicit 

fiduciary relationship in order to fall under the classical or misappropriation theory. 

37 

I think that Professor Langevoort’s response is correct. A statement would put one more brick on the scale in terms of whether 

there is indicia of a duty of trust and confidence. 

I should say, though, that many Securities and Exchange Commission and Justice Department prosecutions are based on such indicia. Everyday, ordinary individuals are prosecuted, even though 

they are not in explicit fiduciary relationships. The SEC’s complaint or the Justice Department’s indictment typically includes 

ethical language from codes, much like the Boy Scout code. And 

that code is put in as a paragraph in the indictment or in the complaint. 

An official statement could be another paragraph in a complaint, 

if it came to that. 

Chairman LIEBERMAN. Right. Thank you. You have been very 

helpful. 

Senator McCaskill, do you have other questions? 

Senator MCCASKILL. I just have one question. How do we address 

in terms of disclosure purchases and sales within a managed fund? 

In other words, if a Member of Congress has a fund that he buys— 

whether it is an index fund or whether it is some other kind of 

fund—would we be creating a new duty for the manager of that 

fund to have to let this particular Member know when he is buying 

and selling stocks within the fund? Or would there only be a duty 

in your mind to report the purchase and sale of the overall fund? 

Do you understand the question I am asking? 

Mr. COFFEE. The fund manager has the discretion—— 

Senator MCCASKILL. Correct. 

Mr. COFFEE. It is not a decision made by the Member who owns 

shares. 

Senator MCCASKILL. Correct. 

Mr. COFFEE. I assume the Member has no control or no ability 

to influence the decision of the fund manager. It would be different 

if he tipped the fund manager. 

Senator MCCASKILL. Right. So, obviously, there could be no information going from the Member of Congress to the manager, but 

whatever decisions the manager had the legal authority to make 

internally that the Member had no control over would not have to 

be reportable every 10 days or every 90 days. I was just curious 

about that. 

Thank you. 

Chairman LIEBERMAN. Thanks, Senator McCaskill. Thanks very 

much to the five of you. You have been an extraordinarily helpful 

panel. In some sense, this is like we have been sitting around the 

table and saying we have a problem, which I think all of us acknowledge, and now how can we best solve this problem legislatively? And I think you have helped the Committee very substantially in doing that, and you have also made the mistake of offering 

to continue to be available to review the work that we do, so we 

will take advantage of that. 

I said earlier that I hoped we could do something on this before 

we leave. December 14 is 2 weeks from today. But we can do that, 

and I think we have to find a balance here to make sure—because 

this is important and complicated—that we do as much as we are 

confident that we have got right on December 14, and if we hold 

38 

parts of this over until January when we come back, that is not 

terrible either. 

We will leave the record of this hearing open for 10 days for any 

additional questions and statements. I thank the witnesses again 

very much, and with that the hearing is adjourned. 

[Whereupon, at 4:36 p.m., the Committee was adjourned.] 

(39) 

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