Rep. Bachus faces insider-trading investigation

U.S. House Financial Services Committee ranking member Rep. Spencer Bachus (R-AL) (C) speaks as Rep. Randy Neugebauer (R-TX) (L) and Rep. Scott Garrett (R-NJ) listen during a news conference on Capitol Hill June 18, 2009 in Washington, DC. / Photo by Alex Wong/Getty Images

This story originally appeared in The Washington Post, and was written by Scott Higham and Dan Keating

The Office of Congressional Ethics is investigating the chairman of the House Financial Services Committee over possible violations of insider-trading laws, according to individuals familiar with the case.

Rep. Spencer Bachus (R-Ala.), who holds one of the most influential positions in the House, has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation's banking and financial services industries.

The Office of Congressional Ethics, an independent investigative agency, opened its probe late last year after focusing on numerous suspicious trades on Bachus's annual financial disclosure forms, the individuals said. OCE investigators have notified Bachus that he is under investigation and that they have found probable cause to believe insider-trading violations have occurred.

The case is the first of its kind involving a member of Congress. It comes at a time of intense public scrutiny of congressional ethics, with the House passing legislation Thursday to tighten rules against insider trading by lawmakers. The impetus for the legislation, a version of which passed in the Senate a week earlier, came from a "60 Minutes" report and a book mentioning Bachus's trades, "Throw Them All Out," by Peter Schweizer.

STOCK Act passes in House
Congress: Trading stock on inside information?
Congress insiders: Above the law?

"The Office of Congressional Ethics has requested information and I welcome this opportunity to present the facts and set the record straight," Bachus said in a statement issued Thursday by his spokesman, Tim Johnson.

Omar S. Ashmawy, OCE staff director and chief counsel, declined to comment. "The office does not confirm or deny whether an investigation is taking place." Chief counsel for the House Ethics Committee, Dan Schwager, also declined to discuss the case. "The committee doesn't comment on specific matters or allegations," he said.

OCE investigators are examining whether Bachus violated Securities and Exchange Commission laws that prohibit individuals from trading stocks and options based on "material, non-public" inside information, said the individuals, who spoke on the condition of anonymity because of the sensitivity of the matter. The office also is investigating whether Bachus violated congressional rules that prohibit members of Congress from using their public positions for private gain.

In recent years, Bachus has made numerous trades, some of them coinciding with major policy announcements by the federal government and industries under his congressional oversight, according to a review of his financial disclosure forms by The Washington Post.

Most of his investments are for less than $10,000, and almost all involve options rather than stock purchases. The options allowed Bachus to buy or sell stocks at certain prices in the future -- betting that the value of those stocks will rise or fall.

A Fidelity brokerage statement Bachus submitted for 2008 shows that he made $30,474 in short-term investments, many of them bought and sold in a matter of days, sometimes during the same day.

The former member of the House Transportation and Infrastructure Committee made several options bets on railroads. While President George W. Bush's fiscal stimulus bill was being crafted in summer 2008, Bachus bet that the stock of Burlington Northern Railroad would rise, and he cashed out that July for a $16,588 profit. In August, he made the same bet but lost $2,900.

[jimatmadison]

Off to jail, and any more like him regardless of party affiliation.

But it is funny how the Republicans always depend on the taxpayers and crooked dealings instead of hard work for their money.

[flexsf]

Send the greedy, power-hungry, bigoted, zealot, to prison.

[antoniof123]

Make me king for a short time I will rid the country of all politicians, religous learders, corporate exec's and prison problems.

Then you are on your own if you screw it up again.

[sirmarion-2009]

Bachus is a crook and needs to be replaced hopefully the voters of Alabama will step up and rid the congress of him.

[rockychance]

What a joke! They all do it if they think they can. It is human nature to seek info that will give you an advantage when buying anything of value. Our entire country is awash in greed and millions of freeloaders getting billions from the federal gov't that they have not earned. All this mess will eventually sink us, so I and my friends and family all are seeking ways to survive the eventual certain economic collapse of our system.

[magnumdr]

Insider trading. I bet there are many of our elected people doing this.

[jd2408]

Not sure how independent this agency really is.

[RogueWave451]

We don't have enough room in our prison system to hold all the greedy congressmen, but they should reserve a place for Bachus - one of the worst of the bunch.
And kudos to 60 Minutes for bringing this egregious, prevalent practice to the general public's attention.

[nancy_naive]

Where is Eliot Spitzer when he's needed. If only he'd stayed NYAG.

[PourpaixPourpaix]

Sorry, I don't get it. If Congressmen are liable for insider trading violations, why the new law this week (STOCK)? Was the outcry over contention so severe that Congress thought agreeing on a uneffective law change is good for public relations?

[sirmarion-2009]

It is called preception and CYA.