Hundreds of Energy Department Officials Hold Stocks Related to Agency’s Work Despite Warnings

Ethics lawyers caution officials not to work on matters affecting the companies but don’t tell them to sell

By Rebecca Ballhaus, Brody Mullins, Chad Day and Coulter Jones of The WSJ. Excerpts:

"U.S. ethics officials in recent years have warned one-third of the Energy Department’s senior officials that they or their families owned stocks related to the agency’s work, reminding them not to violate federal conflict-of-interest rules.

Most held on to the stocks, a Wall Street Journal analysis of officials’ financial disclosures from 2017 through 2021 shows.

The more than 300 agency officials who received such warnings include nearly six dozen who held stocks of major energy companies such as Exxon Mobil Corp.

More than 130 officials in the Energy Department collectively reported about 2,700 trades of shares, bonds and options in companies that ethics officers labeled as related to their agency’s work"

"The letter doesn’t direct the official to sell the stock. It just advises him or her not to work on matters that would “have a direct and predictable effect” on the company, and to “remain alert for any potential conflicts.” In the meantime, the official is allowed to continue owning the stock and is certified as complying with federal conflict-of-interest rules.

U.S. law prohibits federal officials from working “personally and substantially” on any matters in which they, their spouses or their dependent children have a significant financial stake."

"more than 2,600 government officials reported investments that stood to rise or fall with the decisions made by their agencies.

Like the rest of the federal ethics system, the Energy Department’s ethics policy has gaps. It doesn’t take into account whether officials have knowledge of or could come across information affecting companies they invest in."

"The U.S., while prohibiting federal officials from working on any matter in which they have a significant stake, leaves it to individual agencies to decide whether they need additional rules to ensure that officials don’t use their influence for personal gain.

Some do."

"The Energy Department has no such rule."

But  government officials (or legislators) acting on their self interest is not new. Charles Beard wrote about this in his book An Economic Interpretation of the Constitution of the United States. He argued that self-interest was a big force in how the framers wrote the constitution.

In the 1950s, Forrest McDonald We the People : The Economic Origins of the Constitution, in attempt to refute Beard. But more recently, economic historian Robert A. McGuire wrote a book called To Form a More Perfect Union: A New Economic Interpretation of the United States Constitution. He used modern statistical analysis to show that the Beard thesis may be legitimate.

My students might recall something like this that I used to talk about on the first day of the semester. Congressmen in the early 1790s voted on the "Funding and Assumption Act" based on how much money they would receive if that bill passed. The bill paid back all of the debts from the Revolutionary War at full value (they were not getting paid back before the Constitution was passed because under the Articles of Confederation all states had to agree to a tax increase-this did not happen much so taxes were never raised to pay back the money the government borrowed to finance the war). But under the Constitution if both the House and the Senate passed a tax increase and the president signed it, it became law.

The debts were securities or bonds. Some congressman owned them. I found how much about half the congressmen owned in these bonds from McDonald's book. The ones who voted yes on the bill had an average of about $6,000 while the ones who voted no had about $700. So it is possible that money influenced the vote. 

Here is a passage from John Spencer Bassett's book about the "Funding and Assumption Act" The Federalist System, 1789-1801:

"All the speculating class, in Congress and out of it, were zealously in favor of the scheme; and while it was till being debated they were trying to by all the means known to their class to buy up, even in the remote parts of the country, the old bonds at the depreciated values."

Here are they guys who voted yes and their dollar value of their bond holdings:

AMES 35
BASSETT 0
BURKE 5252
BUTLER 0
CLYMER 14000
DALTON 12
DCARROLL 227
ELLSWORTH 5985
FITZSIMMONS 2668
GALE 4252
GERRY 50000
GROUT 0
IZARD 20865
JOHNSON 0
KING 10000
LANGDON 27921
MORRIS 11000
PARTRIDGE 2195
PATERSON 0
READ 341
SEDGWICK 1680
SHERMAN 7729
STRONG 10903
STURGES 189
SUMTER 0
WADSWORTH 1625
WHITE 1619
WLSMITH 11910

Now the no votes

BALDWIN 2500
COLES 0
FEW 640
GILMAN 1025
GRIFFIN 0
HARTLEY 0
LIVERMORE 0
MADISON 0
MATHEWS 0
MJSTONE 3814
MOORE 0
MUHLENBERG 0
SCOTT 127
WILLIAMSON 2600

Related posts:

Looks Like Some Pretty Good Capitalists Run The Congress (2009-lawmakers were making better rates of return than the market averge)

Did U.S. government officials make money buying and selling stocks based on their inside information about Covid policy? (2022)