RALEIGH – In response to allegations of insider trading by longtime Senate Majority Leader Tony Rand, I’m reserving my judgment.
The fact that his former Senate colleague, Republican John Carrington, urged Rand and other politicians of both parties to buy stock in Law Enforcement Associates does not by itself establish the elements of the crime of insider trading. Indeed, you can judge by my continued belief in the innocence of Martha Stewart that I think the laws surrounding insider trading are at best ambiguous, if not unjust. At the very least, you should have to prove that the supposed insider traders are trying to deceive other participants in the stock market – which typically involves selling a stock before bad news hits, not buying and holding a stock.
Still, the News & Observer’s fascinating series of reports on the LEA affair establishes right off the bat that some of North Carolina’s most powerful politicians have a tin ear when it comes to government ethics. Consider these troubling questions:
How could anyone have thought it was okay for former Transportation Secretary Lyndo Tippett and former Division of Motor Vehicles Commissioner George Tatum to be engaged in active trading in the stock of a company that does business with their respective agencies?
How could anyone have thought it was okay for Tatum and other government officials to leave their LEA stock holdings off of their state conflict-of-interest disclosures?
How could anyone advising either then-Gov. Mike Easley or then-Lt. Gov. Beverly Perdue that it would be a good idea to accept a tip from Carrington to purchase stock in one of his companies for their private portfolios? Didn’t it occur to anyone that no matter how the stock performed, this would prove to be an improper and embarrassing means of entangling a prominent statewide politician’s private investments with politics?
After Rand handled the initial allegations with admirable bluntness, why did he and his allies think it would be a good idea for two close friends and fellow LEA board members, Tippett and CEO Alan Terry, to commission a quick review to clear Rand of any wrongdoing? Whatever the intention, the end result was inevitably going to look like friends covering up for friends. I am mystified that anyone would expect any other outcome.
I’m not so naïve to believe that it will ever be possible entirely to divorce the private business dealings of all state officials from the effects of decisions they make. In the General Assembly, for example, part-time legislators usually maintain their businesses and professional relationships. The attorneys sometimes represent clients before state or local agencies or boards. The insurance agents sell products regulated by the state. The manufacturers sometimes make products purchased by state agencies or contractors.
Short of creating a full-time legislature with ironclad rules against members maintaining any private business interests or investments – truly a horrible idea, for many reasons, and one that has never been implemented by any legislative body anywhere – there can only be rules to disclose and police these kinds of relationships, not to prevent them.
But surely those who take full-time administrative jobs in state government can and should live under tighter restrictions. A secretary of commerce shouldn’t be allowed to invest in private firms with whom the state is negotiating incentive packages. A secretary of environment and natural resources shouldn’t be allowed to invest in companies that do wetlands-mitigation business with the state. A secretary of labor shouldn’t be allowed to invest in consulting firms that make safety upgrades at workplaces inspected by the state.
And state executives who oversee law-enforcement agencies shouldn’t be allowed to invest in companies that sell law-enforcement equipment to their agencies. Why anyone could think otherwise is beyond me.
Hood is president of the John Locke Foundation