Patterico's Pontifications


Equifax Executives Sold Stock Worth Over $1 Million Before Announcement of Giant Data Breach

Filed under: General — Patterico @ 8:50 pm

You may have heard about the Equifax breach in which hackers got access to Social Security numbers of up to 143 million people — probably including you and me. Looks like some Equifax executives may have profited (or at least avoided losses) on the news:

Three Equifax Inc. senior executives sold shares worth almost $1.8 million in the days after the company discovered a security breach that may have compromised information on about 143 million U.S. consumers.

The trio had not yet been informed of the incident, the company said.

The credit-reporting service said late Thursday in a statement that it discovered the intrusion on July 29. Regulatory filings show that three days later, Chief Financial Officer John Gamble sold shares worth $946,374 and Joseph Loughran, president of U.S. information solutions, exercised options to dispose of stock worth $584,099. Rodolfo Ploder, president of workforce solutions, sold $250,458 of stock on Aug. 2. None of the filings lists the transactions as being part of 10b5-1 scheduled trading plans.

You probably will not be surprised to learn that the stock plummeted today on the announcement. Had these executives held on to the stock, they would have lost a lot of money. But instead, knowing about the breach, they sold the stock before the breach was announced.

It sounds outrageous, but the company claims that the sales represented “a small percentage of their Equifax shares.” Different people define “small” differently. I have a feeling the SEC will be taking a close look at this. If there were hijinks, someone might be going to prison. (Then again, maybe these dudes are members at one of Trump’s golf clubs and will skate. You never know!)

It is an interesting question whether insider trading should be illegal. The fact that we may recoil at it does not mean it is necessarily bad for society. And there are rational arguments that suggest that insider trading is a good thing, because it helps spread information. As economist Bob Murphy says:

In a nutshell, insider trading is beneficial because it moves market prices closer to where they ought to be. Those profiting from “inside knowledge” actually share that knowledge with the rest of the world through their buying and selling.

Murphy argues that if you parse out who actually loses when insider trading occurs, it’s not the public at large, but just other investors who might have done better through dumb luck. Meanwhile, when insiders profit from their greater knowledge, that knowledge is spread, to the benefit of the public.

Consider these facts from the above story: the company discovered the breach on July 29 — and we are just hearing about it today, on September 7. Was there a cover-up due to embarrassment, or a desire to minimize the company’s damages, to the detriment of the public? Perhaps. On the other hand, there might have been good law-enforcement related reasons for the delay:

The Atlanta-based company declined to comment on that delay or anything else beyond its published statement. It’s not unusual for U.S. authorities to ask a company hit in a major hack to delay public notice so that investigators can pursue the perpetrators.

And yet, that is cold comfort to anyone who is harmed by the breach, yet could have protected themselves over the last month. Perhaps allowing insider trading could have helped communicate news of the breach faster, even if the company — for legitimate or illegitimate reasons — kept the knowledge of the breach closely guarded.

Since I am not a securities law expert, I am also puzzled by exactly what it means to profit from insider knowledge, and where the line is drawn. If you sell your shares before announcing the breach, you’re probably profiting from the insider knowledge. But what if you set up one computer (or even browser tab) to effect a sale of stock, and set up another computer (or browser tab) to send a press release about the breach? Either can be accomplished by the push of a button. If you press the buttons in rapid succession — but press the button to send the press release first — have you profited from the insider information? Probably. So how long do you have to wait?

There may be settled answers to these questions. But I don’t know what they are — and if there are, chances are that the rules don’t make a whole lot of sense.

All this theoretical talk aside, I still kinda want to see these executives suspended above a vat of boiling oil by a sturdy cord wrapped firmly around their testicles.

Would that benefit society? Maybe not. But those of us who have almost certainly had their personal information stolen might consider it a very worthwhile project.

[Cross-posted at RedState and The Jury Talks Back.]

When Trump Makes Chuck Schumer and Nancy Pelosi Happy, That Is a Bad Thing

Filed under: General — Patterico @ 9:30 am

Over the last 18 months or so, a certain strain of “conservative” has arisen: the dyed-in-the-wool Trumper. For this person, Donald Trump is to be praised at all times. Anything Donald Trump does is by definition a genius move. If he sticks it to the GOP establishment, so much the better!

And this is the end point of their logic:

Joe Cunningham summed things up well with this headline: The Democrats Got What They Wanted, But It’s Cool Because Trump Really Stuck It To Paul Ryan. But let’s take it further than this particular debt-ceiling incident. Guess what would stick it to Paul Ryan even more? Doing what Chuck Schumer and Nancy Pelosi want again! And again! Give them single-payer! Expand entitlements! Stick it to Ryan and McConnell good!

Where does it end? And what would Trump have to do — what concessions to Democrats would he have to make — before the unrelenting praise for Trump’s every action stops?

I have seen people defend this by saying: hey, Reagan made deals with Tip O’Neill. (Except Tip O’Neill’s Democrats controlled the House — and the greatest failure of Reagan’s presidency was his inability to control Congress’s runaway spending, beginning the deficit ballooning that still haunts us today.) I have seen people defend it by saying that debt ceiling negotiations are always phony and we never get anything, so why bother fighting it at all? (Not a terrible argument —
but in 2011 we got sequestration, which wasn’t great but also wasn’t nothing.)

The point isn’t that we were going to get an immediate cut in spending. Democrats were going to play politics when there was a must-pass relief bill for Harvey. But the way Trump went about this killed any chance of ever extracting spending concessions of the sort the GOP actually did get in 2011 in return for a debt-ceiling hike. No such deal will be possible again, ever, under Trump. Because he literally said the words: “We agreed to a three-month extension on debt ceiling, which they consider to be sacred — very important — always we’ll agree on debt ceiling automatically because of the importance of it.” I believe “Cave Immediately While Asking for Nothing in Return” is the title of the first chapter in The Art of the Deal, isn’t it?

Trumpers’ over-the-top praise for Trump now extends to praising his playing “hard ball” by giving Chuck and Nancy what they wanted:

Topping off the nuttiness was Lou Dobbs’s insane rant, linked last night by Caleb Howe:

Watch it all, to see what it looks like when someone loses their mind. Dobbs says Trump “took RINO Ryan to the woodshed” by . . . giving Schumer and Pelosi exactly what they asked for. Meanwhile, Dobbs ladled praise on Pelosi and Schumer, saying “they’ve calmed themselves” and have been “far more conciliatory in their rhetoric” in recent weeks.


Schumer, August 26:

“As millions of people in TX and LA are prepping for the Hurricane, the President is using the cover of the storm to pardon a man who violated a court’s order to stop discriminating against Latinos and Ban courageous transgender men and women from serving in our nation’s Armed Forces,” Schumer posted in a series of tweets.

“Then he ran to Camp David. The only reason to do these right now is to use the cover of Hurricane Harvey to avoid scrutiny. So sad, so weak.”

Pelosi, three days ago:

House Minority Leader Nancy Pelosi (D-Calif.) on Monday blasted President Trump’s expected decision to end the Deferred Action for Childhood Arrivals (DACA) program, calling it a “cruel act of political cowardice.”

These are the people Dobbs says have “calmed themselves.” The people who have “far more conciliatory in their rhetoric” in recent weeks.

No, really. This is where we are: we must praise Trump even when he hands Democrat leaders everything they want over the objections of GOP leaders. We must vilify the GOP leadership even if it means praising Democrats for an alleged restraint and sobriety that they have never actually shown and never will.

As I said last night, this can only end with Trump becoming a Democrat and taking 1/3 of the Republican party with him.

Man. That would really stick to Paul Ryan and Mitch McConnell!

[Cross-posted at RedState and The Jury Talks Back.]

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