Tom Price walked into a Senate hearing room Wednesday with an ethics scandal clouding his nomination to become President-elect Donald Trump’s secretary of health and human services, and by the time he walked out, the Georgia congressman had done little to lift it.* If anything, he may have sharpened his critics’ line of attack.
Democrats have been calling for an investigation into whether Price may have violated federal laws designed to stop members of Congress from engaging in insider trading thanks to his track record of buying and selling shares in health care companies while taking actions on Capitol Hill that could boost their profits. Over the past four years, Price, a former orthopedic surgeon who is deeply involved with health care policy, traded more than $300,000 of shares in medical companies, raising serious questions about conflicts of interest. In one case, reported by CNN, he invested in medical device manufacturer Zimmer Biomet less than a week before introducing a bill that would have benefited the company by delaying new regulation detrimental to its business.
This week the Trump transition team tried to diffuse the issue with a one-page fact sheet that claimed Price was not responsible for some of the trades in question. It explained that Price maintained a diversified, broker-run account at Morgan Stanley, overseen by a financial adviser who “designed his portfolio and directed all trades.” The Zimmer Biomet investment? That was the adviser innocently rebalancing his portfolio.
Price largely stuck to blaming the broker as Democrats grilled him Wednesday during his appearance before the Senate Health, Education, Labor, and Pensions Committee. Connecticut Sen. Chris Murphy, for instance, recounted how Price had invested in six pharmaceutical companies that would have been hurt by an Obama administration demonstration project designed to cut Medicare costs. After buying shares, Price led the congressional charge against the project, rounding up 242 fellow members to sign a letter opposing it. Afterward, four of the six companies saw their share values rise. “You did not have to buy those stocks knowing that you were going to take a leadership role in the effort to inflate their value,” Murphy said. “Tell me how it can possibly be OK that you are championing positions on health care issues that have the effect of increasing your own personal wealth.”
“The fact of the matter is I didn’t know any of those trades were being made,” Price said. “I have a broker-directed account. All of those trades were made without my knowledge.”
And ‘round it went. Murphy pressed Price on why he didn’t tell his broker to avoid companies that might be affected by his legislative work. Price said his broker’s job was to “provide a diversified portfolio.” This was a sort of silly answer, since if he was really worried about investment diversification Price could get exposure to the medical sector without buying individual stocks by purchasing health care ETFs—but at most it evidenced a lack of interest in the appearance of propriety or understanding of contemporary portfolio-building strategies, not a nefarious personal enrichment scheme. Assuming he can prove that this broker-directed account is real, he should be in the clear.
Later in the hearing, however, Price admitted that he did have a direct hand in one of the deals that aroused the most concern. In 2015 and 2016, Price purchased discounted shares in a small Australian biotechnology firm, Innate Immunotherapeutics, as part of a private offering the company marketed to a handful of “sophisticated investors” in the U.S. One of those buyers included Rep. Chris Collins, who first invested in the company before he joined Congress, and currently sits on its board (he and his family own about 20 percent of the company’s equity). Innate is still developing a single experimental drug, which would treat multiple sclerosis, but its shares rose rapidly over the course of last year. Late in the hearing, Sen. Patty Murray decided to cross-examine Price about the circumstances of his investment:
Murray: Well, Congressman Chris Collins who sits on President-elect Trump’s transition team, is both an investor and a board member of the company. He was reportedly overheard just last week off the House floor bragging about how he made people millionaires from a stock tip. In our meeting, you informed me you made the purchases based on conversations with Rep. Collins. Is that correct?
Price: No. What I …
Murray: That is what you said to me in my office.
Price: What I believe I said to you is I learned of the company from Congressman Collins.
Murray: What I recall our conversation was that you had a conversation with Collins and then decided to purchase the stock.
Price: That’s not correct.
Murray: Well, that is what I remember hearing you say in my office. In that conversation, did Rep. Collins tell you anything that could be considered, quote, a stock tip? Yes or no?
Price: I don’t believe so, no.
Murray: Well, if you’re telling me he gave you information about a company, you’re offered shares in the company at prices not available to the public, you bought those shares, is that not a stock tip?
Price: That’s not what happened. What happened was he mentioned—he talked about the company and the work that they were doing in trying to solve the challenge of progressive secondary multiple sclerosis, a debilitating disease—
Murray: I’m well aware …
Price: And felt it had some significant merit and promise and purchased the initial shares on the stock exchange …
The key admission here is that Price bought the stock on his own volition after talking to a sitting board member. Was the conversation harmless, like Price suggests? Possibly. Collins has reportedly been a “cheerleader” for the company for years, and a number of his associates have invested in it. Maybe he really was just kvelling about the wonderful science Innate Immunotherapeutics was undertaking. But there’s enough ambiguity here to raise suspicions about impropriety and fuel calls for further investigation. As the Huffington Post notes, it also undermines the Trump team’s attempts to pin all of Price’s trading on his broker:
Trump transition spokesman Phillip Blando said in an email that Price asked his Morgan Stanley broker to open “an account separate from his primary broker-directed account at Morgan Stanley in order to make the purchase.”
Blando added in an email after the publication of this article that “the operative phrasing” in the fact sheet defending Price’s stock trades is that the broker “directed all trades in the account.” He added, “The Australian drug company was not part of that account.”
Price is scheduled for a formal confirmation hearing next week—Wednesday’s was just a “courtesy” warm-up appearance before one of the two Senate committees with jurisdiction over health care policy. We can expect Democrats to drill down harder on the Innate Immunotherapeutics deal, since Price has left plenty of questions unanswered.
*Correction, Jan. 19, 2017: This post originally misspelled Georgia.