Then and Now: Government Official Buys Stock in a Company He (or She) Regulates!

Congratulations, Politico—government officials buying stock in companies they regulate is a good story and there should be consequences.

At the Washingtonian we once thought we had one as good as the Brenda Fitzgerald story. The government official we targeted was Russell Train, head of the Environment Protection Agency. Before helping to start the EPA, Train had headed the Conservation Foundation and then had become one of the government’s environmental leaders. A graduate of the exclusive St. Albans School in DC, Princeton University, and Columbia University Law School, he was a Washington insider and a certified good guy environmentalist.

In December 1973, I found myself looking at a piece of paper that was a 10/23/73 stock transaction at American Security Bank in Washington, where I banked. I had no business seeing it but there it was on paper, available to take back to the magazine and be published:

Aileen B. Train, wife of Russell Train, the head of the EPA, had bought 200 shares of Exxon Corporation, the big oil company, for $19,200.

She was buying stock in a company that her husband could do all kinds of things to help or not hurt.

In the Capital Comment section in the February 1974 Washingtonian, I ran a picture of the stock transaction confirmation with the headline “How to Survive the Energy Crisis—And Maybe Profit From It.”

Then this copy: “The energy crisis is a challenge—the rising gasoline prices, the cutbacks in travel. But informed investors often find another sort of challenge in crises. For instance, on October 27, 1973, a Washington, D.C., bank purchased $19,200 worth of Exxon stock for Mrs. Aileen Train. Exxon, until recently called Standard Oil of New Jersey, is the biggest energy company in the world. And Mrs. Aileen Train is the wife of Russell E. Train, Administrator of the Environmental Protection Agency.”

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Some journalistic background: I had been at the Washingtonian for four years, taking over a monthly magazine that couldn’t get its paid circulation above 20,000 and was losing money.

I had seen what New York magazine was doing with service stories and what Philadelphia magazine was doing with investigative pieces. The editorial challenge: It was a lot easier coming up with service pieces about where to dine out than doing good investigative pieces. So the wife of the head of the EPA buying Exxon stock did look like a story that would help the magazine get some attention and readers.

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Ten days after the February issue was published, Russell Train sent this letter to the Washingtonian:

“In your February issue, you reproduced a purchase order for securities in the name of my wife, Aileen B. Train. For your information, I enclose a copy of a letter, dated January 30, 1974, to Mrs. Train from John W., Davidge, Jr., setting forth the facts of the transaction in question and pointing out that the particular purchase was intended to be made for a “blind trust” set up by Mrs. Train on October 18, 1973, of which Mr. Davidge is trustee. Both Mrs. Train and I had put all personal securities in separate blind trusts on that date.  As I am sure you know, such blind trusts have been a traditional means by which public officials and their immediate families can insulate themselves from possible conflicts of interest.”

Train also sent us a copy of a letter that Davidge, the investment adviser, had sent to his wife:

I am writing this letter to clarify the record of the confirmation of the purchase of 200 shares of Exxon common stock for Aileen B. Train, a copy of which appeared in the February 1974 edition of the Washingtonian. The facts are as follows:

On October 18, 1973 you created a blind trust and appointed me, John W. Davidge Jr., as trustee. The trust instrument granted me sole discretion as to changes in the trust and instructed me not to disclose to you in any way information with regard to assets in the trust.

On October 23, 1973 I arranged for a custody account for the trust with the American Security and Trust Company. This was accepted by the bank on October 24, 1973. Special provisions of the custody account state: ‘No information concerning this this account is to be given to Mrs. Train other than advices of the amount of the monthly distributions.

On October 26, 1973 I, as trustee, arranged through a broker for the purchase of 200 shares of Exxon common for the trust. I, of course, in compliance with the trust instrument, did this without your knowledge or approval. The notice was erroneously recorded as as a purchase in a custody account you had formally maintained with the American Security & Trust Company prior to creation of the trust. It is understandable that the bank had not been able to change its records in the two days that elapsed after the time that the assets were transferred from your personal account to the blind trust.”

Now that, contrary to the intent of the blind trust, you have knowledge of the purchase of the 200 shares of Exxon common, I am arranging for their sale.”

I feel that the Washingtonian article is a most unfortunate occurrence. If you choose to make this letter public, I feel sure that the above facts with be conclusive evidence that neither you nor Russell had any prior knowledge of the Exxon purchase.

Sincerely, John W. Davidge Jr.

These letters were published in the March 1974 issue and, along with some background on the situation, we told readers we’d do more reporting on the story for the next issue.

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In the April 1974 issue there was a wrap-up of what was published in the February and March issues and then these paragraphs:

“The Washingtonian wrote to Mr. Train asking him when he and his wife learned of the Exxon stock purchase. We also asked if we could discuss with him his stock transactions from 1969 to 1973, when he was serving as Under Secretary of the Interior and as head of the White House Council on Environmental Quality, and his reasons for not setting up the blind trust until October 1973. After repeated phone calls, Mr. Train finally said he would not answer any of our questions.”

What’s a small magazine to do? I called Les Whitten, who worked with Jack Anderson, writer of the then most widely read and influential column in journalism. (Anderson’s staff also included young journalists such as Brit Hume, Jim Grady, and Howie Kurtz.)

From the April 1974 Washingtonian:

“Columnist Jack Anderson’s staff, following up on our stories, called Mr. Train and told him they had evidence that the Exxon stock purchase receipt had, in fact, been sent to the Train home in October 1973. [The proof of that was that I knew that’s where my source had found the stock purchase receipt in December.] Mr. Train admitted that this was true, and said that he and his wife kept the Exxon stock, reasoning that it would not be a conflict with his post as Administrator of the Environmental Protection Agency because he would not know when his blind trust sold the stock. He said he sold the Exxon stock after the Washingtonian article appeared.”

Thus ended a try at investigative journalism that created some talk but had no real impact. Russell Train continued to run the EPA, leaving in 1977 to run the World Wildlife Federation.

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What could Brenda Fitzgerald and her lawyers have learned from how Russell and Aileen Train successfully defused their stock purchase problem?

Russell Train did have this advantage: Unlike Ms. Fitzgerald, he had an established good reputation in Washington. And the nation’s capital does like people it knows and who know how the game is played. Washingtonians are skeptical of those who come here thinking they can run the country better than we can.

And it didn’t help Ms. Fitzgerald that Washington now is a very different city from what it was in 1974. It’s now dominated by the Democratic party—Donald Trump got 4 percent of the DC vote in the 2016 election.

Politics is less civil and more partisan. In 1974, there was more of a you’re-innocent-until-proven-guilty attitude versus today’s you’re guilty until you can prove otherwise, especially if you’re a Trump Republican.

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From Russell Train’s New York Times obituary in 2012:

“Russell Errol Train was born in Jamestown, R.I., on June 4, 1920, and raised in Washington, the youngest of three boys of Rear Adm. Charles Russell Train and the former Errol Cuthbert. His paternal great-grandfather had been a congressman during the Civil War. An ancestor, John Trayne, had emigrated from Scotland to the Massachusetts Bay Colony in 1635.

Mr. Train went to the Potomac School and then St. Albans (learning to hunt on family vacations in the Adirondacks). He graduated from Princeton in 1941 and Columbia University Law School in 1948.

A man of exquisite manners, he was trained in the ways of Washington from an early age. His father had an office at the White House, where he served as President Herbert Hoover’s Naval aide.”

From Aileen Train’s death notice in the Washington Post in 2017:

“AILEEN BOWDOIN TRAIN 1925 ~ 2017 Aileen Bowdoin Train, 92, died peacefully at her home in Florida on July 7, 2017. Her husband, life-long partner, and environmental pioneer, Russell E. Train, passed away on September 17. 2012. Inspired by a safari in Kenya in 1956 with her husband, Aileen became a committed force for conservation and the protection of wildlife and wild places around the world.”