You may remember that a couple of months ago, Rep. Louise Slaughter (D-NY) said on Air America that there had been day-traders working out of Rep. Tom DeLay’s (R-TX) and Sen. Bill Frist’s (R-TN) offices.
Well, today’s Wall Street Journal reports that Slaughter and Rep. Brian Baird (D-WA) are introducing legislation to stop the practice. Although they’re still quiet about who in Frist’s office was doing this (and Frist has an entirely separate insider trading investigation to deal with), they’ve named one culprit: Tony Rudy, DeLay’s former deputy chief of staff. According to the WSJ, he “bought and sold hundreds of stocks from his computer in the U.S. Capitol in 1999 and 2000.”
If Rudy’s name sounds familiar, it’s because he’s already been implicated in the Jack Abramoff investigation. Among other things, he’s accused of taking $50,000 in payments through his wife in exchange for helping Abramoff’s clients on two key pieces of legislation. He left DeLay in 2000 to go work for Abramoff.
So Rudy’s already in trouble.
But it looks like what he’s accused of here wasn’t actually illegal. Classic insider trading is when someone uses non-public information obtained from inside a company. That’s not the case here, which is why Slaughter and Baird are introducing the bill. Apparently the practice of this brand of insider trading is so widespread that there’s a whole industry built up around exploiting insider news about forthcoming legislation that will effect a stock price. So the bill also “would require that companies register with Congress if they sell information about congressional activity to Wall Street investors.”
Here’s what Rudy was up to while working for DeLay, according to today’s WSJ:
The aide, Tony Rudy, bought and sold hundreds of stocks from his computer in the U.S. Capitol in 1999 and 2000, according to financial-disclosure forms and other DeLay aides.
Neither Mr. Rudy nor his lawyer returned calls seeking comment. It is impossible to tell from the disclosure forms whether Mr. Rudy traded stocks based on information he gathered while working as deputy chief of staff and general counsel to Mr. DeLay, then the No. 3 Republican in the House.
Mr. Rudy made nearly 500 trades in 1999 and 2000, according to his annual financial-disclosure forms. Those forms show that he typically invested in high-technology and health-care companies and often held stocks for less than a day. About two-thirds of the stocks he purchased gained in value after he bought them.
It is difficult to tell how much Mr. Rudy profited on particular trades. House financial statements require disclosure of stock trades only in broad ranges. Mr. Rudy bought each of his stocks for between $1,001 and $15,000 and sold them in the same ranges.
But Mr. Rudy’s net worth grew from 1999 to 2000. Mr. Rudy and his wife were at least $49,000 in debt at the end of 1999, according to his disclosure form. They owned no more than $1,000 in stock and reported a student-loan debt between $50,001 and $100,000.
At the end of 2000, Mr. Rudy and his wife reported assets between $6,007 and $91,000. Their student-loan debt was between $30,002 and $100,000.