Reps. Brian Baird (D-Wash.) and Louise Slaughter (D-N.Y.) sponsored a bill to prevent members of Congress from trading on information gleaned from working on the Hill. (house.gov)

In November of 2005, then-Senate Majority Leader Bill Frist (R-Tenn.) took to the upper-chamber floor with a major announcement. The Senate, he revealed, would soon put its full weight behind legislation creating a multi-billion dollar fund to settle lawsuits from victims of asbestos exposure — lawsuits that had already bankrupted several building supply companies.

“I am pleased to inform my colleagues that asbestos reform will be the first major legislation that we consider in late January when we return,” Frist said at the time.

Illustration by: Matt Mahurin

For most of the country, Frist’s speech was the first notice of that strategy. But for some Wall Street investors, his plan was old news that translated into big money. Indeed, shares of the world’s largest sheet-rock company, Chicago-based USG Corp., jumped more than $2 — and trading volume nearly tripled — the day before Frist delivered his announcement.

Somehow, someway, the message that Congress was moving to help companies like USG had dribbled onto Wall Street before the rest of the world knew a thing about it. And trading on such leaks, it turns out, is perfectly legal.

Now, a small group of Democrats, backed by a host of public-interest groups, wants to prevent the use of similar non-public information to guide investment decisions. Under the bill, sponsored by Reps. Brian Baird (D-Wash.) and Louise Slaughter (D-N.Y.), lawmakers and their staffs would be prohibited from trading in stocks, bonds and commodities markets based on insider knowledge gleaned from their everyday duties on Capitol Hill. The proposal would also prohibit the transfer of such information to other parties — a spouse; a brother-in-law; a political intelligence firm — who then use the information for trading purposes.

In a telephone interview last month, Baird said there’s no clean evidence that such insider trading is endemic in Washington. “But in a town that trades on information,” he added, the likelihood that it’s happening is “almost a certainty.”

“There’s no question that we get access to information,” Baird said. “There need to be bright-light firewalls between public and non-public [information].”

With most lawmakers dabbling to some extent in stocks and other publicly traded commodities, watchdog groups warn that the opportunities for members to use or convey non-public information — even if it’s done 100 percent unconsciously — are frequent. This has particularly been the case during the long string of government-funded bailouts of the finance industry that’s marked the last 18 months.

Last September, for example, as Wall Street was crumbling but before the extent of the troubles were clear, the heads of the Federal Reserve and the Treasury Department called congressional leaders to an emergency, closed-door meeting to announce their plan for an unprecedented, multi-billion dollar rescue of the nation’s financial sector.

One day later, at least 10 senators traded stock or mutual funds related to the finance industry, according to personal financial disclosure forms submitted by lawmakers last month.

At least one of those lawmakers, Sen. Richard Durbin (D-Ill.), had attended the meeting the evening before, an episode first reported by Bloomberg last month. A Durbin spokesman told Bloomberg that the senator didn’t use any information from that closed-door gathering to counsel his trades the following day.

While there’s no evidence to refute that claim, public-interest advocates argue that the mere appearance of lawmakers’ abusing their powers can lead to a dangerous erosion of public trust in all government officials.

“If it appears to be the case, then everyone’s under suspicion,” said Laura MacCleery, deputy director of campaign finance at New York University’s Brennan Center for Justice. “You want politicians to be beyond reproach. You want a system that protects the innocent and makes it impossible for the guilty to operate.”

While current law prevents insider trading on non-public information gotten through corporate channels, the Securities and Exchange Commission does not have similar powers to regulate trades made on non-public information obtained through government channels.

That loophole could allow lawmakers and other federal employees to make millions of dollars on insider investments, Baird said. If they’re later accused of getting insider information, he added, they’ve got a simple defense: “Not from the company, I didn’t.”

In March, a coalition of public interest groups, including the League of Women Voters, Common Cause and Public Citizen, endorsed the House bill in a letter to Baird and Slaughter that explained the loophole further. “Under current law, ‘insider trading’ is defined as the buying or selling of securities or commodities based on non-public information in violation of confidentiality — either to the issuing company or the source of information,” the groups wrote. “Most federal officials and employees do not owe a duty of confidentiality to the federal government and thus are not liable for insider trading.”

There is some evidence that, consciously or not, federal lawmakers tend to use their informational advantage to reap better Wall Street returns than other investors find. A 2004 study conducted by researchers at Georgia State University, for example, found that trades made by selected senators between 1993 and 1998 produced returns more than 12 percent higher than the rest of the market.

“These results,” the researchers concluded, “suggest that Senators knew appropriate times to both buy and sell their common stocks.”

Such findings might make a strong case for adoption of safeguards like the Baird-Slaughter bill. But it’s not easy to get Congress to police itself. Indeed, despite having both control of the White House and comfortable majorities in Congress, Democrats this year seem poised to ignore proposals reforming campaign finance laws and eliminating automatic congressional pay raises.

Melanie Sloan, executive director of the Center for Responsibility and Ethics in Washington, said the Baird-Slaughter bill fits into the same category. “There’s rarely support,” she said, “for things that limit lawmakers’ behavior.”

Robert M. Stern, president of the Center for Governmental Studies, a Los Angeles-based non-profit research group, agreed, maintaining that the Baird-Slaughter proposal has little chance of getting anywhere anytime soon.

“I don’t think I would hold my breath for that one,” Stern said, adding, “It’s so typical of legislators holding everyone up to standards except themselves.”

Former Vice President Dick Cheney (Official White House Photo)

Even if he doesn’t raise a dime from his political allies, Dick Cheney is well positioned to continue speaking out against the Obama administration’s national security agenda, according to the former vice president’s 2009 financial records.

Illustration by: Matt Mahurin

Cheney filed his final financial disclosure form as a public official, known as his termination filing, with the Office of Government Ethics on Feb. 18, 2009, covering assets the ex-vice president possessed from Jan. 1 2008 to Jan. 20, 2009. The filing indicates Cheney is worth between $11 million and $50 million, with stock options held in such companies as Hewlett-Packard, Procter & Gamble, Lockheed-Martin and the oil-services company he ran during the 1990s, Halliburton. Determining Cheney’s precise net worth was not possible, due to the broad ranges in which filers can list the value of their assets.

TWI acquired the filing and is making it available here. “Here’s a guy who’s pretty well off,” said Bill Allison, a senior fellow at the Sunlight Foundation, an open-government advocacy organization. “This is not someone who by any means is poor or likely to go on the dole any time soon.”

During the span of Cheney’s vice presidency, he did not cash those stock options, meeting requirements for government service, assigning after-tax proceeds “irrevocably… to charity.” It appears that Cheney’s worth dipped from his previous year’s filing, in which he claimed assets worth between about $21 million and $99 million. Real estate previously claimed by Cheney in McLean, Va. — reported in his 2008 filing as valued at as much as $5 million — does not appear in the 2009 filing. The value of his 48,000 Halliburton shares, vested at $19.75 per share, are now filed as being worthless. On Cheney’s previous filing in 2008, he listed the value of those stock options between $1 million and $5 million. As of 11 a.m. on May 20, Halliburton shares traded for $23.09 per share.

The vagueness highlights a problem with the financial disclosure system, Allison said. At the time of Cheney’s filing, the intrinsic value of the stock “may have been zero,” but the form makes it difficult to evaluate precisely what the claim is intended to mean. “The idea of public disclosure is that the average citizen can understand whether a member of Congress or executive branch official has a conflict of interest, but these are not written in plain English,” he explained.

The filing also lists the value of gifts Cheney received during his final year in office. The Lucchese Boot Company of Hendersonville, Tenn. and the Oak Ridge Boys, a country band, jointly provided the former vice president with $631 worth of black cherry goat leather boots and three CDs, appraised at $631. His senior staff purchased the “Vice President’s Cabinet Chair” as a gift for him, valued at $1,190. Gordon England, who served as deputy secretary of defense in the Bush administration, gave Cheney, an avid fisherman, a $2,075 handmade split cane fly rod and matching wading staff. Former Treasury Secretary Nicholas Brady gifted him a Remington 12-gauge automatic shotgun worth $999. Members of the Boston Red Sox signed a baseball for Cheney, estimated at $3,500, after winning the 2007 World Series.

Cheney currently works out of an office in McLean, Va., provided by the government for six months to former presidents and vice presidents as they transition out of office. A spokeswoman for Cheney’s transition office did not reply to emailed questions about Cheney’s finances and post-transition plans for public life, including whether he anticipates raising money through speeches or other public appearances.

Since leaving office, Cheney has made a series of high-profile media appearances, granting interviews to CBS News and Politico, accusing the Obama administration of jeopardizing national security by planning to close the Guantanamo Bay detention facility and renouncing the Bush administration’s torture policies. Cheney claimed to Politico that Obama officials were “more concerned about reading the rights to an Al Qaeda terrorist than they are with protecting the United States against people who are absolutely committed to do anything they can to kill Americans.” Obama political adviser David Axelrod replied to CNN, “It’s a little incredible to me that he would argue somehow that what we’re doing in forging and international alliance to finally pursue a strategy to defeat and dismantle al Qaeda in Afghanistan is going to make us less safe.”

Additionally, Cheney called on the Obama administration to declassify CIA memoranda that he contends vindicates the proposition that torture resulted in valuable intelligence. The CIA rejected the request on the grounds that the memoranda are the subject of ongoing litigation, and indicated that it might release the memoranda in the future alongside other documents that critics of the torture program contend cast doubt on the intelligence value of torture.

Allison pointed to the frequency of government officials “cashing in on their public” service by “addressing corporate groups, making speeches, or consulting,” though it was too early to see whether Cheney planned on going that route. “He certainly doesn’t have to,” Allison added. “He could become a freelance commentator on Fox News. He appears to be well set for the rest of his life.”

Cheney is scheduled to speak before the American Enterprise Institute, a sympathetic conservative think tank, on the subject of national security Thursday morning.

Research assistance provided by Aaron Wiener.