Does the SEC Care Whether Hegseth Is Killing Iranians To Get Rich?

Source: The New Republic · Bias: Left

Summary

Last month, I considered whether Defense Secretary Pete Hegseth used what he knew about the imminence of the Iran war to expand his stock portfolio with a little blood money (“Is Pete Hegseth Killing Iranians To Get Rich?”). That was the thrust of a shocking Financial Times report, based on three anonymous sources, that said Hegseth’s Morgan Stanley broker approached Black Rock in February about making a “multimillion-dollar investment in the asset manager’s Defense Industrials Active ETF.” An ETF, or Exchange-Traded Fund, is a financial instrument comprised of multiple stocks and/or bonds that are bundled together and sold as a single stock. According to the FT, Hegseth’s broker’s request was flagged internally at Black Rock, presumably because it so obviously threatened to trigger an insider-trading investigation. (I’m guessing the FT’s three sources all worked at Black Rock.) Ultimately, Black Rock denied the request on the technicality that its Defense Industrials Active ETF was not yet available to Morgan Stanley clients. Whether Hegseth found some other way to profit from the Iran war remains an open question. (A Pentagon spokesperson called the FT report “entirely false and fabricated” and denied that Hegseth or any Hegseth representative approached Black Rock.)This is a matter that demands immediate investigation by the Securities and Exchange Commission, and this morning Senator Elizabeth Warren, Democrat of Massachusetts, sent SEC chair Paul Atkins a letter requesting him to do just that.It says a lot about our current scandal-rich environment that the FT story hasn’t dominated the news these past three weeks. But congressional Democrats certainly didn’t forget it. The day after the story broke, the House Committee on Government and Oversight Reform’s ranking member, Rep. Robert Garcia of California, and the ranking member of its Subcommittee on Military and Foreign Affairs, Rep. Suhas Subramanyam of Virginia, sent Hegseth a letter instructing him to preserve “all documents, records, and communications” on his financial transactions back to November 1, 2024. Regrettably, no investigation by their committee is likely, because its chair, James Comer of Kentucky, is perhaps the most shamelessly partisan hack in the entire Republican House majority. As I write, Comer is trying to justify Pam Bondi’s evading a committee subpoena in its Jeffrey Epstein investigation despite the fact he previously voted to hold the Clintons in contempt for defying committee subpoenas in the same investigation. Two days after the FT story broke, Senator Elizabeth Warren of Massachusetts and three other Democratic members of the Senate Armed Services Committee pointed out, in a letter to Hegseth, that even in peacetime Hegseth would be prohibited by federal law “from owning any stock in Lockheed Martin, Northrop Grumman, General Dynamics, Huntington Ingalls, Boeing, RTX Corporation, and L3Harris Technologies.” Stakes in all of these companies were bundled into the ETF his broker reportedly tried to buy. It would be illegal for Hegseth to buy a Defense Industrials Active ETF because—duh—these are defense companies, and Hegseth is the Secretary of Defense.In her new letter, Warren observes that failure on the SEC’s part to investigate the FT allegations would undermine “the confidence investors around the world place on the integrity of our markets.” Granted, Hegseth’s broker was not able, the FT reported, to complete the offending insider trade. But securities law, Warren points out, doesn’t just ban securities fraud; it also bans attempted securities fraud. The relevant language is “Whoever knowingly executes, or attempts to execute” [italics mine] the fraud in question. If the FT story is true (and I think probably it is), why would Hegseth do anything so very stupid? If I’m right that the FT’s three sources were all at Black Rock, it shouldn’t be hard for a determined investigator to locate them. Also, if Hegseth’s request was flagged internally at Black Rock, that probably means there’s a paper trail just waiting for some government official to subpoena. Even if Hegseth defied Garcia and tossed all communications with his broker into a bonfire, he’d still be screwed. This is not a difficult investigation. So, I ask again: How could Hegseth be so stupid? One answer is that Hegseth has already given us plenty of reason to believe he’s a few sandwiches short of a picnic. The most hilarious recent example (there are many) was Hegseth’s recitation last week of Scripture that turned out to be a fictional embellishment memorably recited by Samuel L. Jackson before he blows a few yuppie deadbeats’ brains out in the great Quentin Tarantino film Pulp Fiction.

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Does the SEC Care Whether Hegseth Is Killing Iranians To Get Rich?
The New Republic

Does the SEC Care Whether Hegseth Is Killing Iranians To Get Rich?

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Last month, I considered whether Defense Secretary Pete Hegseth used what he knew about the imminence of the Iran war to expand his stock portfolio with a little blood money (“Is Pete Hegseth Killing Iranians To Get Rich?”). That was the thrust of a shocking Financial Times report, based on three anonymous sources, that said Hegseth’s Morgan Stanley broker approached Black Rock in February about making a “multimillion-dollar investment in the asset manager’s Defense Industrials Active ETF.” An ETF, or Exchange-Traded Fund, is a financial instrument comprised of multiple stocks and/or bonds that are bundled together and sold as a single stock. According to the FT, Hegseth’s broker’s request was flagged internally at Black Rock, presumably because it so obviously threatened to trigger an insider-trading investigation. (I’m guessing the FT’s three sources all worked at Black Rock.) Ultimately, Black Rock denied the request on the technicality that its Defense Industrials Active ETF was not yet available to Morgan Stanley clients. Whether Hegseth found some other way to profit from the Iran war remains an open question. (A Pentagon spokesperson called the FT report “entirely false and fabricated” and denied that Hegseth or any Hegseth representative approached Black Rock.)This is a matter that demands immediate investigation by the Securities and Exchange Commission, and this morning Senator Elizabeth Warren, Democrat of Massachusetts, sent SEC chair Paul Atkins a letter requesting him to do just that.It says a lot about our current scandal-rich environment that the FT story hasn’t dominated the news these past three weeks. But congressional Democrats certainly didn’t forget it. The day after the story broke, the House Committee on Government and Oversight Reform’s ranking member, Rep. Robert Garcia of California, and the ranking member of its Subcommittee on Military and Foreign Affairs, Rep. Suhas Subramanyam of Virginia, sent Hegseth a letter instructing him to preserve “all documents, records, and communications” on his financial transactions back to November 1, 2024. Regrettably, no investigation by their committee is likely, because its chair, James Comer of Kentucky, is perhaps the most shamelessly partisan hack in the entire Republican House majority. As I write, Comer is trying to justify Pam Bondi’s evading a committee subpoena in its Jeffrey Epstein investigation despite the fact he previously voted to hold the Clintons in contempt for defying committee subpoenas in the same investigation. Two days after the FT story broke, Senator Elizabeth Warren of Massachusetts and three other Democratic members of the Senate Armed Services Committee pointed out, in a letter to Hegseth, that even in peacetime Hegseth would be prohibited by federal law “from owning any stock in Lockheed Martin, Northrop Grumman, General Dynamics, Huntington Ingalls, Boeing, RTX Corporation, and L3Harris Technologies.” Stakes in all of these companies were bundled into the ETF his broker reportedly tried to buy. It would be illegal for Hegseth to buy a Defense Industrials Active ETF because—duh—these are defense companies, and Hegseth is the Secretary of Defense.In her new letter, Warren observes that failure on the SEC’s part to investigate the FT allegations would undermine “the confidence investors around the world place on the integrity of our markets.” Granted, Hegseth’s broker was not able, the FT reported, to complete the offending insider trade. But securities law, Warren points out, doesn’t just ban securities fraud; it also bans attempted securities fraud. The relevant language is “Whoever knowingly executes, or attempts to execute” [italics mine] the fraud in question. If the FT story is true (and I think probably it is), why would Hegseth do anything so very stupid? If I’m right that the FT’s three sources were all at Black Rock, it shouldn’t be hard for a determined investigator to locate them. Also, if Hegseth’s request was flagged internally at Black Rock, that probably means there’s a paper trail just waiting for some government official to subpoena. Even if Hegseth defied Garcia and tossed all communications with his broker into a bonfire, he’d still be screwed. This is not a difficult investigation. So, I ask again: How could Hegseth be so stupid? One answer is that Hegseth has already given us plenty of reason to believe he’s a few sandwiches short of a picnic. The most hilarious recent example (there are many) was Hegseth’s recitation last week of Scripture that turned out to be a fictional embellishment memorably recited by Samuel L. Jackson before he blows a few yuppie deadbeats’ brains out in the great Quentin Tarantino film Pulp Fiction.

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