Congressional investigators find 'substantial reason to believe' Republican Reps. Pat Fallon and John Rutherford violated a federal stock law

• Reps. Pat Fallon and John Rutherford were late filing federally mandated stock-trade disclosures.
• Rep. Chris Jacobs, a Republican from New York, is also facing scrutiny.

The US House's independent, nonpartisan Office of Congressional Ethics has determined that there is "substantial reason to believe" Republican Reps. Pat Fallon of Texas and John Rutherford of Florida violated federal law and House rules by improperly disclosing their personal stock trades.

All five members of the Office of Congressional Ethics' board voted to recommend that the US House Committee on Ethics investigate Fallon and Rutherford for failing to comply with the Stop Trading on Congressional Knowledge Act, or STOCK Act, by blowing through federal deadlines to report their stock trades.

While Office of Congressional Ethics investigators lack the authority to enforce federal ethics laws, they referred both cases to the lawmaker-led House Committee on Ethics for further review and potential penalties that range from fines and reprimands to formal censures and, in extreme cases, expulsion.

As Insider previously reported, Rutherford failed to properly disclose five individual stock transactions worth as much as $75,000 that he made in late 2020. These triggered the Office of Congressional Ethics investigation, which found that from early 2017 until December 2021, Rutherford had improperly reported 157 financial transactions valued between $652,000 and $3.5 million.

Fallon was months late disclosing dozens of stock trades during early- and mid-2021. Together, they were worth as much as $17.53 million. The Office of Congressional Ethics began reviewing his case in October 2021 and Fallon was late again disclosing stock trades in December 2021.

Members of Congress generally have 30 days to report their stock trades, but up to 45 days if they learned about a trade a few days later — such as cases where brokers are making trades for lawmakers without checking with them beforehand. As part of its reports on Fallon and Rutherford, the Office of Congressional Ethics posted a slideshow of the ethics training it presents to new members about the deadlines for publicly disclosing stock trades.

The STOCK Act's reporting requirements are intended to help the public assess whether lawmakers could personally profit from policies or spending bills they vote on and write. It becomes harder to evaluate such ties when lawmakers file their paperwork late.

'Refused to cooperate'

The Office of Congressional Ethics, which Congress itself created in 2008, wrote it its report that Fallon "refused to cooperate" with the review by producing a "limited set of documents" and by declining to be interviewed.

"This non-cooperation undermined the OCE's ability to verify Rep. Fallon's overall STOCK Act compliance and to fully assess the reasons for his late filings," investigators wrote.

It went on to say that it couldn't assess whether he received adequate training on the financial documents but said he "should have known" about the obligations no later than February 2021 yet continued to blow past deadlines after his broker made other trades.

Fallon denies that he was uncooperative. In a in a letter to the committee chairs, Reps. Ted Deutch, a Democrat of Florida, and Jackie Walorski, a Republican of Indiana, he also asks them to dismiss his case. Fallon, who is a freshman member of Congress and made his fortune in the apparel business, said in the letter that he "did not realize" he had to disclose stock trades by his broker, of which he said he wasn't aware.

"This is a common misconception, which, coupled with the overwhelming amount of information new members and their staff receive at the beginning of their terms, often results in inadvertent" late disclosures, he wrote through his attorney, Kate Belinski. Fallon said he thought he had to disclose the information annually just as he had to do when he was serving in the Texas legislature.

The letter goes on to say that Fallon paid a late penalty and hired a team to make sure he filed his reports correctly moving forward. Pictures of the checks included in the Office of Congressional Ethics' report showed he paid $600 in total in fines.

In the letter, Fallon called the Office of Congressional Ethics investigation an "unnecessary investigation at taxpayer expense and administrative burden."

"Right now, the congressman won't be commenting any further than his response that was issued with the report," Fallon's spokesman, Austin Higginbotham, told Insider.

In his letter to the Ethics Committee, Rutherford — who likewise wrote to the committee through Belinski — also asked lawmakers to drop the matter.

Belinski said Rutherford's late filing "comes down to a simple misunderstanding of the requirements and inadvertent human error."

Office of Congressional Ethics investigators said in their report that Rutherford and his chief of staff, Jenifer Bradley, "refused to cooperate" with the review and that Rutherford didn't agree to an interview. The Office of Congressional Ethics published a copy of a receipt showing he paid $800 in late penalties.

Rutherford himself is a member of the 10-member House Committee on Ethics, which includes five Republicans and five Democrats.

Investigators also reported a third case, for GOP Rep. Chris Jacobs of New York, to the House Committee on Ethics, but didn't agree in that case whether the congressman had likely violated the STOCK Act. Jacobs was months late filing various transactions made throughout early- to mid-2021, Forbes first reported, and the board tied 3-3 over whether to recommend that a violation occurred.

Jacobs, in his letter to the House Committee on Ethics, said that one of the trades was actually a corporate spinoff, which is supposed to be reported, but didn't explain the other late filings.

Numerous STOCK Act violations

The GOP lawmakers aren't alone in blowing past STOCK Act deadlines.

Reporting by Insider and other news outlets has found that in the last two years at least 63 members of Congress — including prominent Democrats such as Sens. Dianne Feinstein of California and Rep. Katherine Clark of Massachusetts — have violated the STOCK Act. Last year, the Office of Congressional Ethics found reason to believe Democratic Rep. Tom Malinowski of New Jersey violated the STOCK Act and referred him to the House Committee on Ethics.

The Office of Congressional Ethics cited Insider's on Fallon in its investigation of Fallon, calling lawmakers' STOCK Act violations "pervasive." Some STOCK Act violations are because of members of Congress' negligence, while others show a need for better training, the report said.

Lawmakers from both parties have introduced several bills to limit or ban lawmakers' trading of individual stocks or otherwise increase financial transaction transparency and strengthen fines for violating existing law.

But after a congressional hearing in April on the matter, progress has slowed as lawmakers attempt to craft a single bill that could pass on the floors of both the House and Senate.

Some members have suggested that improving ethics training would be adequate in addressing the late disclosure issues.

But others want to go further.

Last week, a coalition of 16 reform advocates, government watchdog groups, and political organizations urged President Joe Biden in a letter to "publicly and actively" push Congress to ban its members from trading individual stocks.