Daily Beast report finds Sen. David Perdue pushed for key deregulation of financial industry, then bought stock in industry leader
Perdue’s stock purchases — and sell offs — in First Data coincide with his attempts to deregulate the industry and subsequent changes in the law that sought to benefit the company
Perdue’s actions “could draw the scrutiny of those who enforce trading laws at the federal Securities and Exchange Commission”
Ethics expert: Perdue’s behavior “stinks to high heaven”
Atlanta, Ga. — A new damning report from The Daily Beast finds Sen. David Perdue (R-Ga.) facing new allegations of using his position in the United States Senate to line his pockets in “perfectly timed” stock trades.
After he pushed to deregulate the prepaid debit card industry, Perdue purchased large volumes of stock in a company that stood to benefit directly from the deregulation Perdue sought.
Perdue, a member of the U.S. Senate Banking Committee, advocated for and then pushed to roll back a Consumer Financial Protection Bureau regulation that required the prepaid debit card industry to be more transparent about fees and penalties — a rule change that stood to benefit the industry. Then, as the CFPB was partially rolling back the regulations, which Perdue took credit for, he reported purchasing up to $250,000 worth of stock in First Data, an industry leader of prepaid debit cards.
Perdue’s behavior and decisions are under fire from good governance groups and ethical experts.
Meredith McGehee, executive director of a nonpartisan good government advocacy group, told The Daily Beast that Perdue’s stock purchase after pushing a bill to help the industry “stinks to high heaven.”
And David Chase, a former prosecutor at the Securities and Exchange Commission, compared Perdue’s actions to “batting 100 percent,” which could draw the scrutiny of those who enforce trading laws at the federal Securities and Exchange Commission.
This is just the latest example of Perdue’s “perfectly timed” stock trades, some leading to questions of insider trading.
As the U.S. Senate was briefed in the early months on the the dangers of the coronavirus pandemic, Perdue publicly minimized the risk of the crisis to Georgians, but privately, he was buying shares in a manufacturer of PPE and a company that’s working on a coronavirus vaccine while selling stock in casinos and hotels.
More from the new bombshell reporting:
Daily Beast: Sen. David Perdue Says His Perfectly Timed Stock Trades Are Completely Innocent
Sam Brodey and Lachlan Markay
- Two weeks after Sen. David Perdue (R-GA) helped to dilute a rule that governed the prepaid debit card industry, he reported acquiring stock in a company that stood to benefit from the rollback of those regulations.
- In early 2017, Perdue was pushing to overturn a recent Consumer Financial Protection Bureau measure that, among other things, imposed new regulations on the growing prepaid debit card industry—including requirements that they be more transparent about fees and penalties, and extend the fraud and theft protections enjoyed by normal account holders to those with prepaid cards. The rule was not completely overturned, as Perdue wished, but it was rolled back.
- A review of Perdue’s trading of shares of Atlanta-based financial company First Data reveals that an investment firm owned by the senator and his wife, and for which he serves as a director, bought and sold substantial shares in the company from June 2017 to April 2019.
- But Perdue does serve as a member of the Senate Banking Committee with jurisdiction over the financial industry. And he has eschewed measures taken by some other lawmakers to more concretely insulate himself from his financial positions. The Senator has not placed his assets in a blind trust, meaning there is no formalized mechanism for ensuring he is not involved in such investment decisions—and that the public must simply take his word for it when he insists he is not.
- According to Senate ethics rules, investment vehicles such as mutual funds, which are available to the public and not controlled by the lawmakers themselves, may be disclosed in lieu of each of the fund’s individual holdings. But no such fund is mentioned in any of Perdue’s annual financial disclosure filings, which simply listed First Data as a holding of his DBP Enterprises.
- And Perdue—or his financial adviser—repeatedly bought First Data stock, sold it off, then bought it again in transactions that coincided with both policy announcements affecting the company and a major merger that sent its stock price soaring.
- But the frequency and timing of those trades, say those familiar with this field, is unusual to see in an account managed by a third-party broker, where more cautious, long-term investments tend to be prized over quick gains through repeated buying and selling.
- The First Data trades show the ethical pitfalls of owning or transacting in shares of companies whose interests intersect with a lawmaker’s official duties, professors, lawyers, and outside ethics experts told The Daily Beast.
- In February 2017, Perdue introduced legislation to eliminate the new rule before it had even gone into effect. He used a parliamentary maneuver, usually employed by members of the minority party, in order to force a vote on the measure the following month. Despite garnering support from Senate Majority Leader Mitch McConnell (R-KY), the proposal faced opposition from some key GOP senators and never ended up receiving a vote.
- The public didn’t get a glimpse at those concessions—which rolled back some of the consumer protections—until CFPB officially asked stakeholders for comment on the changes in June 2017.
- As it happened, Perdue’s DBP Enterprises, through the senator’s investment adviser, had begun purchasing First Data stock just a couple weeks earlier. From June 2, 2017, through December 11, 2017, Perdue reported 17 First Data purchases, acquiring between $100,000 and $250,000 in holdings in the company. Then on December 13, he liquidated his First Data holdings entirely. Perdue’s office said the transactions had “nothing to do with his role in the Senate.”
- Just a month later, he reported purchasing another $100,000 to $250,000 in FirstData stock. Once again, the timing coincided with a major CFPB move on its prepaid card rule. On January 25, 2018, the agency unveiled the final version of its rule. By that time, Obama’s CFPB chief, Richard Cordray, had been replaced by Mick Mulvaney, the conservative ex-congressman who would later become Trump’s acting chief of staff. And the rule that Mulvaney’s agency rolled out made significant concessions to the industry, and delayed final implementation of the new restrictions.
- After that, Perdue held on to his First Data stock for about five months. In June 2018, he reported the first of 11 First Data stock sales over three months. By the time the selling spree ended, the value of First Data shares had appreciated by nearly 33 percent. Within days of the final sale, its stock price began to plummet, from $25.74 per share on the day of Perdue’s final sale in September, to just over $18 on Oct. 29.
- That’s when the buying started once again. Perdue reported eight First Data stock purchases in late October and November 2018. Then on Nov. 26, those holdings were liquidated once again, with the reported sale of between $100,000 and $250,000 in First Data stock. But just a month later, Perdue acquired yet another batch of First Data stock worth between $100,000 and $250,000.
- That last purchase came just three weeks before First Data announced its merger with Fiserv, sending its stock price soaring. On the same day the merger was announced, Perdue reported selling between $15,001 and $50,000 in First Data stock. Over the next three months, he reported 18 more sales until he once again liquidated his position in April 2019.
- It’s difficult to gauge just how much money Perdue may have made on those trades, since senators are only required to disclose transactions in broad ranges. But every one of his sales of First Data stock after the Fiserv merger was announced occurred as its stock price hovered well above its January 2019 value.
- But Chase, a former SEC prosecutor himself, said that while the use of a third party broker makes the prospect of insider trading more unlikely, “the issue is whether there were communications between the individual and the adviser and these were directed trades. It’s not unheard of… if it’s not in a blind trust, it can happen.”
- Meredith McGehee, executive director of Issue One, a nonpartisan good government advocacy group, said the pattern, particularly Perdue’s reported purchase of First Data stock after pushing a bill that would have helped it, “stinks to high heaven.”
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