Resident cheers new insider trading law [Ocala Star-Banner, Fla.]

Feb. 11--Ocala resident Steve Schonberg had a point to make -- and within the past week, Congress has helped him make it.

On Thursday, the U.S. House of Representatives passed by a near-unanimous margin the Stop Trading on Congressional Knowledge, or STOCK, Act, a measure designed to preclude lawmakers and other federal employees from profiting through insider trading in the stock market.

All four members of Marion County's congressional delegation supported the bill.

The House's 417-2 vote for the STOCK Act came just days after the Senate approved a similar version by a 96-3 vote.

Besides banning insider trading by members of Congress, the proposal requires lawmakers to post their trades online within 30 days, instead of documenting them in the once-yearly paper reports they now file.

Lawmakers still have to hammer out differences in the two bills before the STOCK Act is shipped to President Barack Obama for approval.

Specifically, the House excluded the Senate's language that forces people engaged in "political intelligence" to register as lobbyists.

That industry was described recently by The Wall Street Journal as a $100 million business built around a small network of insiders -- primarily former congressmen and Capitol Hill staffers -- who glean information from lawmakers and pipe it back to Wall Street investment firms.

Laws against insider trading typically punish people for profiting from confidential information about a company's activities that has not been made public.

Congress, however, has been exempt from such laws.

Versions of the STOCK Act had floated around Congress for years, gaining little traction.

Then last November, a "60 Minutes" report raised questions about a number of legislators -- including Republican House Speaker John Boehner and Democratic leader Nancy Pelosi -- who appeared to make big financial windfalls from deals tied to certain bills.

After that report, Schonberg, a retired lawyer and doctor from Ocala, filed a lawsuit against Boehner, accusing him of insider trading.

The Federal Election Commission and the Securities and Exchange Commission also were named in the lawsuit.

Public option

Schonberg, a registered Democrat who challenged Republican Rep. Cliff Stearns of Ocala in 2010, maintained that in December 2009 Boehner, as the House minority leader, knew the Democratic-led House lacked the votes to include a "public option" health care insurance plan in the Patient Protection and Affordable Care Act, Obama's signature health care law.

During that period, Boehner bought between $93,000 and $345,000 worth of health care stocks, including shares of insurance giant WellPoint valued between $15,000 and $50,000, Schonberg argued in court records.

Schonberg, in contrast, noted that in December 2009 he sold short his shares of WellPoint stock valued at $164,060 and repurchased them a month later for $196,640 -- a loss of $32,580.

WellPoint's stock went up by $10 a share during that month, Schonberg argued, because Congress defeated a public-option plan that would have "decimated" WellPoint's stock value.

Boehner never formally responded to the lawsuit.

But on the "60 Minutes" broadcast, he denied participating in any insider deals related to health care stocks.

The broadcast also noted that Boehner's staff said those stocks were purchased by an investment adviser with whom Boehner consults on an annual basis.

House records show that the STOCK Act was introduced on March 17, 2011, and had 10 backers prior to the "60 Minutes" report on Nov. 13, 2011.

It passed on Thursday with 286 co-sponsors.

Local support

Some local lawmakers applauded the passage of the STOCK Act.

Stearns, who became a co-sponsor, said in a statement that he backed the proposal because current laws do not hold members of Congress or their staffers legally accountable for any personal investment decisions based on nonpublic information they obtain through their official positions.

"I was pleased to join ... in approving a bill that will hold members and their staff to the same rules as all Americans," Stearns said.

Rep. Rich Nugent, a Brooksville Republican who represents a portion of western Marion County, said in a statement issued Thursday that he would have preferred a bill he introduced that would force lawmakers to keep their investments in blind trusts -- a simpler, more transparent way to prevent insider trading on Capitol Hill and to restore public trust.

Still, Nugent called the STOCK Act "necessary" and "a step in the right direction."

"If the United States Congress is ever going to address the serious challenges facing this country, it has to first address the lack of trust that Americans have for the institution," Nugent said.

"If individuals cannot resist the temptation of coming to Congress to enrich themselves, they will never earn the trust and respect of the American people. You can't lead the country without that respect," he said.

On Feb. 6, after the Senate overwhelmingly passed the STOCK Act, and it appeared the House would follow, Schonberg dropped his lawsuit against Boehner.

Schonberg said in an interview on Friday that he first filed it because of the "60 Minutes" segment.

Now, he said he was both surprised and pleased that Congress had acted and done so as quickly as it did.

"That's what I wanted to happen," he said of the proposed ban on congressional insider trading. "Congress has brought a lot of shame on itself with insider trading. I think it will have an effect. I feel good about that STOCK Act."

Contact Bill Thompson at 867-4117 or at [email protected].

___

(c)2012 the Ocala Star-Banner (Ocala, Fla.)

Visit the Ocala Star-Banner (Ocala, Fla.) at www.ocala.com

Distributed by MCT Information Services