New stock questions plague HHS nominee Tom Price as confirmation vote nears
WASHINGTON — President Trump's choice to be the top U.S. health official bought and sold health care company stocks often enough as a member of Congress to warrant probes by both federal securities regulators and the House ethics committee, former government ethics lawyers say.
A USA TODAY analysis of stock trade reports by Rep. Tom Price, R-Ga., also shows he often misstated the timing of stock purchases or failed to report them altogether.
These include disclosures related to his much-publicized investment in the Australian biotech company Innate Immunotherapeutics, which gave him preferential treatment for a private stock offering he learned of through another member of Congress who is the company's biggest shareholder.
Price also invested in more health care companies that could benefit from legislation he introduced than previously reported.
When asked about Price's stock trades, the Department of Health and Human Services released an unsigned statement that said Price's legislative activity on behalf of the medical equipment industry, which dates back about 20 years, illustrated his long-held concerns with the CMS' competitive bidding process.
Last May, Price introduced the Patient Access to Durable Medical Equipment Act to block Medicare changes to reimbursements for durable medical equipment. A week later, he purchased up to $15,000 worth of shares in Blackstone, which owns the privately held home medical equipment company Apria. Apria sells home medical equipment, including walkers, hospital beds and wound therapy devices.
Apria spent up to $100,000 lobbying members of Congress to support Price’s bill between May and June.
Price's support of the industry, which has been targeted by HHS for fraud, was mutual. The American Association of Homecare, a home medical equipment lobbying and member organization, donated $7,200 to Price in 2016 and $7,000 in 2012. The organization filed six lobbying disclosure reports on this one bill — more than any other group. Apria is a corporate partner of the lobbying group.
When Price was nominated to head HHS, the group released a statement applauding his work: “The home medical equipment community, as well as HME patients and their caregivers, owe him a debt of gratitude for his leadership and effectiveness on this issue.”
USA TODAY reported last week that Price bought $15,000 worth of stock in the health care company McKesson and soon after sponsored different legislation that would benefit the company, its clients and others involved in the durable medical equipment industry.
That put Price at risk of violating the Stop Trading On Congressional Knowledge (STOCK) Act, which was designed to keep members of Congress and their staffs from using information they have through their jobs to make money in the stock market.
"A lot of trades like this by someone in a position to have access to confidential information is exactly the kind of thing that typically triggers an SEC (Securities and Exchange Commission) investigation," says Richard Painter, who was President George W. Bush's chief ethics lawyer. "I have no idea if it’s going on and where (a probe) would lead, but it shows extremely poor judgment making these trades in and out of health care stocks."
Price was approved by the Senate Finance Committee in a party-line vote last week. The full Senate is expected to vote on his nomination Thursday.
Price made dozens of health industry stock trades while he was a member of the Ways and Means Committee and the SEC was in the midst of a three-year investigation focusing on the panel, Kaiser Health News reported Wednesday. Although he was neither targeted by nor implicated in the the investigation, it was considered the first test of the STOCK law and unusually bold for a sitting member of Congress to do so, Kaiser reported.
A coalition of 13 left-leaning groups sent a letter to Senate leaders Tuesday urging them to delay consideration of Price until the SEC can investigate. A rally is planned for Wednesday by these and other groups, along with Senate Democrats and at least one cancer patient concerned about losing coverage under the Affordable Care Act, which Price strongly opposes.
"Before the Senate rushes to confirm a nominee for the president’s cabinet, the public deserves to know whether they’re guilty of insider trading," said the letter signed by groups including the U.S. Public Interest Research Group and Public Citizen. "Mr. Price was a sitting Member of Congress actively working to pass health policy changes — to accept special stock offers from a health care company in that position was not ethical and not appropriate.”
But as Painter's comments show, the criticism isn't only coming from the left.
"This is something the voters should be concerned about," says John Pudner, a conservative Republican who runs Take Back Our Republic, an advocacy group trying to get money out of politics. "Money that is personally benefiting you is more of a concern and can be a more powerful force pulling you into a decision on related issues than campaign funding."
In his Senate confirmation hearings, Price said he personally directed the January 2015 purchases of stock in Innate Immunotherapeutics, He insisted that his broker handled all of his other direct stock holdings and did not consult him on those transactions.
However, in Price’s self-reported periodic transaction report filed in February 2015, Price said he was informed of the Innate trades about a month after the transaction took place — even though he directed them himself. This illustrates that Price misstated the timing of two out of three of his most controversial investments.
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Even if it's not insider trading, House members are "supposed to take it very seriously when they are dealing in legislation that may also affect these stocks," says Larry Noble, former general counsel of the Federal Election Commission, now general counsel of the Campaign Legal Center.
Painter, a securities law and ethics professor at the University of Minnesota, says a nominee with Price's health care stock trading would never have been nominated in the last Bush administration.
The same would have been true in the Obama administration, says Jim Messina, former personnel director for the Obama transition.
"Price is the prime example of why you have to have a thorough vetting process that includes an FBI background check and an extensive personal investigation," says Messina, who also supervised the White House office of personnel as deputy chief of staff. "Any real vetting process would have uncovered this and we would have never nominated Price much less asked the Senate to confirm him."
Says Noble: The vetting process here is "clearly deficient."
The 'wild west'
A notable amount of Price's investment activity and legislative help has focused on what's known as "durable medical equipment," which former Centers for Medicare and Medicaid Services official Tim Gronniger calls the "wild west of the health care industry."
The distribution of these products — including wheelchairs, canes and bed lifts — is not as rife with fraud as it once was, which Gronniger attributes to some hard-won regulatory changes, such as creation of a competitive bidding program that was supported by the previous Bush administration.
"This was not hurting anyone’s care. The utilization of services barely budged," says Gronniger. "We were very confident that their claims that beneficiaries would lose access to care were wrong."
What's missing?
Omissions and incorrect dates can "lead one to wonder whether it is related to any legislative work you’re doing," says Noble.
That’s why the solution for Cabinet secretaries and White House officials is to divest stocks so they are not in any position to directly influence companies they've invested in, says Noble.
The "bare minimum" standard should be for legislators to put their investments into a blind trust, says Pudner.
Former New Jersey Bureau of Securities Chief Laura Posner says when it comes to insider trading law, the amount of money involved is typically relevant only in determining the penalties that can be sought and in helping regulators prioritize which cases to investigate given their limited resources — not whether or not someone broke the law.
In fact, a recent Supreme Court decision found the law doesn’t necessarily require that someone receive a financial benefit for there to be insider trading liability, says Posner, now with the law firm Cohen Milstein Sellers & Toll.
Price, a former orthopedic surgeon, has a net worth estimated at nearly $14 million by the Center for Responsive Politics. Since 2012, Price has traded shares worth more than $300,000 in about 40 health-related companies, according to a Wall Street Journal analysis
Price has said he only personally purchased stock in Innate Immunotherapeutics. The other trades were made by his broker with the goal of keeping his portfolio diversified. But even if one only considers the 25 or so trades with missing or inaccurate trades, about a third are health-related companies, suggesting a lack of diversity.
"If you want to have a broker and a diversified portfolio, set up a blind trust and have the broker deal with the trustee," says Noble.
Price has said he would divest all shares as directed and agreed to with the Office of Government Ethics.
Kaiser Health News reported that Price took about a year off from trading in health stocks after he joined Ways and Means' health subcommittee in 2011, but then resuming trading in 2012. That's the year the STOCK Act was signed into law.