Investment disclosure rules for Congress are permissive, confusing
By Kimberly Kindy and Dan T. Keating,
After the Enron scandal, Congress required corporate executives who buy or sell shares of their company’s stock to file electronic reports within two days of trading.
But they have not been so strict with themselves.
A bill to make lawmakers report their own trades within 90 days has gained support of only a handful of members.
“We have no problem making strict rules for others, but we have a difficult time doing it for ourselves,” said Rep. Brian Baird (D-Wash.), a co-author of the bill.
The shortcomings of the disclosure system keep a true picture of a member’s wealth from public view -- when more lawmakers are investing and Congress is exerting greater control over companies through bank bailouts, executive pay rules, stimulus spending and financial regulation.
Disclosure requirements for members of Congress are permissive and confusing, with few rules for how they must identify their assets and a lag of a year or more before they must report.
Since 1978, Congress has relied on annual disclosure forms that allow the public only a glimpse of members’ investments but are supposed to act as a check on potential conflicts and corruption.
The time lag in disclosure makes it difficult to determine whether members are casting votes that might affect their current holdings. Disclosure forms containing lawmakers’ financial activities during early 2009, as they negotiated details of the $787 billion stimulus package, will not be available until later this week, 16 months after the bill passed.
The reports are often incomplete, incorrect or illegible. Lawmakers’ assets routinely appear without explanation. Because the information is initially filed on paper forms, the public cannot electronically search or analyze them for patterns.
Ethics rules allow members and their senior staff to report their investments in wide ranges, making it impossible in most cases to determine profits and losses.
Those ranges extend from $1,000 to $15,000 on the low end, and from $50 million and above at the top. Lawmakers can also report multiple trades in a batch without giving a breakdown.
The Washington Post, using financial disclosure data from 2004 to 2008 that were compiled by the nonprofit Center for Responsive Politics, found that one in five transactions listed by lawmakers did not include dates of when they bought or sold stock or property.
“They are given a lot of latitude with the way they fill these forms out,” said Dan Auble, the center’s researcher who tracks members’ personal finances.
The annual disclosure forms are not formally audited, an issue the Government Accountability Office has twice told Congress it should remedy.
Public access to the paper forms is limited. The House posts non-searchable images of the forms online, and the Senate makes its reports available only to those who journey to Capitol Hill. They do not release electronic copies; only paper printouts.
“For the most part, this is about blurring distinctions that ought to be clear,” said Micah Sifry, technology adviser to the Sunlight Foundation and a political journalist. “There is no reason for them to keep doing it this way in the 21st century.”
Congress is considering a bill, sponsored by Rep. Mike Quigley (D-Ill.), that would require members to file their forms electronically.
Over the past four decades, the House ethics committee has conducted public inquiries into 14 members for failing to include information in their reports or for filing false information, records show. Two have been formally reprimanded, one fined and one resigned from office. An investigation into Charles B. Rangel’s real estate holdings and other matters is pending. Rangel (D-N.Y.) denies any wrongdoing.
“You can’t have a system where there are rarely any consequences,” said Norman J. Ornstein, a political scientist at the conservative-leaning American Enterprise Institute who specializes in congressional ethics. “Congress has to change this if they ever want the system to work.”
The discrepancy between what Congress requires of itself and what it mandates for others has infuriated private industry and a few lawmakers.
The double standard dates at least to the 1960s, when Congress passed a series of conflict-of-interest rules for government employees in response to a public outcry about corruption in Washington. The strict rules included requirements for selling off assets that might create a conflict. They also include provisions for recusal from government activities that might affect personal investments.
They applied to all parts of the government -- except Congress.
When Baird introduced his bill last year with Rep. Louise M. Slaughter (D-N.Y.), it originally called for Congress to report all trading within a two-day window, just as corporate insiders must do. But lawmakers fought them so vigorously that the pair amended the bill to require reporting every 90 days.
With only a handful of members supporting the effort, Baird and Slaughter’s bill has stalled.
“We have a crisis of credibility, but we aren’t willing to do anything about it,” Baird said. “What must people think of us when we are unwilling to address conflicts but we require it of others?”
Staff writer Robert O’Harrow Jr. and researcher Madonna Lebling contributed to this report.