In January 2020, the U.S. public was largely unaware of the threat posed by the virus spreading in China, but health officials were on high alert and girding for a crisis.
A deputy to top health official Anthony Fauci reported 10 sales of mutual funds and stocks totaling between $157,000 and $480,000 that month. Collectively, officials at another health agency, Health and Human Services, reported 60% more sales of stocks and funds in January than the average over the previous 12 months, driven by a handful of particularly active traders.
By March, agencies across the government were working on wide-reaching measures to prop the economy and markets. Then-Transportation Secretary Elaine Chao purchased more than $600,000 in two stock funds while her agency was involved in the pandemic response and her husband, Republican Sen. Mitch McConnell, was leading negotiations over a giant, market-boosting stimulus bill.
And as the government was devising a loan package aimed specifically at helping companies including Boeing Co. and General Electric Co., a Treasury Department official involved in administering the aid acquired shares of both companies.
Federal officials owned millions of dollars of stock in industries most affected by the pandemic and the government’s response. About 240 officials at health agencies and at the Pentagon, a key player in the vaccine rollout, reported owning a total of between $9 million and $28 million in stocks of drug, manufacturing and biotechnology companies that won federal contracts related to Covid-19 in 2020 and 2021, the Journal’s analysis found.
Nearly 400 officials across 50 agencies reported owning stocks in airline, resort, hotel, restaurant and cruise companies in early 2020, the review found.
By March, every major agency was drawn into the pandemic response. That month was the most active for trading by officials across the federal government, including at HHS, in the Journal’s analysis of financial disclosure forms for about 12,000 officials spanning 2016 to 2021. Federal officials reported more than 11,600 trades that month, 44% more than in any other month in the analysis.
The health agencies didn’t respond to requests for comment. A Pentagon spokeswoman said most defense personnel don’t work on matters affecting large defense contractors or affecting the finances of private companies, and said the department is “committed to preventing conflicts of interest.”
Senior federal officials are required to disclose their financial assets and transactions and those of their spouses and dependent children in annual reports.
Federal employees are barred from working on matters in which they have a significant financial stake, from trading on nonpublic information learned on the job and from taking any official action that creates an appearance of a conflict of interest.
Agency ethics officials rarely have a complete picture of what employees are working on or privy to, especially during a fast-moving, governmentwide mobilization in response to a national emergency.
Most agencies’ ethics rules focus on what kinds of stocks officials can trade, not when they can trade. And there are no restrictions on federal officials’ investing in diversified mutual funds, which were more volatile than usual early in the pandemic. Ethics officials certified that the employees identified by the Journal were in compliance with these rules.
Three days into January 2020, top U.S. health officials were alerted to an unexplained virus sickening people in China.
By late January, Centers for Disease Control and Prevention leaders were rushing to develop accurate tests, National Institutes of Health officials were taking the first steps toward developing a vaccine, and the Food and Drug Administration was racing to facilitate prevention and treatment options for the novel coronavirus.
On Jan. 24, four days after the CDC publicly reported the first confirmed U.S. Covid-19 infection, Hugh Auchincloss, principal deputy director at the NIH’s National Institute of Allergy and Infectious Diseases, summed up the state of his agency in an email: “New coronavirus all the time.”
That same day, while the stock market remained lofty, Dr. Auchincloss reported selling $15,001 to $50,000 of a stock mutual fund. Days later he sold two more mutual funds and a stock, Chevron Corp., according to his financial disclosures, which give wide dollar ranges. That was just the beginning.
Dr. Auchincloss was invited to a Jan. 29 meeting of an NIH working group called the International Clinical Research Subcommittee. The top agenda item was “Wuhan coronavirus—plans for a response,” according to emails released in response to public-records requests.
On the last day of January, an email sent to Dr. Auchincloss and his boss, Dr. Fauci, signaled the severity of the threat. Public Health Service officers had been told they could be deployed, a health official wrote, and could assist with “quarantine efforts.”
Dr. Auchincloss disclosed six sales of mutual funds that day, totaling between $111,006 and $315,000 in value.
His January sales amounted to the largest number of transactions he had reported for a single month since 2018, according to his financial disclosures.
Each holding he sold fell sharply in the market downturn that soon followed, as the public and investors started paying attention to the threat posed by Covid-19.
Dr. Auchincloss, who retained some other holdings, didn’t respond to requests for comment. The National Institute of Allergy and Infectious Diseases declined to make him available for an interview.
The agency said that financial disclosure reports are routinely reviewed by NIH ethics officials to ensure compliance with reporting requirements and resolve potential conflicts of interest. It declined to say whether Dr. Auchincloss made the trades himself or had a managed account.
“As a matter of employee privacy, we will not disclose the additional information requested because it is beyond the public financial disclosure reporting requirements,” the agency said.
Among officials involved in the CDC’s early pandemic response was Stephen Redd, a veteran epidemiologist serving as deputy director for Public Health Service and Implementation Science at the agency. His role involved collecting information about the state of the virus and the federal response in order to brief lawmakers.
The CDC had a clear view of the virus’s threat by the end of January, Dr. Redd later told a student interviewer in Atlanta. “It was easy to see it was going to be a really big problem,” he said.
Dr. Redd disclosed sales of between $95,004 and $250,000 in stocks and bonds in January. He reported the sale in February of $100,001 to $250,000 of bonds, along with purchases of between $2,002 and $30,000 of short-term bond funds, a low-risk investment.
Dr. Redd said he had no advance knowledge of these trades, which he said were in his wife’s retirement account and made by a financial adviser. He said he didn’t learn of them until that summer, although he was required by law to report any trades made in his or his wife’s accounts within 30 days.
He acknowledged that federal officials are “responsible for knowing” about their financial transactions. He said neither he nor his wife knew why the adviser made the trades.