Kelly Loeffler, the U.S. senator from Georgia and former top executive at the parent company of the New York Stock Exchange, continues to trail in most polls to keep her Senate seat following her controversial stock sales before the coronavirus pandemic rocked the markets.
Now her campaign is considering an unusual “Hail Mary” to turn the tide, FOX Business has learned.
People close to Loeffler are advising her to meet directly with securities regulators including those at the Securities and Exchange Commission, Wall Street’s top cop, and make her case that the stock sales were not based on illegal "insider" information. The game plan is to get regulators to publicly state that Loeffler's stock sales were legal and that their blessing would end the controversy that could cost Loeffler her Georgia Senate seat in the November election, these people add.
Loeffler is said to be considering the move, though it's unclear if she will go forward with it, these people said.
Loeffler's husband is Jeffrey Sprecher, the chief executive officer of the Intercontinental Exchange (ICE), which owns the NYSE. She was appointed to the Georgia Senate seat in December by the state's governor, Brian Kemp, following the health-related retirement of Johnny Isakson. Since ICE bought the NYSE in 2012 for $8.2 billion, Loeffler has held high-ranking positions at the Atlanta-based company.
Most recently, she ran a subsidiary of ICE known as Bakkt, a cryptocurrency exchange. Public filings show that she received a $9 million golden parachute after leaving her job with ICE to serve in the Senate.
But in late March, Loeffler made the type of headlines no politician wants when they're running for office during a time of crisis. Financial disclosures showed she was one of a handful of lawmakers who made money selling stock in various companies after receiving private briefings on the spread of the virus and before the markets tanked. Because she is running for reelection the controversy over the stock sales has been particularly jarring; her opponents have attacked her for privately profiting from her position at a time when millions of Americans are losing their jobs due to the quarantines that have shuttered business across the nation. They have also raised the issue of whether she committed stock fraud by trading on "inside" information not available to the public.
White-collar crime experts interviewed by FOX Business say any insider trading case against Loeffler would be a legal stretch, since insider trading laws are murky and usually don't involve selling stock based on information gleaned through congressional briefings. Loeffler has said the stock sales were legal because she did not initiate the sales, rather they were executed by independent financial advisers.
Meanwhile, the so-called private information she received during the briefing wasn’t much different than what health officials were publicly stating in late January about the potential of the virus to spread from China and then to the United States, she has said. If true, that would negate not only insider trading charges but also a possible violation of a 2012 law known as the STOCK Act, which was designed to prevent members of Congress from using proprietary information they receive on the job for market trades.
Still, the optics of Loeffler's stock sales has been a defining event in her Senate campaign with opponents using it to weaken her standing in the polls. Those polls are showing her trailing both Democrats and a GOP insurgent candidate, Rep. Doug Collins, who will also be on the November ballot under the state's election laws.
Advisers to Loeffler believe a statement from regulators that she didn't violate the law would quell the controversy and resurrect her campaign, even if such a vote of confidence would be highly unusual since agencies like the SEC regard themselves as independent from political campaigns. SEC officials are also hesitant to announce publicly the innocence of market participants that they investigate and prefer merely to drop cases without comment.
"She did nothing wrong," one Loeffler adviser told FOX Business, "but this controversy won't go away and that's why they're thinking of going to the SEC, so the authorities can say the trades weren't illegal."
A spokesman for Loeffler’s office would not deny the discussions about approaching the SEC and other regulators, adding that the senator has "been fully transparent about all of this because she's done nothing wrong."
An SEC spokesman declined comment, as did a spokesman for the U.S. Attorney's office, which is investigating the various stock sales of public officials before the markets collapsed in February and March. The SEC and Justice Department, for instance, are investigating the stock sales of North Carolina Sen. Richard Burr, who also said he's done nothing wrong.
A spokesman for Sprecher declined comment.
Loeffler was chosen to replace Isakson because of her appeal to suburban women -- a key demographic in contested Senate races and the 2020 presidential campaign. Georgia Republicans believed her wealth could be leveraged for what was likely to be a tough race even before her stock sales became public.
Her husband, Sprecher, a long-time financial services executive, is one of the richest men in Georgia where ICE is headquartered. He has an estimated net worth between $500 million and $1 billion.
Initially, Loeffler was considered the odds-on favorite to keep the seat in GOP hands given her backing from the state's powerful Republican Party. But that was before her stock sales were made public through standard disclosures, which showed that between Jan. 24 and Feb. 14 accounts held by her and her husband engaged in 29 different transactions and all but two were stock sales.
The trades were completed before the stock market took a nosedive beginning in late February when large investors began pricing in the impact of the pandemic on the U.S. economy and corporate earnings. Records also show that the sales occurred immediately after she and other government officials received a private briefing on the spread of the virus throughout the world and into the U.S.
As the virus spread to the U.S., the Dow Jones Industrial Average would fall close to 37 percent from late February to late March. Major stock market averages have recovered — even if they remain below their pre-pandemic highs — amid a torrent of fiscal and monetary stimulus.
The disclosures of the stock sales by Loeffler and other public officials sparked not just public outrage but also regulatory scrutiny. And since the controversy erupted in March, Loeffler has made a series of public comments on FOX Business and elsewhere defending her trades, including a Wall Street Journal op-ed to refute the criticism that she traded on inside information.
But with millions of Americans losing their jobs, Loeffler remains on the defensive. And with just six months left until Election Day, campaign advisers believe time is running out for her to reverse a narrative that could lead to her defeat.
"I know Kelly, she had no knowledge of the sales, and would never trade on anything looking like insider trading," added a person close to Loeffler. "But Georgia has a knock-down-drag-out election with Republicans and Democrats on the ballot and they’re using this to crush her unless something happens quickly."