MARY LOUISE KELLY, HOST:
Some of the nation's wealthiest executives have been making millions by trading the stocks of their competitors. That is the conclusion of a new investigation by ProPublica. Their report analyzes decades of never-before-seen records from the Internal Revenue Service, and it finds instances where, quote, "the executives bought and sold with exquisite timing." Well, ProPublica data reporter Ellis Simani is a co-author on that investigation and is here now. Hey there.
ELLIS SIMANI: Hi, Mary Louise.
KELLY: Hi. So you write in this story - and I'm quoting - "such trading records have never been publicly available. Even the SEC, the Securities and Exchange Commission itself, doesn't have such a comprehensive database." So I'll start there. How did you get them?
SIMANI: Yeah. You know, we haven't said too much about that in terms of the provenance of the data. But, you know, once we received these leaked records, you know, we spent several months verifying their accuracy and checking them against other public sources, reporting on them for the last couple years without any instances of people disputing the accuracy of what's inside the records.
KELLY: So let's dig in on what might be happening here. Is it possible that these execs may be relying on years of industry knowledge and that helps them make smart bets at smart moments?
SIMANI: You know, that's certainly a possibility. And, you know, this kind of trading can be illegal. But, you know, it's pretty complicated. We aren't alleging that any of the individuals we're writing about are necessarily acting illegally. But we talked with several experts, many of whom were troubled by our findings. You know, they mentioned that this could still run afoul with insider trading laws.
KELLY: Yeah. One of the experts you spoke to is a former chair of the SEC itself, Harvey Pitt, who said executives should not be trading in the stocks of their competitors. But just for clarity, is there actually any rule against doing so?
SIMANI: You know, there isn't actually any rule necessarily against doing so. And, you know, one of the things about insider trading is that it can be really difficult to prove. Usually trades only violate insider trading laws when a couple different elements are met. So one thing is that traders have to have non-public information that would impact a company's share price. And the second thing is that the trader has to also have a duty not to disclose that information or use it for their own personal benefit.
KELLY: Give me an example. I'm just trying to wrap my head around how this works. When you say you've documented execs from from a range of industries trading the stock of their competitors, what's an example?
SIMANI: Yeah. So, you know, one of the people we touched on in our story was the CEO of a company called MGA Entertainment. He's somewhat of a toy magnate. His company is close competitors with the maker of Barbie dolls, Mattel. They're really fierce rivals and have been engaged in litigation between one another. And we found that he traded hundreds of millions of dollars worth of shares of his rival's securities over more than a decade, and he strongly denied any wrongdoing. He also declined to be interviewed. But, you know, he really stood out because there weren't any other executives who seemed to be trading in that large a volume with their direct competitor and oftentimes very successfully as well.
KELLY: Did any of the execs that you write about offer a comment or agree to an interview? How did they explain this?
SIMANI: Yeah, you know, so some did. Some said that they, you know, didn't act on any non-material public information. But, you know, nobody outright admitted to have acted improperly.
KELLY: So what happens now that you've put all this information out there? To your knowledge, are any of these trades you've written about being investigated?
SIMANI: Not to our knowledge. But, you know, I think in terms of the takeaway from our findings, you know, one of the really important components of this reporting is just that perception that executives and industry insiders could perhaps be trading on non-public information - this dynamic could really contribute to this idea that the stock market might be rigged or biased to benefit folks who have some kind of privilege.
KELLY: ProPublica data reporter Ellis Simani. Thanks so much.
SIMANI: Yes, thanks for having me. Transcript provided by NPR, Copyright NPR.
