Arlen Specter's Stock Trading Raises Conflict-of-Interest Concerns

Strategic Insights -

Pennsylvania Senator Arlen Specter is the busiest stock trader among U.S. senators in Pennsylvania and New Jersey, according to Senate records. While he has invested in various companies, including Boeing, Comcast, and Microsoft, his investments have raised concerns about potential conflicts of interest. Specter holds shares in companies that have come before his committees, and in some cases, his wife, Joan, has purchased stock shortly after he has learned about the companies' business.

Key Takeaways:

  • Arlen Specter is the busiest stock trader among U.S. senators in Pennsylvania and New Jersey, with investments in 24 companies since 1996.
  • Specter holds shares in companies that have come before his committees, including Boeing, Comcast, and Microsoft.
  • In two cases, Specter's wife, Joan, purchased stock in companies shortly after they had testified before his committees: Cisco Systems in 2000 and Boeing in 1997.
  • Specter said the timing of the purchases was coincidental, while Joan Specter attributed it to her broker's recommendations or her son's suggestion.
  • The U.S. Supreme Court has ruled that public officials can be held liable for conflicts of interest if they act on nonpublic information that a reasonable investor would care about.
  • David Skeel, a professor at the University of Pennsylvania Law School, stated that the question is whether Specter or his wife has material nonpublic information that could affect the value of the stock.
  • Specter has said he would avoid buying stock if he knew about a potential conflict, but critics argue that this is not enough, citing the need for absolute transparency and disclosure.

Statistics:

  • Since 1996, Specter has invested in 24 companies, including Boeing, Comcast, and Microsoft.
  • In 2000, Joan Specter purchased up to $15,000 in Cisco Systems stock four weeks after Ken Watson testified before the Senate Committee on Governmental Affairs.
  • In 1997, Joan Specter purchased up to $15,000 in Boeing stock three weeks after top officials testified before the antitrust subcommittee.
  • Specter has collected a profit of between $5,000 and $13,000 from the sale of Entercom Communications Corp. stock.

Sources:

  • The Philadelphia Inquirer, November 7, 2004.
  • Senate records, 1996-2004.
  • U.S. Supreme Court precedent, cited by David Skeel.
  • University of Pennsylvania Law School, interview with David Skeel.