A congressional ethics watchdog has concluded there is “substantial reason to believe” that the wife of Pennsylvania Rep. Mike Kelly used nonpublic information gained through her husband's position in Congress to purchase stock last year, a likely violation of federal law and House rules.
A report from the Office of Congressional Ethics released late Thursday detailed the April 2020 purchase of stock in an Ohio steelmaker. The company had threatened to shut down a plant in Kelly's district unless the Trump administration took action that would help make it more competitive, steps the administration took after Kelly, a Republican, and others intervened.
The ethics office has recommended that subpoenas be issued for Kelly, his wife, Victoria, a senior staffer and former Commerce Secretary Wilbur Ross because they declined to be interviewed or participate in the investigation.
“Victoria Kelly made an uncharacteristic stock purchase ... on April 29, 2020 and profited from this purchase. The purchase occurred just after her husband, in the course of his official job duties, learned confidential information about the company,” the report states.
Though the ethics office investigates complaints, only the House Ethics Committee has the power to punish a lawmaker for wrongdoing. The committee said in a statement that it would review the report and investigate further.
Kelly is just the latest in a collection of lawmakers from both parties to draw scrutiny for conspicuous stock trading in recent years. This underscores the shortcomings of a law known as the Stock Act, which proponents initially said would end stock speculation among members of Congress when it passed with bipartisan support in 2012 in the wake of a stock-trading scandal.
Kelly's office did not respond to a request for comment Friday. Neither he nor his wife has been criminally charged.
Insider trading cases are exceptionally difficult to prosecute because they hinge on definitely proving whether someone acted on nonpublic information.
The report details a timeline of events beginning in early 2020, when Cleveland-Cliffs Inc. threatened to shut down a plant in Kelly's northwest Pennsylvania district. The factory employed 1,400 making a specialty steel used in power grid transformers. The company argued that foreign producers were exploiting a loophole in federal trade law that gave them an unfair competitive advantage and requested new tariff enforcement.
Kelly and other members of Pennsylvania's and Ohio's congressional delegations quickly lobbied the Trump administration. The ethics report details an aggressive push by Kelly, who worked closely with the company while pressing administration officials, including Mark Meadows, who was Trump's chief of staff at the time.
Though the administration initially rebuffed their efforts, it eventually acquiesced, culminating with a phone call from Ross to Cleveland-Cliff's CEO on April 28, 2020, informing him that it would soon make an announcement.
Word of the development spread quickly through Kelly's office, and the following day — several days before the announcement was made public — Victoria Kelly purchased between $15,001 and $50,000 worth of stock in the company, the report states.
She purchased the stock at roughly $4.70 a share and later sold it when the price hit $18.11 a share, the report states.
Kelly's office defended the purchase after it drew media scrutiny in September 2020, calling it a "small investment to show her support for the workers and management of this 100-year old bedrock of their hometown, where they both are life-long residents."
But investigators found “no public announcement by the Kellys about this purchase that would have elicited or demonstrated support for the plant employees.”
Additionally, investigators noted the purchase was out of the norm with her stock-buying practices. Months before, Victoria Kelly liquidated all of her individual stocks and invested the money in bond and mutual fund holdings, which are often considered the best investments for members of Congress looking to avoid questions about stock-buying impropriety.
The Kellys are hardly alone in facing ethics scrutiny.
The Associated Press previously reported that Democratic Rep. Tom Malinowski of New Jersey repeatedly failed to disclose trades worth as much as $1 million in medical and tech companies that had a stake in the virus response. On Thursday, the House Ethics Committee revealed Malinowski had been fined for repeatedly failing to report his stock transactions to Congress, as required by law.
Republican Rep. Jim Hagerdorn also faces an ethics probe over whether taxpayer money allotted to his office was used to contract for services from businesses owned by his staff. And Republican Rep. Alex Mooney faces an investigation over whether he used campaign cash to make personal purchases.
But stock purchases, like those made by Victoria Kelly, have drawn the most attention in recent months.
Former Republican Sens. David Perdue and Kelly Loeffler, of Georgia, both lost their runoff bids for the Senate in January after their own stock trades became a major campaign issue. Both were investigated by the Justice Department and ultimately cleared.
Perdue had dumped between $1 million and $5 million worth of stock in a company where he was formerly a board member. After markets crashed, he bought it back and earned a windfall after its price skyrocketed.
Loeffler and her husband, the CEO and chairman of the parent company of the New York Stock Exchange, dumped millions of dollars in stock following a briefing on the virus.
Republican Sen. Richard Burr of North Carolina drew perhaps the most scrutiny for his trades. He stepped aside as chairman of the Senate Intelligence Committee after the FBI obtained a search warrant to seize a cellphone.
Burr and his wife sold between $600,000 and $1.7 million in more than 30 transactions in late January and mid-February, just before the market began to dive and government health officials began to sound alarms about the virus. Burr was captured in a recording privately warning a group of influential constituents in early 2020 to prepare for economic devastation.
The Justice Department investigated Burr’s actions, but did not file charges and closed the case.
