Right before he was put in charge of a powerful Senate subcommittee with jurisdiction over the U.S. Navy, Sen. David Perdue (R-GA) began buying up stock in a company that made submarine parts. And once he began work on a bill that ultimately directed additional Navy funding for one of the firm’s specialized products, Perdue sold off the stock, earning him tens of thousands of dollars in profits.
In January 2019, Perdue was named as the chairman of the Senate Armed Services Subcommittee on Seapower. It was good home-state politics for Perdue: Georgia is home to one of the most important Naval facilities on the East Coast, the Kings Bay Naval Submarine Base. And his appointment was seen as a win for the submarine segment of the Navy, with trade publications calling it a “coup” for submariners.
But in the month before he took over the job, Perdue did something unusual: he acquired up to $190,000 worth of stock in BWX Technologies, a company he had never invested in before. The Virginia-based firm had lucrative contracts with the U.S. Navy to develop high-tech components for its fleet of nuclear submarines—and it was looking to expand that business when lawmakers took on the 2019 version of the sweeping annual legislation that sets funding benchmarks for the U.S. military, called the National Defense Authorization Act.
Perdue would have a key role in shaping the NDAA as Seapower chairman, and later as one of the few lawmakers hand-picked by party leadership to hammer out the final version of the bill between the House and Senate. By the time the bill passed the Senate in June, Perdue touted several wins—one of which was securing $4.7 billion for Virginia-class submarines. As it happens, BWX is one of two to three vendors with Pentagon contracts to design and make key parts for Virginia-class submarines, including nuclear reactors that power them and the systems that launch missiles from the submarines.
From February to July, as he was shaping the defense bill and working for that submarine funding, Perdue reported selling off all his shares of BWX—reaping a healthy profit in the process. The senator’s final financial disclosure form for the year 2019 reported earnings of $15,000 to $50,000 in his trading of BWX. Due to the way congressional financial disclosures are structured—they ask lawmakers to classify the value of their assets in broad categories, not specific amounts—it is not possible to know the exact dollar value of Perdue’s profits, or that of his purchases and sales of stock. But the company’s stock price also rose from the time Perdue first bought, in December and January, through the six-month window during which he sold off the shares.
Scott Amey, the general counsel of the Project on Government Oversight, a nonpartisan good-government advocacy group, said it’s concerning that a lawmaker like Perdue would invest in a defense stock out of the thousands of stocks available, given his specific responsibilities on the Armed Services Committee.
“Members have inside information about our national security and defense spending, and personally benefiting from that information should be banned,” Amey said.
In response to inquiries from The Daily Beast about this activity, Perdue’s office referenced past scrutiny of the senator’s stock trading, insisting that he does not have anything to do with his investment portfolio.
“This has been asked and answered—Senator Perdue doesn’t manage his trades, they are handled by outside financial advisors without his prior input or approval,” said a Perdue spokesperson. “No amount of lies from liberal media outlets or Democratic political groups will change that fact.” Perdue is defending his seat in a runoff election set for January 5, which will help decide control of the Senate.
Perdue’s investment in BWX is not the first time the senator, one of the most active stock traders in Congress and one of its wealthiest members, has engaged in conspicuously timed trading.
In 2017, the Georgia Republican purchased stakes in an Atlanta-based prepaid debit card provider called FirstData weeks after he pushed to overturn federal regulations affecting the sector, The Daily Beast reported in September. Through 2019, Perdue reported buying and selling shares in FirstData around key moments affecting the company’s value. His office denied that he acted improperly, calling any allegations to that effect “categorically false.”
To outside experts, the BWX trading activity is just another example—albeit from the same politician—to implement much stricter rules around lawmakers’ stock activity. A 2012 law called the STOCK Act prevents members from engaging in financial activity with any nonpublic knowledge they receive in their official capacities. While it was hailed as a breakthrough for good government, it’s proven so difficult to prosecute anyone for violations under the law that some critics have called it unenforceable.
Kedric Payne, who analyzes stock trades at the Campaign Legal Center, a nonpartisan money-in-politics advocacy group, said Perdue’s example is the very reason why many lawmakers avoid trading individual stocks.
“It is nearly impossible to make decisions affecting an industry and then receive a personal financial benefit without appearing to have a conflict of interest,” said Payne. “Even if officials rely on financial advisors to make trading decisions on their behalf, the perception of conflicts of interest remains because the public does not know if there are winks and nods prompting the trades.”
Though Perdue’s office has maintained that a third-party investment adviser carries out his trades, the senator has rejected the use of a blind trust for his assets, which would put to bed any questions about his potential influence over trades.
It’s not uncommon for lawmakers to own stock in companies that could be affected by their policymaking actions—the practice is not prohibited, so long as lawmakers are not trading on nonpublic information. But Perdue’s activity is unusual in how his leadership of a very niche subcommittee lined up with his investment in a company squarely within that niche—just as work began on the federal legislation most important to that company’s bottom line. BWX certainly thought so: it spent $1 million lobbying Congress over the NDAA in 2019, and after it passed, company brass called the legislation proof of “positive traction” for its programs during an August earnings call.
At the very least, Perdue’s trades create the appearance of a conflict of interest, ethics experts say, and leave broader questions about whether he was profiting off his legislative activity.
“The conflict of interest situation is heightened when the member of Congress sits on a particular committee that is so pervasively affecting the company whose stock is in question,” said Donna Nagy, a law professor at Indiana University who studies lawmaker stock trading.
“I think that the question raised here—and we don't know the answer, is did personal stock holdings influence his legislative activity?” asked Nagy. “We’re left with a series of questions… we shouldn’t, as members of the public, be left to ask these questions about elected officials.”
Some of Perdue’s colleagues have come under scrutiny for similar reasons—and adjusted their behavior because of it. In December 2018, The Daily Beast reported that the Senate Armed Services Committee chairman, Sen. Jim Inhofe (R-OK), had purchased up to $100,000 of stock in the defense contractor Raytheon after lobbying the Trump administration to increase military spending. After The Daily Beast inquired with Inhofe’s office about the trades, the senator directed his investment adviser to avoid investing in the defense industry going forward.
Perdue began reporting purchases in BWX before the Inhofe news broke—and continued to purchase shares after, including on Dec. 13, 2018, the day that Inhofe’s staff distributed playing-card size statements to Capitol Hill reporters saying he’d told his adviser to swear off defense stocks.
By that time, Perdue was in the mix for the chairmanship of the Seapower subcommittee. With the 115th Congress ending, lawmakers were jockeying ahead of the committee shakeups that typically come with a new legislative session. The month before, the previous chairman of the subcommittee, Sen. Roger Wicker (R-MS), was signalling his intent to take over the gavel of the Senate Commerce Committee, which would have freed up his slot at the head of the Seapower panel.
It’s unclear when Perdue would have known for sure that the gavel was his, but on January 19, 2019, he was announced as the next chairman. In the six weeks preceding that announcement, Perdue reported in his disclosure forms purchasing 18 shares of BWX Technologies, ranging from $32,000 to $305,000. At the time, Perdue’s move was being reported by the defense trade press as a win for the submarine sector, given that his House counterpart, Rep. Joe Courtney (D-CT), represents the largest sub base on the Eastern Seaboard.
In statements on the announcement, Perdue said his priorities would center on building up the country’s military in the face of threats from China, Russia, Iran, and North Korea. “A robust naval fleet is critical to deter aggression worldwide, project power, and support our allies,” said Perdue in January 2019.
Over the coming months, Perdue would participate in or chair several committee hearings related to the Navy’s budget and the NDAA, as the $738 billion defense budget bill came together. The Pentagon, along with dedicated submarine advocates like Courtney, had long been pushing for funding for the Navy to expand construction of Virginia-class submarines.
On May 23, Perdue’s subcommittee approved its segment of the Senate’s version of the defense spending bill, with Congress ultimately securing $1.5 billion more than the administration had requested to build an additional boat. For that boat, the legislation was also written to require the use of modernized “Virginia payload modules,” the mechanism through which missiles are launched from the submarines. BWX Technologies designed this system and was awarded a $35 million contract from the Pentagon in 2016 to advance that work.
In a statement following the NDAA’s passage in the full Senate on June 27, Perdue claimed a number of Navy-related wins in the process—including $4.7 billion for the Virginia-class submarines and requiring the use of Virginia payload modules. Perdue reported selling $1,000 to $15,000 in BWX stock on that day, according to his financial disclosure forms.
While the NDAA was being drafted, Perdue began selling off his shares of BWX, starting on February 26. Through July 9, he reported 21 sales, earning anywhere from $49,000 to $385,000. The company’s stock price rose from when Perdue first bought stakes to when he began selling them off. In December, he purchased shares for as low as $35.91 a piece. By July, they were trading at $51.23 per share.
It’s unclear if the $4.7 billion set aside in the NDAA for a Navy program that benefits BWX was the central reason why share prices jumped. But it certainly helped. In an August earnings call, the company said the Senate version of the NDAA continued to “reflect positive traction” for their programs.
And Perdue could claim several victories of his own, unrelated to his finances. By helping steer more money for these projects, he may have padded his profile as a national security hawk and strengthened his bona fides as an advocate for submarines in a state where that sector of the military is important.
But the fact that there’s even an appearance that Perdue benefited financially from the legislative process he was involved in must be considered alongside those political considerations, too, experts said.
“A lawmaker can hold on to stock or hold on to the public's trust,” said CLC’s Payne, “but it is hard to do both.”
