“Stinks To High Heaven”: Perdue Traded Stocks In Company Expected to Benefit From Rule Change He Pushed

Perdue “Bought And Sold Substantial Shares” In Prepaid Debit Card Company “Around Key Events” That “Sent Its Stock Price Soaring”

A devastating new report from The Daily Beast today reveals that Senator David Perdue pushed to water down regulations on prepaid debit cards and then bought “stock in a company that stood to benefit from the rollback of those regulations.”

Government ethics and securities law experts slammed Perdue’s “suspicious trading,” with one saying it “stinks to high heaven” and another saying Perdue’s activity “raise[s] questions about what he knew and when he knew it.” Perdue has refused to put his assets in a blind trust or provide any documentation to support his office’s claim that he has no influence over individual trades.

This isn’t the first time Perdue has landed in hot water over well-timed stock trades. As the pandemic was beginning to spread throughout the country, Perdue engaged in “heavy trading” of up to seven figures in stocks as “the markets took a turn for the worse,” which represented a “nearly threefold” increase in his portfolio activity compared to the previous 26-month period.  Among the investments Perdue made were in Netflix and “a chemical company that supplies personal protective equipment” beginning the very same day the Senate held a private coronavirus briefing.

The Daily Beast: Sen. David Perdue Says His Perfectly Timed Stock Trades Are Completely Innocent

By Sam Brodey and Lachlan Markay

Key Points:

• 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.

• 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. Perdue has been among the most active traders in Congress. But of the more than 400 companies in which he’s bought and sold stock since taking office in 2015, he’s reported more transactions involving First Data—a major card payment processor with a significant business in prepaid cards—than any other company but one.

• 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.

• Some of those purchases and sales, including six-figure acquisitions of shares in the company, fell around key events, such as the finalization of the CFPB rule that softened regulatory language designed to crack down on prepaid debit cards, a key plank of First Data’s business. 

• 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 James D. Cox, a law professor at Duke University who specializes in securities law, says his prior trades in First Data still raise red flags. “If somebody was really conscientious about the appearance of impropriety, they’d never trade individual stocks. But Perdue did,” Cox told The Daily Beast. “He traded large amounts, and they do raise questions about what he knew and when he knew it.” But Cox cautioned that such a pattern might not form sufficient basis for federal investigators to take a look. 

• In the final months of the Obama administration, the CFPB introduced the rule imposing new restrictions on the burgeoning industry.

• Perdue, a consistent CFPB critic, was a vehement opponent of this particular rule as well.

• In February 2017, Perdue introduced legislation to eliminate the new rule before it had even gone into effect…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.

• But Perdue claimed that his move had successfully pressured the CFPB to water down its rule. “Ultimately, the CFPB should have scrapped this rule altogether but we were able to extract significant concessions to narrow its scope,” he said in a statement at the time. 

• 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. 

• 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…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.

• Regardless of exactly how much Perdue may have profited in this period, his acquisition of First Data stock before key CFPB rule announcements, shedding of it before a bad quarterly report and share value dip, and re-acquisition before a crucial merger is, as attorney David Chase put it, akin to “batting 100 percent,” and could draw the scrutiny of those who enforce trading laws at the federal Securities and Exchange Commission, in spite of Perdue’s attribution of the trades to an outside investment adviser.

• Even granting that Perdue did not trade on nonpublic information, experts say First Data’s outsized role in the senator’s portfolio presents an inescapable conflict of interest, or at least gives the appearance of one. 

• 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.”

• “The fact that a third party made the decision doesn’t let a politician wash their hands and say, ‘I didn’t do it,’” McGehee said, adding that some lawmakers have provided direction to their stockbroker to avoid even going near investments that could create the appearance of a conflict of interest.

• [Perdue] faces what’s expected to be a tough re-election battle this fall, and his Democratic opponent has attacked him over his coronavirus-era stock trades. Perdue’s past trading activity involving First Data adds another layer of complexity to the record of a lawmaker who, in his lone term in the Senate so far, quickly became one of Capitol Hill’s most enthusiastic players of the stock market.

Read the full story here.

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