Open Government Advocates Disappointed by Rollback of STOCK Act Requirements for Online Access

by Gavin Baker, 4/18/2013

Just a year after enacting it, Congress and the president rolled back a key transparency provision of the Stop Trading on Congressional Knowledge Act of 2012 (STOCK Act) instead of amending it to address concerns.

On April 15, President Obama signed S. 716, which repealed the STOCK Act's requirements for online access to most public conflict-of-interest disclosures filed by congressional and senior executive branch staff. The STOCK Act's other disclosure requirements remain in place.

Background

In 2011, a 60 Minutes investigation charged that members of Congress and their staff were using information about pending legislation to trade stock and make windfall profits. In response to the public outrage that followed, Congress passed the STOCK Act, which specifically made members and their staff subject to insider trading prohibitions. The law also contained several other ethics reforms and reporting requirements for high-level congressional and executive branch staff. The president signed the law on April 4, 2012.

The STOCK Act sought to guard against corruption or unethical profits being made from trading on inside political knowledge by increasing transparency in two ways: expanding financial disclosure requirements to include information on stock trades and posting online the annual financial disclosure forms filed by thousands of federal officials.

Expanded Disclosure

The STOCK Act expanded financial disclosure requirements to include regular reporting of financial transactions. The law required covered staff to disclose changes in their financial holdings within 45 days, rather than annually. In addition, the law required a subset of top officials to report mortgages on personal residences – a provision included in response to the Countrywide political loan scandal, where several public officials received preferential home loans. These provisions are unaffected by the recent amendments and remain in place.

Improving Electronic Access

In addition, the STOCK Act aimed to improve electronic access to the annual disclosure forms already filed by senior federal officials. Under the Ethics in Government Act of 1978, members of Congress, their staff, and approximately 28,000 senior executive branch employees have annually disclosed their financial holdings, sources of income, and transactions. While these financial disclosures are public records, most have not been posted online and are only available upon written request (a legal requirement for verification purposes). The president, vice president, Senate-confirmed presidential appointees, and members of the U.S. House already post their disclosure statements online; the STOCK Act would have significantly increased the number of high-level public officials who would have been required to post their disclosure statements online.

The STOCK Act also required that officials file their disclosures electronically, rather than on paper as is currently common. E-filing allows for more efficient and useful access to the information, facilitating improved analysis – which could make it easier to detect corruption.

Additionally, the law required the Office of Government Ethics to post the executive branch disclosures online, in a searchable and sortable database. The House and Senate were also required to develop systems to post the information online. Such databases would afford timelier and more useful public access than having to file a request and receive a paper copy of the disclosure form.

Online Access Questioned

These online access provisions were criticized by some public officials, who argued that easier access to these disclosures could increase the risks of identity theft and/or targeting of economically vulnerable high-security-clearance staff by foreign agents. After public officials filed suit on Aug. 2, 2012, challenging the provisions, Congress delayed the provisions' effective date.

On Sept. 13, 2012, the judge in the case granted a temporary preliminary injunction, prohibiting the provisions from going into effect pending resolution of the case, stating that the plaintiffs had "shown a likelihood of success on the merits" of their claim that the provisions would violate their constitutional right to privacy.

In response, Congress passed, and the president signed, another law delaying the provisions' effective date and directing the National Academy of Public Administration (NAPA) to study the risk of harm to security or privacy resulting from online disclosure provisions and to recommend ways to mitigate any such risks.

While the NAPA study was under way, Congress again delayed the effective date of the provisions. The delay was scheduled to expire on April 15.

Narrow NAPA Study

The NAPA study, The STOCK Act: An Independent Review of the Impact of Providing Personally Identifiable Financial Information Online, was issued on March 28. The study recommended that Congress indefinitely suspend the online posting requirements and the unrestricted access to searchable, sortable, downloadable databases of disclosure forms. However, the study supported implementing the other requirements of the act and recommended that the 35 year-old government ethics system be strengthened.

The NAPA study was limited in its scope. While the researchers spoke with hundreds of government officials across federal agencies, there was no apparent effort to contact and incorporate the views of civic organizations dedicated to transparency and accountability. The report detailed the concerns of government officials but did not explore the possibility of policy changes such as redactions or waivers that could have addressed their issues and still allowed online disclosure.

Nor did the NAPA study consider the experience of states that have implemented similar requirements. A 2012 report by the Center for Effective Government (then OMB Watch) found that several states have established online access to their public officials' financial disclosures, including Arkansas, Rhode Island, and Tennessee. There is no evidence of harm resulting from online access in these states.

The Congressional Substitute

Faced with the impending April 15 deadline to begin online disclosure and armed with NAPA's recommendations, as well as a March 27 court opinion denying the government's motions to dismiss, Congress repealed the online disclosure provisions. Senate Majority Leader Harry Reid (D-NV) introduced and hastily shepherded a bill repealing the provisions on April 11, and the House followed suit the next day. President Obama signed the bill on April 15.

The bill also repeals the e-filing requirements of the STOCK Act, even though they were explicitly endorsed by the NAPA study and never challenged in the lawsuit.

Under the remaining law, only the president and vice president, Senate-confirmed executive branch officials, and members and candidates for Congress will be required to e-file their disclosures, and only those disclosures will be posted online. Congressional staff and the approximately 28,000 senior executive branch officials who file public disclosures will not have to e-file, and those disclosures will not be posted online.

The open government community is disappointed by what they consider backsliding by Congress and the president. Sean Moulton, Director of Open Government Policy at the Center for Effective Government, said, "Returning to hand-written requests fulfilled at the whim and in the time frame that ethics officers choose makes it much harder for citizens to hold public officials accountable for misbehavior in real time." This is especially so for congressional staff who are privy to valuable secret information about upcoming changes in the law but do not have their disclosure forms reviewed by ethics officers like executive branch staff do.

A Better Solution

Putting public information online is the gold standard of open government, and being able to examine the personal finances of public servants is an important safeguard against corruption. But public service should not require the sacrifice of all privacy rights. Just as Freedom of Information Act requests must be made in writing to verify the identity of the requester, it is not unreasonable for public servants to ask for the same safeguards from individuals who request their personal financial information.

While there may be valid reasons for not posting personal financial information online, Congress could have addressed the privacy concerns (by redacting the name of the banks or limiting the amount of information released publicly, for example). Instead, the posting requirement was simply deleted.

While some of the STOCK Act's protections, such as timelier reporting of financial transactions, remain in place, the financial activities of congressional staff – the source of the original 60 Minutes expose – remain difficult for the public to access.

Image: Schedule A disclosure from Attorney General Eric Holder’s 2012 filing