REight years before he was assigned the responsibility of a powerful Senate subcommittee with jurisdiction over the US Navy, Senator. David Purdue (R-GA) I started buying shares in a company that makes submarine parts. Once he began work on a bill that ultimately directed additional funding to the Navy for one of the company’s niche products, Purdue sold the shares, bringing him tens of thousands of dollars in profits.
In January 2019, Purdue was appointed chair of the Senate Armed Forces Subcommittee on Naval Power. Domestic state policy was good for Perdue: Georgia is home to one of the most important naval facilities on the east coast, Kings Bay Naval Submarine Base. His appointment was seen as a win for the Navy’s submarine sector, with trade publications calling him a “coup” for submarine passengers.
But the month before taking the job, Purdue had done something extraordinary: he had secured up to $ 190,000 in shares in BWX Technologies, a company in which he had never invested before. The Virginia-based company had lucrative contracts with the U.S. Navy to develop high-tech components for its nuclear submarine fleet – and was looking to expand that business when lawmakers took the 2019 version of the comprehensive annual legislation setting out U.S. military funding standards, called the National Defense Authorization Act. .
Perdue will have a major role in forming the NDAA as Seapower’s chair, and later as one of the few lawmakers the party leadership has selected to reach the final version of the bill between the House of Representatives and the Senate. By the time the bill was passed in the Senate in June, Purdue had achieved several victories – one of which was securing $ 4.7 billion for Virginia-class submarines. As it happens, BWX is one of two to three vendors with Pentagon contracts to design and manufacture key parts for Virginia-class submarines, including the nuclear reactors it operates and the systems that launch missiles from submarines.
From February to July, while drafting the defense bill and working towards financing the submarine, Purdue reported selling all of his shares in BWX – making a good profit in the process. The Senator’s Final Financial Return Form for 2019 reported earnings ranging from $ 15,000 to $ 50,000 in his trading at BWX. Because of the way Congressional financial disclosures are regulated – they require lawmakers to classify the value of their assets into broad classes, not specific amounts – it is not possible to know the exact value of Purdue’s dollar profits, or the value of his purchases and sales from inventory. But the company’s share price has also risen from the time Purdue first bought it, in December and January, through the six-month window in which he sold the shares.
Scott Amy, general counsel for the Government Oversight Project, a non-partisan advocacy group that advocates for good government, said it is a matter of concern that a lawmaker like Purdue is investing in a defense stock out of thousands of available stocks, given his specific responsibilities over the armed forces. Services Committee.
“Members have inside information about our spending on national security and defense, and they should be prohibited from using this information personally,” Amy said.
In response to inquiries from The Daily Beast about this activity, Perdue’s office pointed to a previous audit of the Senator’s stock trading, insisting it had nothing to do with his investment portfolio.
A Purdue spokesperson said, “This question has been asked and answered – Senator Purdue does not manage his trades, rather outside financial advisors deal with it without his input or prior approval.” “No amount of lies from the liberal media or democratic political groups will change this fact.” Purdue Defend his seat In the runoff elections scheduled for January 5, which will help determine control of the Senate.
Perdue’s investment in BWX isn’t the first time the Senator, one of the most energetic stock traders in Congress and one of its wealthiest members, has participated in a clearly timed trade.
In 2017, Georgia’s Republican candidate bought stakes in an Atlanta-based prepaid debit card provider called FirstData weeks after he pushed to scrap federal regulations affecting the sector, The Daily Beast reported in September. During 2019, Perdue reported buying and selling stocks in FirstData about key moments affecting the company’s value. His office denied that he acted inappropriately, describing any allegations to this effect as “categorically false.”
To outside experts, the BWX trading activity is just another example – albeit from the same politician – of implementing stricter rules around stock activity for regulators. A law passed in 2012 called the Equity Act prohibits members from engaging in financial activity with any non-public knowledge they receive in their official capacity. While hailed as a breach of good government, it has proven extremely difficult to prosecute anyone for violations of the law that some critics have described as unenforceable.
Kidric Payne, who analyzes stock trading at the Legal Center of the Campaign, a nonpartisan group that advocates money in politics, said the Purdue example is the main reason why many lawmakers have avoided trading individual stocks.
“It is almost impossible to make decisions that affect an industry and then obtain a personal financial benefit without appearing to have a conflict of interest,” Payne said. “Even if officials rely on financial advisors to make trading decisions on their behalf, the perception of conflicts of interest still exists because the public does not know if there are winks and nods to stimulate deals.”
Although Perdue’s office confirmed that a third-party investment advisor is executing his deals, the senator has refused to use blind credit to his assets, which could raise any questions about his potential impact on the trades.
It is not uncommon for regulators to own shares in companies that could be affected by policy-making actions – this practice is not prohibited, as long as lawmakers do not trade in non-public information. But Perdue’s activism is unusual in how his leadership of a highly specialized subcommittee lined up with his investment in a company directly in that place – just as he began work on the federal legislation most important to the company’s bottom line. BWX definitely believed it: It spent $ 1 million lobbying Congress over the NDAA in 2019, and after it passed, the company’s senior officials called the legislation evidence of the “positive pull” of its programs during a earnings call in August.
Ethics experts say Purdue’s trading creates, at the very least, the appearance of a conflict of interest, and leaves broader questions about whether he benefits from his legislative activity.
“Members have inside information about our spending on national security and defense, and personal use of this information should be prohibited.“
– Scott Amy project from government oversight
Donna Nagy, a law professor at Indiana University who studies stock trading in law, said Donna Nagy: “The conflict of interest situation is exacerbated when a congressman sits on a committee that greatly affects a company whose stock is in doubt.”
“I think the question posed here – and we don’t know the answer, has personal equity affected his legislative activity?” Nagy asked. “We are left with a series of questions … We should not be left, as members of the public, to ask these questions about elected officials.”
Some of Purdue’s colleagues have come under scrutiny for similar reasons – and have modified their behavior because of it. In December 2018, The Daily Beast reported The Chairman of the Senate Armed Services Committee, Senator Jim Inhovey (Republican for OK), has bought up to $ 100,000 in shares in defense contractor Raytheon after lobbying the Trump administration to increase military spending. After The Daily Beast inquired of Inhofe’s office about the deals, the senator directed his investment advisor to avoid investing in the defense industry in the future.
Perdue started reporting purchases at BWX before the Inhofe news came out – and continued to buy shares after, including on December 13, 2018, the day that Inhofe employees distributed playing card size data To Capitol Hill reporters saying he had asked his advisor to split up defensive stocks.
By then, Purdue was in the mix to chair the Sea Power Subcommittee. With the end of the 115th session of Congress, lawmakers were competing before the committee amendments that usually come with a new legislative session. A month earlier, the former chair of the subcommittee, Senator Roger Wicker (R-MS), was signaling his intention to take over the Senate Commerce Committee, which would have freed his place at the head of the Seapower Committee.
It is unclear when Purdue knew for sure that the gavel was his, but on January 19, 2019, it was announced that he was the next president. In the six weeks preceding this announcement, Purdue reported on his disclosure forms that he had bought 18 shares of BWX Technologies, valued between $ 32,000 and $ 305,000. At the time, the defense commercial press reported that Purdue’s move was a win for the submarine sector, given that his House counterpart, Representative Joe Courtney (D-CT), represents the largest sub-base on the East Coast.
In remarks about the declaration, Purdue said his priorities will be focused on building the country’s military in the face of threats from China, Russia, Iran and North Korea. “A robust naval fleet is critical to deterring aggression around the world, to show strength, and to support our allies,” Purdue said in January 2019.
Over the coming months, Purdue will participate or chair several committee hearings relating to the Navy and the NDAA budget, as the $ 738 billion defense budget bill has been put together. The Pentagon, along with submarine advocates such as Courtney, had long been lobbying for Navy funding to expand the construction of Virginia-class submarines.
On May 23, the Perdue subcommittee approved its portion of the Senate version of the defense spending bill, with Congress ultimately getting $ 1.5 billion more than the administration requested to build an additional boat. For this boat, the legislation was also drafted to require the use of updated “Virginia Payload Units,” the mechanism by which nuclear missiles are launched from submarines. BWX Technologies designed this system and secured a $ 35 million contract from the Pentagon in 2016 to further this work.
In a statement following the NDAA’s passage of the entire Senate on June 27, Purdue claimed a number of Navy-related gains in the operation – including $ 4.7 billion for Virginia-class submarines that require the use of Virginia tonnage units. Purdue reported selling between $ 1,000 and $ 15,000 in BWX shares that day, according to his financial disclosure forms.
While drafting the NDAA, Perdue started selling his shares in BWX, starting on February 26th. As of July 9, it reported 21 sales, grossing anywhere from $ 49,000 to $ 385,000. The company’s share price has skyrocketed since Purdue first bought stakes until he began selling them. In December, it bought shares at as low as $ 35.91 a piece. By July, they were trading at $ 51.23 a share.
It’s unclear if the $ 4.7 billion NDAA earmarked for the Navy program that benefits BWX is the main reason behind the stock price rise. But it definitely helped. In an August earnings call, the company said the Senate version of the NDAA continued to “reverse the positive traction” of its programs.
And Purdue can claim several victories of his own, unrelated to his finances. By helping direct more money to these projects, he may have lined his profile as a national security hawk and cemented his goodwill as a defender of submarines in a country where this sector of the military is important.
But experts said the fact that there was an appearance Purdue had financially benefited from the legislative process in which he was involved must be taken into account along with those political considerations.
CLC’s Payne said, “A legislator can hold on to the stockpile or hold on to the public’s trust, but it’s hard to do both.”