EIGA: What Politicians Have to Disclose

Senior members of each branch of the federal government are required to routinely disclose their financial interests and activities to the public under the Ethics in Government Act of 1978 (EIGA).
EIGA and What Politicians Have to Disclose

Senior members of each branch of the federal government are required to routinely disclose their financial interests and activities to the public under the Ethics in Government Act of 1978 (EIGA). These disclosures include annual reports, due at the latest in mid-August, that provide an overview of the official’s income, assets, liabilities, transactions, and gifts and other compensation that they received over the previous 12 months. Additionally, these individuals’ are required to periodically disclose any purchase, sale, or exchange transactions of stocks and bonds (but not mutual funds or ETF’s) within 30 days of receiving notice of the transaction. Congressional and Presidential candidates must file financial disclosures no later than 30 days before the election.

The following government officials are required to submit annual reports: The President, the Vice President, all members of the House and Senate, Justices of the Supreme Court, judges of the United States courts of appeals, United States district courts, and Court of Appeals for the Federal Circuit, and the Postmaster General, the Deputy Postmaster General, and the Director of the Office of Government Ethics. Additionally, senior members of the uniformed services as well as senior Congressional and executive branch employees are required to disclose publicly. Lower level government officials must file confidential, internal financial disclosure reports.

Failing to report can result in a fine in any amount up to $50,000. Knowingly and willfully falsifying any information that an individual is required to report can result in a fine, imprisonment for no more than a year, or both.

Over time, the Federal legislature has taken various steps in order to make officials’ financial activities more transparent, notably the Ethics in Government Act of 1978 in response to the Watergate scandal. This legislation established the Office of Government Ethics and financial reporting requirements of senior elected officials. Though the accountability generated by this legislation worked well in theory, its enforcement mechanisms regarding financial conflicts of interest among elected officials were minimal.

More recently, Congress passed the 2012 STOCK Act (an acronym for Stop Trading in Congressional Knowledge) prohibiting the use of non-public information for private profit, including insider trading by members of Congress and other government employees. Barely a year later Congress amended the STOCK Act to modify the public disclosure portion of the act so that many previously available records were no longer easily accessible to the public. The amendment eliminated the requirement for the creation of a searchable, sortable database of the information contained in reports, and the requirement that reports be done in electronic format, rather than on paper. Both chambers of Congress passed this amendment by unanimous consent. In the House, the bill received only 14 seconds of ‘discussion’ before being passed. In contrast, it took only 10 seconds for the Senate to consider the amendment before passing it.

Who Reports to Whom

Different public officials file their financial disclosure reports with different branches of government. The executive branch, for example, goes through the Office of Government Ethics (OGE) and candidates for executive office must file with the Federal Elections Commission (FEC). For federal judicial officials, they file through the Administrative Office of the US Courts.

In Congress, the Senate and House each have its own mechanisms for handling these disclosures. Representatives file with the House Clerk; Senators file with the Secretary of the Senate. Each has their respective Ethics committee overseeing regulations and enforcing penalties.

If you’ve not by now, you might currently be asking yourself: “Wait a minute, so Congress just regulates themselves?”

The answer is yes, but is not as clear as it should be. The Securities and Exchange Commission (SEC) is an independent government agency tasked with regulating and investigating potential financial misconduct, including insider trading. The SEC chairperson is nominated by the president and confirmed by the Senate, but because the SEC is part of the executive branch, Congress has argued that there is a concern over the SEC monitoring Congressional trading activity with regards to the separation of powers. Legislators have instead suggested that they be the ones to initiate investigations and refer them to the SEC through the House and Senate Ethics Committees.

With an understanding of what’s in these disclosures and who oversees them, let’s look at how we, private citizens and media professionals, can access this information–and why it’s so difficult to do so.

Reading the Fine Print

Since all this data is public, accessing individual reports is fairly straightforward: you can download them off the federal government websites. However, the copious amount of paperwork makes it difficult to draw bigger-picture conclusions from the data if you are scouring the reports by hand. A generic Senate annual report form for a single Senator, for example, is over 10 pages long and many Members of Congress are making hundreds of transactions a year, which translates to thousands of periodic transaction reports.

That’s where we come in.

We have developed software that archives each financial disclosure report and saves them for posterity. We’ve also automated the process of extracting machine-readable data from these financial disclosures and joining them in a database with publicly-available, company-specific information. Together, these tools let us track political stocks in real-time as well as ascertain aggregate investment trends over time.

Even with this technology, problems still persist. Most forms are available in a standard electronic format but many forms are still handwritten, manually typed, or scanned from existing documents. Training our software to extract data from these forms requires time and more data than we currently possess. For now, processing these documents requires manual supervision.

Looking ahead, we continue to comb through these disclosures to empower you with a clearer understanding of the financial behavior of your elected officials. Though we are currently focused on the Federal Government, we are expanding our scope. Some 30 US state governments have online, publicly accessible (but difficult to use) financial disclosure requirements of their senior elected officials. We’ve already automated the process of collecting disclosures from several states and investigating ways to collect financial disclosure data from states that do not make this information available online.

The process of collecting this raw data and translating it into actionable information is a difficult task, and one that has not been made easy by the politicians required to disclose financial activity –but we are committed to seeking out this information and reading the fine print for all to understand.


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