Rep. Kelly's Wife May Have Traded on Non-Public Section 232 Information, Ethics Committee Finds
The House Ethics Committee unanimously found that "there is substantial reason to believe" that Rep. Mike Kelly's wife purchased at least $15,000 worth of stock in Cleveland-Cliffs based on non-public information about a Section 232 investigation into the import of laminations for stacked cores for incorporation into transformers, stacked and wound cores for incorporation into transformers, electrical transformers, and transformer regulators. The Kellys live in Butler, Pennsylvania, where about 1,400 people work for the steel company, making electrical steel. The company had repeatedly argued that unless the 25% tariffs on steel were extended to these downstream products, it would have to close the Butler plant.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Victoria Kelly and her husband, R-Pa., did not cooperate with the investigation, and the committee recommended that they, along with former Commerce Secretary Wilbur Ross and Kelly's chief of staff, be subpoenaed as the investigation continues. The report said that if the purchase was made after Victoria learned from her husband that an investigation would be announced, "then Rep. Kelly may have violated House rules, standards of conduct, and federal law."
Attorney Thomas King, who practices in Butler, wrote in response to this investigation, "as we expected, [the Ethics investigation and] subsequent report found no evidence that Rep. Kelly or his wife Victoria acted improperly."
The report said that Kelly actively lobbied the administration to protect the company from these imports (see 2004160053). On April 24, the Commerce Department told Cleveland-Cliffs that it would not cover the lamination and cores as derivative products under the Section 232 tariffs and quotas, and the information was relayed to Kelly's staff that day through a conference call arranged by Cleveland-Cliffs.
The investigation found documents that showed that Ross called Cleveland-Cliffs the next day, a Saturday, and that around noon on April 28, Ross called Cleveland-Cliffs' CEO to tell him that they would soon announce a new Section 232 investigation covering transformer laminations and cores.
"Rep. Kelly’s staff was apprised of these developments on April 28, 2020 by both Cleveland-Cliffs and a senior Commerce Department official," the investigation found. Kelly's chief of staff, Matt Stroia, texted other staff at 8:05 p.m. to tell them that he expected the announcement to come on April 29.
"Because Rep. Kelly, Victoria Kelly, and Matt Stroia refused to cooperate with the Office of the Committee of Ethics’s review, the OCE cannot definitively say what Rep. Kelly and his wife knew about these developments and when they knew them. However, when asked whether Rep. Kelly would have been alerted to these key developments on April 28th as they occurred, [Kelly staff members] both said they believed Rep. Kelly would have been informed by Stroia given their significance to Rep. Kelly personally and to the Butler community."
According to financial disclosures, Victoria Kelly purchased between $15,001 and $50,000 of stock in Cleveland-Cliffs on April 29. On Monday, May 4, the Department of Commerce announced its Section 232 investigation (see 2005040059). It was Victoria Kelly's first individual stock purchase in 11 months, and the only single stock purchased and held between May 2019 and now. She sold her shares on Jan. 11. She bought them for about $4.70 a share, and sold at about $18.11 a share.
When the Pittsburgh Post-Gazette wrote about the timing of the purchase, given that Kelly's office knew about the investigation on April 28, Kelly issued this statement: "At a time when the entire Butler community is rallying to save the AK Steel plant and its 1,400 jobs, Representative Kelly’s wife made a small investment to show her support for the workers and management of this 100-year old bedrock of their hometown, where they both are life-long residents." The report questioned that logic, given that the purchase was not publicized at the time, and was only revealed through mandated quarterly financial reports. Ultimately, although the Commerce Department determined in October that tariffs were warranted, the president never signed an executive order implementing them (see 2107290039).