In 2012, Congress passed the Stop Trading on Congressional Knowledge Act (STOCK Act), which originally was meant to prohibit insider trading by members of Congress and their staffs. The legislation came after a CBS 60 Minutes investigation suggested some members of Congress were using insider information to gain a competitive edge over other investors in the stock market.
The STOCK Act included language requiring high-level staff at nearly all federal agencies to publicly disclose their financial records,” wrote Regulatory Focus—covering about 28,000 officials. Here is a summary of the Act from Congress.
Last week, however, Congress voted “to entirely dismantle the STOCK Act, saying they would re-draft a similar piece of legislation that took into account concerns raised by outside groups,” writes Regulatory Focus. “Both chambers of Congress quickly — and near silently — approved the repeal legislation at the end of last week by unanimous consent, just before heading home to their districts,” reported The Hill.
What should be interesting about this development is that groups of individual employees, particularly in the medical and science fields, were protesting the publication of their private financial information—yet in the same realm, Congress passed the Sunshine Act which requires the same information, in even greater detail, to be published. Are physicians who bill Medicare or federal health programs any different?
It would be interesting to see how arguments from private physicians would play out in court under similar theories of privacy and invasion raised by the federal employees. How is publishing payments for consulting or having ownership interests in a hospital any different from what these federal workers complained about? While we are in favor of increased transparency when it comes to physician-industry collaboration, the STOCK Act provides a preview of things to come for physicians and teaching hospitals.
Will patients use the database to threaten the security of physicians if they are unhappy with their treatment? Will already rampant healthcare fraudsters use the Sunshine database to create new billing numbers and defraud physicians? Who is really going to use this information, and how much will it expose physicians to security and identity threats? The answers to these questions, for now, are unfortunately, uncertain with respect to the Sunshine Act.
The bill signed by Obama, S. 716, “eliminates the requirement in the STOCK Act to make available on official websites the financial disclosure forms of employees of the executive and legislative branches other than the President, the Vice President, Members of and candidates for Congress, and several specified Presidentially nominated and Senate-confirmed officers; and delays until January 1, 2014, the date by which systems must be developed that enable public access to financial disclosure forms of covered individuals.”
Two major elements of the law remain: (1) Insider trading is illegal, even for members of Congress and the executive branch; and (2) for those who are covered by the now-narrower law, disclosures of large stock trades are required within 45 days. It will just be harder to get to them. As the Wall Street Journal pointed out, “Congressional and executive-branch staff would still be required to report their stock trades publicly but people seeking the information would have to request it in person.”
Some government-worker advocacy groups praised the decision. “In the interest of ensuring that government works effectively, which includes safeguarding employees’ sensitive information, this was the right decision,” Senior Executives Association President Carol Bonosaro said in statement. Bonosara noted that the new bill eliminates the ability of people to go “phishing.”
Background
Prior to the legislation, certain federal employees had to file financial disclosure reports with the federal government, known as an OGE-278, describing their assets and nonfederal income, as well as those of their spouses and dependent children (details here). The OGE-278 filers include about 600 senior staff members (not all scientists) at the National Institutes of Health (NIH), according to Holli Beckerman Jaffe, director of NIH’s ethics office.
Under the law, agencies were to post those disclosures on their Web sites, and eventually the forms were to be put in a central database that will be publicly searchable and sortable. Currently, while the disclosures are publicly available, most are kept only at the agencies and must be requested individually. However, online access to such forms raised tremendous concern from scientific and national security groups regarding increased vulnerability to identity theft and cybercrime.
In September 2012, the STOCK Act was temporarily blocked by U.S. District Court Judge Alexander Williams until Oct. 31. His opinion, noted his concerns that the law violated federal workers’ right to privacy by requiring them to disclose their bank, retirement, stock and other asset holdings. Here is the complaint and motion for preliminary injunction.
Shortly thereafter, Congress voted to delay the measure by six months, which President Obama signed. Under the legislation, S.3625, reporting requirements would not go into effect until after the National Academy of Public Administration (NAPA) had time to study how best to provide for disclosure and issue recommendations to that effect—six months. The published report pointed out “substantial national security, personal security, and law enforcement issues on this matter,” reported Jay Carney, President Barack Obama’s press secretary. “And it is also worth noting that NAPA concluded that in the context of the executive branch, that posting requirements had no positive impact in identifying conflicts,” he added.
At the time the STOCK Act was passed, Joshua Zimmerberg told the Washington Post that his personal financial information should not “be posted for the world to see just because he’s a federal employee.” As chief of a cellular and molecular biophysics lab at NIH, he is one of 28,000 high-level civil servants and political appointees who would have been affected by the STOCK Act.
Zimmerberg joined other researchers and government officials to file the injunction case that led to Judge Williams opinion, which drew heavily on a June 19 letter to Congress from an ad hoc group of former national security officials who said that “posting this detailed financial information on the Internet will jeopardize the safety of executive branch officials.” The Senior Executive Association (SEA) was the lead plaintiff. Other plaintiffs include several individuals and the American Foreign Service Association, the Assembly of Scientists (AOS) and the National Association of Immigration Judges. SEA identified 11 unintended consequences of the law, “most of which we think would have a serious impact on government operations,” Bonosaro said. Those consequences include:
- “Federal executives will become prime targets for identity thieves.”
- “Federal employees posted overseas . . . may have their finances scrutinized by foreign interests, including terrorists.”
- “The online posting requirement could easily jeopardize the cover of U.S. intelligence personnel posted at U.S. embassies.”
- “Implementation of the Stock Act is also likely to make it significantly harder to attract capable political appointees to the current administration, as well as future administrations.”
For reasons such as these and those cited in the letter from the former national security officials, Judge Williams said the “plaintiffs have shown that they are likely to suffer irreparable harm” because of the posting provision. If the government publishes that information online, Williams added, it is like “a bell that one cannot unring.”
The letter from esteemed former security officials stated that “this new uncontrolled disclosure scheme for executive branch officials will create significant threats to the national security and to the personal safety and financial security of executive branch officials and their families, especially career employees.” “Placing complete personal financial information of all senior officials on the Internet would be a jackpot for enemies of the United States intent on finding security vulnerabilities they can exploit.”
“I feel that this is just wrong,” Zimmerberg, speaking for himself and not his agency, said in a telephone interview. “There’s a limit to what is in the balance between an invasion of privacy for a federal worker and a way to stop corruption.” Interestingly, non-federal researchers and physicians will have all this payment data reported on them through the Physician Payment Sunshine Act.
“We believe that this indiscriminate disclosure puts filers at the mercy of anyone who wishes to harm or defraud us or our families,” Scientists said in their letter. “Many senior employees, faced with diminished privacy rights, are discussing leaving the government for the private sector. Colleagues at universities are concerned and less likely to accept positions at national laboratories, thereby putting U.S. institutions at a disadvantage in recruiting and retaining the nation’s most prominent and creative scientists.”
A number of senior executives said they were considering leaving the service, and a number actually did so to avoid the online posting, SEA President Carol Bonosaro said when the legislation first passed.
In addition to the employee organizations, the union representing certain Congressional Research Service employees, Social Security administrative law judges, and immigration judges also has objected to the law. The International Federation of Professional and Technical Employees said the Stock Act poses “a serious threat to the safety and security [of employees], not to mention the unwarranted invasion of their privacy.”