GOP Sen. John Hoeven, R-N.D., purchased between $100,000 and $250,000 of stock in a fund invested in health sciences companies in late January, just days after attending a briefing on the federal government’s response to the coronavirus.
The Jan. 29 purchase of shares in the BlackRock Health Sciences Trust II fund, detailed in Hoeven’s financial disclosure report filed in February, came before markets began plunging later that month, once the unfolding public health crisis began to affect economies around the world.
It came five days after Hoeven was briefed by officials from the Centers for Disease Control and Prevention, the National Institutes of Health and the State Department on efforts to contain COVID-19, the disease caused by the novel coronavirus.
The purchase came on the same day as the fund’s initial public offering.
The fund, which owns shares in pharmaceutical developers and medical device manufacturers, has outperformed the broader market slightly since Hoeven’s purchase. Between the market close Jan. 29 and its open on Friday, BMEZ has fallen 20.3%, compared with the S&P 500’s losses of 25.7%.
Kami Capener, a spokesperson for the senator, said in a statement that Hoeven’s purchase was not motivated by the Jan. 24 briefing and that Hoeven approved the purchase weeks beforehand.
“No, the fund was purchased based on the recommendation of his financial advisor and in accordance with Senate regulations and reporting requirements,” Capener said. “Also, the senator agreed to his financial advisor’s recommendation during the first week in January, however the fund didn’t IPO until January 29.”
In response to a request for documentation that could substantiate that timeline, Capener forwarded an email sent to her by John Mayer, a financial advisor at Stifel, on Friday.
“I received the Investor Kit for the Blackrock Health Sciences Trust II fund on January 2nd and contacted Senator Hoeven to recommend he invest in it,” Mayer wrote in the email to Capener.
Mayer did not respond to an emailed inquiry asking about when he made the recommendation to Hoeven and when Hoeven approved the purchase.
The fund’s top holdings are Teleflex, a Pennsylvania-based specialty medical devices manufacturer; Genmab, a Danish biotechnology firm specializing in cancer treatments, and Seattle Genetics, another biotechnology company fighting cancer, which is based in Washington.
Hoeven is the latest lawmaker to come under scrutiny for securities trades that have raised questions about whether those in government have used their positions to avoid the heavy financial losses that have hit the public.
The purchase represents only a small portion of Hoeven’s portfolio. Hoeven served as the president and CEO of the Bank of North Dakota for seven years before becoming the state’s governor and has reported owning millions of dollars in shares, including large stakes in companies such as Apple, Coca-Cola, Intel and Kraft Heinz.
Hoeven, though, did not appear to own shares of the previous BlackRock health sciences fund — Health Sciences Trust — at any point in the last four years for which data is available. That fund debuted in 2005.
Hoeven purchased between $100,000 and $250,000 of stock in a separate BlackRock fund, Science and Technology Trust II, on Nov. 19. That fund commenced operations in June.
Hoeven also owns between $250,000 and $500,000 worth of BlackRock shares, according to his 2018 financial disclosure. His 2019 disclosure is not due until May.
Senators are barred from trading on material nonpublic information derived from their position in Congress, although it’s not clear if such a prohibition would apply if the information is not related to a specific company.
Sen. Elizabeth Warren, D-Mass., has called for tougher rules around stock trades in Congress. The former presidential candidate has introduced legislation that would bar members of Congress from owning single stocks entirely.
Four other lawmakers have come under scrutiny in recent days over stock trades made before the coronavirus pandemic tanked markets.
Senate Intelligence Committee Chairman Richard Burr, R-N.C.; Sen. Kelly Loeffler, R-Ga., who is married to the chairman and CEO of the New York Stock Exchange’s parent the Intercontinental Exchange; Sen. Dianne Feinstein, D-Calif., another member of the intelligence committee; and Sen. Jim Inhofe, R-Okla., all unloaded large amounts of stock while the major indexes were still at or near record highs.
The S&P 500 and Dow Jones Industrial Average have both entered bear markets this month, halting 11-year bull runs.
Burr, who sold between $630,000 and $1.7 million worth of stock one week before the market slide, said in a statement on Friday that his decision to sell was based “solely on public news reports,” including those from CNBC.
He said that he asked the Senate Ethics Committee to conduct “a complete review of the matter with full transparency.”
Loeffler, along with her husband, Jeffrey Sprecher, sold shares worth between $1.25 million and $3.1 million in late January and early February. Loeffler also bought between $100,000 and $250,000 in Citrix, a technology firm that makes teleworking software and has seen its share price boosted since the coronavirus crisis.
“These were completely discretionary trades at the decision of our investment managers,” Loeffler said Friday on CNBC’s “The Exchange.” “Certainly I had no involvement and will continue to have no involvement in these investment decisions.”
The Intercontinental Exchange also defended the transactions Friday.
Feinstein and her husband sold between $1.5 million and $6 million in a biotech firm, Allogene Therapeutics, in two transactions in January and February, according to The New York Times. The senator said in a statement on Friday that her assets are held in a blind trust over which she has no control and denied that she had sold any assets. She said she had “no input” into her husband’s decision-making.
“My husband in January and February sold shares of a cancer therapy company. This company is unrelated to any work on the coronavirus and the sale was unrelated to the situation,” she said. The senator said that she was not present for the Jan. 24 briefing.
Inhofe sold up to $400,000 of shares in companies including PayPal, Apple and real estate firm Brookfield Asset Management on Jan. 27, according to the Times. Inhofe said in a statement provided to the Times, which first reported on his and Feinstein’s transactions, that he did not have “any involvement” in the stock trades and did not attend the Jan. 24 coronavirus briefing.
Burr’s trades were first reported by the investigative outlet ProPublica. Loeffler’s transactions were first reported by The Daily Beast.
Federal lawmakers are rarely prosecuted for insider trading, though a dramatic example of such a thing came earlier this year.
Former Rep. Chris Collins of New York was sentenced in January to 26 months in prison for an illegal stock tip that he gave his son from the White House lawn about a biopharmaceutical company’s failed drug trial. Collins learned about the failed trial from the CEO of the company, Innate Immunotherapeutics, before the information was public.