More than 2,600 government employees owned or traded stocks whose prices would rise or fall depending on their actions, according to a new investigative report by The Wall Street Journal, which analyzed 31,000 financial disclosure forms from 12,000 senior government employees and political staffers.
Of those 2,600 federal officials, more than 400 owned or traded in Chinese stocks, including in the Department of Defense, Department of State, and White House, the Oct. 11 report said.
“The Defense Department was among the federal agencies with the most officials who invested in Chinese stocks, even as the Pentagon in recent years has shifted its focus to countering China,” the report said.
The report also found that, from 2016 through 2021, more than 25 percent of government employees at the Department of the Treasury, Environmental Protection Agency, Department of Defense, Internal Revenue Service, Securities and Exchange Commission, and Federal Reserve traded in stocks of firms that were actively lobbying their agency.
Notably, officials in the Pentagon, State Department, and White House were found to have traded in numerous Chinese companies, including Alibaba, Baidu, and the China Petroleum and Chemical Corporation, also known as Sinopec.
Sinopec is owned by the China Petrochemical Corporation, which is overseen by the State-owned Assets Supervision and Administration Commission, a special commission of the Chinese Communist Party.
Among those who were found to have traded in Chinese stocks were Reed Werner, who served as deputy assistant secretary of defense for south and southeast Asia, and Jack Wilmer, who served as senior White House cybersecurity adviser and later as a chief information security officer at the Pentagon.
Werner owned Alibaba stocks at the time the Pentagon was debating adding the company to a blacklist. Alibaba’s stock rose 4 percent in one day when the Pentagon did not add the company to the list.
Werner sold his Alibaba stock for a profit three days later, just before officials were slated to renew their push for blacklisting.
“At the Defense Department, officials in the office of the secretary reported collectively owning between $1.2 million and $3.4 million of stock in aerospace and defense companies on average each year, examined by the Journal. Some held stock in Chinese companies while the U.S. was considering blacklisting the companies,” the report said.
The apparent conflict of interest demonstrated in the Defense Department and White House appeared to be part of a broader pattern in which government employees actively traded stocks of companies whose businesses ran counter to the stated mission of the employee’s department.
In one example, a top official for the Environmental Protection Agency traded in oil and gas stocks. In another, an employee of the Food and Drug administration owned stocks explicitly listed on the agency’s no-buy list.
The report found that the agencies in question would, at times, waive the rules when it was discovered that an employee had a conflict of interest. Other times, the agencies would sign off on the use of one of several exemptions established to allow government officials to own stocks.
The report noted that many of the thousands of records requested as part of the investigation had not yet been handed over by the government and that some agencies appeared to be stalling their release. In the case of the Department of Homeland security, for example, no documents had yet been turned over.