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Paul Larkin on the STOCK Act

In two issue briefs focused on the Stop Trading on Congressional Knowledge ("STOCK") Act of 2012, Paul Larkin, Senior Legal Research Fellow at The Heritage Foundation's Center for Legal and Judicial Studies, comprehensively compared the House and Senate versions of the Act. In his comparison, Larkin drilled down on the fraud and gratuities provisions concluding that the House version championed by Rep. Eric Cantor which excludes S.AMDT. 1483, the Leahy-Cornyn Amendment (also known as the "public corruption amendment"), is the better policy choice.

When discussing the fraud provisions specifically, Larkin cited the following problems with the Senate's version of the STOCK Act, which we outline in brief:

  • The term "undisclosed self-dealing" is new and lacks a widely accepted contemporary interpretation as well as any longstanding common law antecedent.

  • The term "financial interest" is vague and can conceivably be interpreted to embrace the very position for which a public official is seeking re-election.
  • Increasing the punishment for violating a state ethics law, the new, revised federal mail/wire fraud statute might impose a penalty that is out of proportion to the sanctions available under state law.
  • It is odd for the federal government to instruct states and localities about how serious they ought to treat potential infractions under their own ethics laws.

Larkin then pointed to other weaknesses in the Senate version, some of which are directed toward its gratuity provisions:

  • The Senate bill makes a material alteration to the definition of an "official act" in the bribery statute, adding the phrase "any act within the range of official duty" to the definition. But there is no definition of what constitutes an "official duty" of a Member of Congress, and the scope of that term could be quite broad.
  • It is not clear whether "intangible" gifts are covered. If they are, any number of things, including celebrity endorsements, would trigger the act.
  • Although the Senate bill would create an exemption for gifts of $1,000 or less, it leaves unanswered the question of how long the period is for calculating that cap.
  • The Senate's bill would also lead to inconsistency in federal law. If violations of state campaign, fundraising, or ethics regulations constituted the predicate acts that make conduct a federal crime, there would be, in effect, different federal laws at work in different states.
  • The Senate bill could have unintended consequences at the state or local level. If a state- or municipal-law violation subjects an offender to a potential 20-year term in a federal prison, a state legislature or city council may decide not to pass new disclosure laws, or to repeal the current rules, in order to avoid a penalty that is grossly disproportionate to the foot fault that triggers the federal crime. Inconsistency therefore could lead to a race to the bottom, not the top.

In these issue briefs, Larkin reiterated the important point that "the House-passed bill did not immunize any conduct from prosecution. The House just declined to add to the corpus of the federal criminal code." This goes to the very point of our last PoL post discussing the STOCK Act which sought to distinguish between the "public corruption amendment" and the fight against public corruption.

Currently, the two versions of the STOCK Act are still separate and Senate leadership has not yet reported how they plan to proceed with the proposed legislation.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.