Legislation intended to deter members of Congress from profiting from stock trades based on inside information is inadvertently forcing 28,000 federal employees to expose their personal financial information on the Internet.
The result, according to a trade group for senior government executives, is a number of unintended risks that federal employees must now bear, and another reason for talented executives to think twice about serving their country by taking a position in the federal government.
At issue are provisions of the STOCK Act, which was signed into law April 4, which requires public disclosure of federal career executives’ financial disclosure reports. The STOCK Act stands for Stop Trading on Congressional Knowledge and among other provisions, requires that public reports of new transactions exceeding $1,000 be posted online either 30 days after the individual was notified of a transaction in his or her account, or 45 days after the transaction.
According to officials from the Senior Executives Association, high ranking employees in the Executive Branch “should be, and already are, required to submit financial disclosure reports,” which are reviewed by specially trained agency ethics officials and “have been available to the public in a controlled manner that has safeguarded the privacy and integrity of employees’ financial information.”
Implementation of the STOCK Act is also likely to make it significantly harder to attract capable political appointees to the current administration, as well as future administrations.”
The STOCK Act removed this crucial check on information security by requiring that the reports be posted on a public, easily searchable database, the association’s officials argued in a paper released today.
“These new requirements (Sections 6 and 11 of the Act) will serve no necessary purpose that we are aware of, jeopardize the privacy and integrity afforded by the Ethics in Government Act system, and hinder government performance in a number of ways,” association officials said in a prepared statement, citing 11 unintended consequences of the Act, including:
• Federal executives will become prime targets for identity thieves since the reports include names, addresses, signatures, assets, and liabilities. The time and energy required to address identify theft will be a needless distraction from their work.
• Federal employees posted overseas and those who travel overseas on government business may have their finances scrutinized by foreign interests, including terrorists. Foreign service officers are fearful that their children will become prime kidnapping targets, as may those traveling overseas who have substantial financial resources.
• James Lewis, a cyber-security analyst who advises the Obama administration and Congress, has the impression that “at least one smart country is building a data base on [U.S. Government] employees.” The information posted on line from the financial disclosure reports will be a gold mine to any country building such a database.
• The online posting requirement could easily jeopardize the cover of US intelligence personnel posted at US embassies. Since intelligence officers’ financial disclosure reports cannot be made public, the absence of a senior foreign service officer’s report from the public data base will serve to confirm a foreign interest’s suspicion.
• Those who are under investigation by federal law enforcement agencies and Inspectors General may attempt to exert pressure on those agency executives by using sensitive financial information available on the Internet against them.
• Senior Executive Service members could be subject to unwarranted personal scrutiny by their subordinates, causing tension and problems in the workplace, particularly when addressing poor performers.
• Career executives are often targets of frivolous lawsuits by members of the public for merely carrying out the routine duties their positions require. Plaintiffs may use sensitive financial information to intimidate those who are faithfully executing their duties. Executives faced with the possibility of such lawsuits may avoid making difficult decisions for fear of retaliation.
• The spouses of the over 28,000 federal executives who are covered will also be affected since filers are required to report the identity of their spouses’ employers, as well as their assets and liabilities, and any financial transactions they made during the past year. As a result, spouses working in the private sector may have their finances more easily scrutinized by their own co-workers, subordinates, and neighbors.
• Senior executives’ spouses’ financial information will be posted on the Internet, even if that spouse is in the intelligence community.
• The Act is already having a chilling effect on the recruitment and retention of career executives. The Association has heard from a number of GS 14s and 15s who are abandoning their plans to apply for Senior Executive Service positions. And, to be exempt from the Act, many current Senior Executives are considering retirement or falling back to GS-15 positions.
• Implementation of the STOCK Act is also likely to make it significantly harder to attract capable political appointees to the current administration, as well as future administrations. Political appointees already expect to file financial disclosure reports that have a good chance of being examined by journalists and “good government” groups, but they have never had the expectation that their financial disclosure reports will be freely available to criminal elements and foreign groups.
The Senior Executive Association is seeking to have the STOCK Act amended to eliminate the requirement for internet posting of Executive Branch employee financial disclosure reports, particularly those of career employees.
“At the very least, implementation of the act should be delayed until its impact on government performance can be carefully studied, which to date has unfortunately not occurred,” its officials said in a statement.
“Those who chose to run for Congress do so being well aware of the public scrutiny to which they will be subjected. In contrast, the over 28,000 Federal employees who file annual financial disclosure reports did not make a choice to subject their personal lives (and those of their spouses and dependents) to such invasive public scrutiny.