Sen. David Perdue Says His Perfectly Timed Stock Trades Are Completely Innocent
The Georgia senator pushed to roll back regulations on prepaid debit cards. Then he acquired stock in an industry leader.
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. 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.
Perdue’s office told The Daily Beast that all of those transactions—involving First Data and every other company—are handled by a third-party investment adviser, and that the senator has no role in buying or selling the securities in his portfolio.
“As we have told numerous publications in response to repeated false accusations, Senator Perdue and Mrs. Perdue have outside, independent advisers who made these specific trades,” said a Senate spokeswoman for Perdue. “The Perdues cannot direct or influence these independent fund managers. These outrageous attacks are based on information that has been publicly available for years. Any accusation of improper conduct is categorically false and nothing more than lies by liberal groups hoping to win an election.”
There is no available evidence that Perdue traded on nonpublic information, a practice barred by federal law. 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.
Perdue reported buying and selling First Data stock through DBP Enterprises LLC, a company jointly owned by him and his wife Bonnie, and apparently named after their initials. Financial disclosure forms filed with Senate ethics officials say the senator is a director of the company, and has an “ownership interest” in it.
Perdue’s office told The Daily Beast that DBP’s First Data holdings actually came by way of a managed fund publicly available to other investors. But his office would not name that fund or provide any additional details about it. 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.
All of that would be less noteworthy but for the timing and structure of Perdue’s many transactions in First Data stock. 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. Perdue’s office denied that the senator had any advance knowledge of that merger. 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.
Regardless of Perdue’s specific involvement, 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. Indeed, Perdue appears to have recognized the pitfalls this year. As some of his colleagues, most notably Sens. Richard Burr (R-N.C.) and Kelly Loeffler (R-GA), faced scrutiny over huge stock sales that coincided with closed-door coronavirus briefings, Perdue decided, in April, to move away from individual stock holdings and into exchange-traded funds, mutual funds, and bonds.
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.
Before its merger with financial technology conglomerate Fiserv in 2019, First Data was a financial services giant in its own right, handling as much as half of all debit and credit card transactions nationwide in the mid-2010s. A key business niche was the prepaid debit card, an increasingly lucrative financial product. In 2018, First Data reported processing $20 billion in prepaid payments for nearly 3 million customers as the overall prepaid sector grew to nearly $200 billion in annual transactions.
In the final months of the Obama administration, the CFPB introduced the rule imposing new restrictions on the burgeoning industry. The aggressive rule compelled companies to make prepaid account balances available to card holders, provide them assistance if their cards were used for fraudulent or stolen purchases, and to be transparent with them about fees and charges associated with the cards.
Perdue, a consistent CFPB critic, was a vehement opponent of this particular rule as well. “As a business guy, I have experienced first-hand the impact overregulation has on growth and innovation,” he said, invoking his past career as a CEO at major companies like Reebok and Dollar General. “This rule is entirely too broad and would cripple the electronic payment marketplace which Georgians and millions of consumers across the country depend on.”
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.
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. 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.
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.
“No one should jump to conclusions,” he said. “There may be good reasons or rationale that persuasively and truthfully explain what is, again, at first blush, suspicious trading.”
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.” Perdue’s office stated that he was barred from influencing any investment decisions in this fund, but declined to provide documentary evidence of that arrangement.
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.
Members of Congress are barred by a federal law called the STOCK Act from engaging in financial transactions using knowledge gleaned through their official duties. But it can be difficult to marshal anything more than circumstantial evidence for such conduct based on public records. Recent controversies involving Loeffler and Burr in particular have renewed calls to strengthen laws restricting financial activity by members of Congress, with groups such as Issue One calling on more broad adoption of blind trusts and restrictions on the types of assets that federal officials can own and trade while in office.
Perdue’s decision to stop trading equities—his last reported stock sale occurred in April—suggests that he grasped the moral hazard it created, or at least the resulting public perception problems. He 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.
“Members of Congress should not own individual stocks in companies, full stop,” said Donna Nagy, a law professor at Indiana University who studies lawmaker stock trading. “Part of the reason is… the ownership of stock in companies that are directly and substantially affected by legislative action raises all sorts of questions.”
- With reporting by Lachlan Markay