House Passes STOCK Act on Insider Trading

The House today passed its version of the Stock Act, S. 2038, the "Stop Trading on Congressional Knowledge Act of 2012.") Groups like CREW are misguided in complaining that it does not include the Leahy-Cornyn amendment (S. 1483.) It's a good thing that the Leahy-Cornyn Amendment was dropped. It should stay out of the bill when the Senate-House Conference meets.

The Amendment was presented as one that closed loopholes but it is more than that. As the National Association of Criminal Defense Lawyers (NACDL) wrote in letters to Congress, the Amendment adds a host of unnecessary crimes and increased penalties and effectively overrules two recent Supreme Court decisions. [More...]

The Leahy-Cornyn Amendment was an ill-advised and sneaky amendment to the Stock Act. It was added just days before the Senate vote, and contrary to claims of its proponents, it contained significant provisions that had not been publicly debated. It passed the Senate on a voice vote. What it does:

The amendment would undo a unanimous Supreme Court decision (United States v. Sun-Diamond Growers) and expand a fraud law that was so vague and overbroad that another unanimous Supreme Court decision (Skilling v. United States) found it necessary to narrow the definition to avoid injustice.

The bill increases penalties for numerous offenses where there is no evidence that current penalties are inadequate to deter or adequately punish those who violate the law. Furthermore, the bill ignores the proper limitations on Congress’s constitutional authority and the principles of federalism by further expanding the federal criminal code in an attempt to criminalize broadly defined self-dealing by local officials, even where the conduct concerns wholly local matters. The amendment’s overbroad definitions, overlapping and expanded penalties without adequate justification, and federalization of local conduct are prime examples of overcriminalization.

We don't need increased prison sentences. As NACDL wrote in its letter:

The proposal would dramatically increase (in some cases, even doubling) various maximum imprisonment terms for multiple offenses. These increases are unjustified, as neither the proposed bill nor the Justice Department has provided any evidence that any increases are necessary, let alone appropriate.

(Added: Corrected to delete the reference to mandatory minimums. The Amendment does not increase mandatory minimum terms, only the maximum terms.)

The Amendment is a re-write of The “Clean Up Government Act” (H.R. 2572) previously considered and rejected by the House Judiciary Committee last summer, due to its vagueness and the risk for criminal prosecution of innocent people. (A similar version by James Sensenbrenner passed the House Judiciary Committee in December.) Leahy and Cornyn slipped their latest version into the Stock Act as S. 1483 at the last minute. Their Amendment does not change the bill's fundamental problems. Nor were the revisions ever debated by either the House or Senate Judiciary Committees. NACDL writes:

Contrary to the claims of its sponsors, not all of the provisions of S.AMDT. 1483 have been fully vetted by either the Senate or House Judiciary Committee. While much of the text of S.AMDT. 1483 is similar to the so-called “Clean Up Government Act” (H.R. 2572), it fails to include some of the key changes made to H.R. 2572 during markup that would increase the mens rea (criminal intent) protections provided by the law, and, worse, it includes an entirely new change that dramatically expands an existing federal criminal offense—the removal of the word “personally” from 18 USC 201©(1)(B).

This change is unnecessary and eviscerates a sensible limitation contrary to Congressional intent. Deleting “personally” from the existing law will subject all things of value given to anyone with a connection (either professional or personal) to a public official to prosecutorial scrutiny and will create uncertainty with regard to items such as campaign contributions. The change in the law is not necessary due to the operation of criminal conspiracy laws as well as case decisions that already allow DOJ to prosecute third parties.

The Leahy-Cornyn Amendment also amends the Wiretap Act (Title III) to add more offenses subjcect to wiretapping.

You can read the Leahy-Cornyn Amendment here (it starts at the bottom of the page.)

We have more than enough federal laws penalizing corruption by federal and state officials. There's been no showing more are needed. The limitations on "honest services" fraud imposed by the Supreme Court do not warrant the creation of more criminal laws, or a "fix" that fails to adequately address the concerns expressed by the Supreme Court in Skilling.

Here's a redline version of the Act showing the difference between the House and Senate versions. This appears to be the latest House version.

Sen. Leahy is not happy, but the Leahy-Cornyn Amendment was justly cut from the House version of the Stock Act and deserves to stay out.

Update: NACDL's new press release arguing against reinstating the Leahy-Cornyn Amendment is here.

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    Leahy (none / 0) (#1)
    by gyrfalcon on Thu Feb 09, 2012 at 01:03:02 PM EST
    I am once again compelled to apologize for the rash behavior and serious overreach of my senator. (His aggressive sponsorship and then defense of the indefensible SOPA being the previous time.)

    I didn't pay that much attention to him until I moved to this state 6 years ago.  Has he got a long history of this sort of thing, or is it more recent?

    The guy's nearing the end of his career anyway, he's not going to run for president, and he needs only about 50 bucks to run a reelection campaign in VT, which isn't exactly a hotbed of law-and-order sentiment anyway.  So I can't make much sense of what he's been doing here.

    Also note my correction (none / 0) (#2)
    by Jeralyn on Thu Feb 09, 2012 at 05:30:12 PM EST
    The Amendment did not increase mandatory minimum sentences, just the maximum sentences.