Aug. 27, 2014 SIGN IN | REGISTER

Controversy Buoys Political-Intelligence Efforts

A suspicious stock spike might boost legislation that seeks to bring a clandestine class of Wall Street representatives into the daylight.

At least that’s what proponents such as Sen. Charles E. Grassley, R-Iowa, and Rep. Louise M. Slaughter, D-N.Y., are banking on.

The unlikely duo of lawmakers share a passion for shining a light on the shadowy world of political-intelligence operatives. They’ve tried for years and almost found success with an amendment to the STOCK Act, but now they and their allies see a new opportunity amid investigations into a piece of advance information that sent health care stocks soaring.

“We need transparency of who these people are, what the industry does, just like we do lobbying,” Grassley told me last week. “Transparency brings accountability.”

Political-intelligence operatives scour Capitol Hill and work their contacts in the executive branch for the latest information about upcoming legislation or federal agency decisions. Then they quickly ferry that intel back to Wall Street traders.

They’re under no obligation to report their clients or fees.

“It’s difficult to trace,” Grassley noted. “Obscure people are talking to people they know, or maybe people they don’t know, and they ask questions that may appear innocent to the guy being questioned, but then it ends up being valuable economic espionage information.”

Sometimes regular lobbyists play in the political-intelligence world, and though they may disclose their advocacy clients, their information-only clients are off the books to public eyes. Other times, former government aides or industry analysts have made specialties purely out of political-intelligence gathering.

In an odd twist, the recent health care stock spike appears to involve a former Grassley aide who now works at the law and lobbying firm Greenberg Traurig (made famous for its former employee: convicted lobbyist Jack Abramoff).

The Wall Street Journal first reported that Greenberg Traurig’s Mark Hayes is involved in a widening probe about whether he may have passed on nonpublic information to an investment firm about a Medicare rate decision. The outfit, Height Securities, sent out an alert to traders, which sent the stocks of certain health care firms on a spike.

Now, Grassley has launched an investigation, and the Securities and Exchange Commission and Health and Human Services also are looking into the matter.

Slaughter said traders made more than $600 million in 18 minutes off the tip. If her cause had been looking for a “classic case about what political intelligence does,” she says she’s found it.

“We do not exist to affect the markets,” Slaughter said last week, her voice rising. “As a member of Congress, I am grievously offended by this.”

Slaughter said her proposal would exclude reporters, who trade in not-yet-public information (but for a typically far lesser price than stock traders).

Craig Holman, a lobbyist with Public Citizen who is working with Grassley’s and Slaughter’s offices on the bill, said roping political-intelligence operatives under the Lobbying Disclosure Act is the right path. They would likely have their own category separate from lobbyists, and it might include their own stock trades.

“What we’re trying to capture is the real insider game,” Holman said.

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