Staff of The Wall Street Journal

Hidden records show thousands of senior executive branch employees owned shares of companies whose fates were directly affected by their employers’ actions, a Wall Street Journal investigation found

By Rebecca Ballhaus, Brody Mullins, Chad Day, John West, Joe Palazzolo and James V. Grimaldi

Thousands of officials across the government’s executive branch reported owning or trading stocks that stood to rise or fall with decisions their agencies made, a Wall Street Journal investigation has found.

More than 2,600 officials at agencies from the Commerce Department to the Treasury Department, during both Republican and Democratic administrations, disclosed stock investments in companies while those same companies were lobbying their agencies for favorable policies. That amounts to more than one in five senior federal employees across 50 federal agencies reviewed by the Journal.

A top official at the Environmental Protection Agency reported purchases of oil and gas stocks. The Food and Drug Administration improperly let an official own dozens of food and drug stocks on its no-buy list. A Defense Department official bought stock in a defense company five times before it won new business from the Pentagon.

The Journal obtained and analyzed more than 31,000 financial-disclosure forms for about 12,000 senior career employees, political staff and presidential appointees. The review spans 2016 through 2021 and includes data on about 850,000 financial assets and more than 315,000 trades reported in stocks, bonds and funds by the officials, their spouses or dependent children.

The vast majority of the disclosure forms aren’t available online or readily accessible. The review amounts to the most comprehensive analysis of investments held by executive-branch officials, who have wide but largely unseen influence over public policy.

Among The Journal's findings:

• While the government was ramping up scrutiny of big technology companies, more than 1,800 federal officials reported owning or trading at least one of four major tech stocks: Meta Platforms Inc.’s Facebook, Alphabet Inc.’s Google, Apple Inc. and Amazon.com Inc.

• More than five dozen officials at five agencies, including the Federal Trade Commission and the Justice Department, reported trading stock in companies shortly before their departments announced enforcement actions, such as charges and settlements, against those companies.

• More than 200 senior EPA officials, nearly one in three, reported investments in companies that were lobbying the agency. EPA employees and their family members collectively owned between $400,000 and nearly $2 million in shares of oil and gas companies on average each year between 2016 and 2021.

• At the Defense Department, officials in the office of the secretary reported collectively owning between $1.2 million and $3.4 million of stock in aerospace and defense companies on average each year examined by the Journal. Some held stock in Chinese companies while the U.S. was considering blacklisting the companies.

• About 70 federal officials reported using riskier financial techniques such as short selling and options trading, with some individual trades valued at between $5 million and $25 million. In all, the forms revealed more than 90,000 trades of stocks during the six-year period reviewed.

• When financial holdings caused a conflict, the agencies sometimes simply waived the rules. In most instances identified by the Journal, ethics officials certified that the employees had complied with the rules, which have several exemptions that allow officials to hold stock that conflicts with their agency’s work.

Federal agency officials, many of them unknown to the public, wield “immense power and influence over things that impact the day-to-day lives of everyday Americans, such as public health and food safety, diplomatic relations and regulating trade,” said Don Fox, an ethics lawyer and former general counsel at the U.S. agency that oversees conflict-of-interest rules.

He said many of the examples in the Journal analysis “clearly violate the spirit behind the law, which is to maintain the public’s confidence in the integrity of the government.”

Some federal officials use investment advisers who direct their stock trading, but such trades still can create conflicts under the law. “The buck stops with the official,” said Kathleen Clark, a law professor and former ethics lawyer for the Washington, D.C., government. “It’s the official who could benefit or be harmed…. That can occur regardless of who made the trade.”

Investing by federal agency officials has drawn far less public attention than that of lawmakers. Congress has long faced criticism for not prohibiting lawmakers from working on matters in which they have a financial interest. The rules were tightened in 2012 by the Stop Trading on Congressional Knowledge (STOCK) Act, passed following a series of Journal articles on congressional trading abuses.

Journal reporting last year on federal judges, revealing that more than 130 jurists heard cases in which they had a financial interest, led to a law passed this May requiring judges to promptly post online any stock trades they make.

This article launches a Journal series on the financial holdings of senior executive-branch employees and, in some instances, conflicts of interest hidden in their disclosure forms.

U.S. law prohibits federal officials from working on any matters that could affect their personal finances. Additional regulations adopted in 1992 direct federal employees to avoid even an appearance of a conflict of interest.

The 1978 Ethics in Government Act requires senior federal employees above a certain pay level to file annual financial disclosures listing their income, assets and loans. The financial figures are reported in broad dollar ranges.

Most officials’ financial disclosures are public only upon request. The Journal obtained disclosure forms by filing written requests with each federal agency.

Some made it difficult to obtain the forms, and several agencies haven’t turned over all of them. The Department of Homeland Security hasn’t provided any financial records. (See an accompanying article on methodology.)

Under federal regulations, investments of $15,000 or less in individual stocks aren’t considered potential conflicts, nor are holdings of $50,000 or less in mutual funds that focus on a specific industry. The law doesn’t restrict investing in diversified funds.

Some federal officials, especially those at the most senior levels, sell all their individual stocks when they enter the government to avoid the appearance of a conflict.

The Office of Government Ethics, which oversees the conflict-of-interest rules across the executive branch, is “committed to transparency and citizen oversight of government,” said a spokeswoman. She said the agency publishes financial disclosures of the most senior officials on its website, along with instructions for getting disclosures from other agencies.

At the EPA, an official named Michael Molina and his husband owned oil and gas stocks while Mr. Molina was serving as senior adviser to the deputy EPA administrator, according to agency records. Such companies stood to benefit from former President Donald Trump’s pledge to promote energy production by rolling back environmental regulations and speeding up projects.

Mr. Molina’s job gave him a front-row seat to deliberations about environmental regulations relating to energy. He “reviews and coordinates sensitive reports, documents and other materials,” said his job description, provided by the EPA in response to a public-records request. He served as a “personal and confidential representative” of the EPA deputy administrator in communications with the White House and Congress, according to the job description.

In the month he started the job, May 2018, Mr. Molina reported purchases totaling between $16,002 and $65,000 of stock in Cheniere Energy Inc., a leading producer and exporter of liquefied natural gas. He reported adding Cheniere stock five additional times over the next year. At the time, senior EPA officials were encouraging the production of natural gas in the U.S.

The trades were made through a financial adviser in his husband’s account, according to emails and disclosure forms reviewed by the Journal. Mr. Molina was required to enter the trades into the EPA’s electronic-disclosure system within 30 days of receiving notice of the transactions, under the 2012 STOCK Act.

Officials are responsible for ensuring that their holdings don’t conflict with their work, regardless of whether they use a financial adviser. The Journal’s review of disclosures shows that many federal officials tell their financial advisers to avoid investing in certain industries or to shed specific stocks.

In an interview on Sept. 28, Mr. Molina indicated that he didn’t know much about the energy trades. “I can say this on the record: I didn’t even know what Cheniere was until 36 hours ago,” he said.

In February 2019, Mr. Molina was promoted to EPA deputy chief of staff. He attended scores of meetings on environmental issues, reviewed matters for the then-head of the agency, Andrew Wheeler, and was sometimes asked his opinions in meetings, according to records reviewed by the Journal and people familiar with the matter.

In about 2½ years at the EPA, Mr. Molina reported more than 100 trades in energy and mining companies including Duke Energy Corp., NextEra Energy Inc. and BP PLC. About 20 of the transactions were for between $15,001 and $50,000 each, according to Mr. Molina’s disclosures. Those trades also were made for his husband by his financial adviser.

In the month he was promoted, February 2019, his husband made several stock purchases through the adviser in Cheniere and Williams Cos., which builds and operates natural-gas pipelines.

Two months later, Mr. Trump said the EPA would propose new rules to help the gas industry.

After publication of this article, Mr. Molina said in a written statement: “Neither I nor my husband knew about or directed any of these trades. Our financial advisor had complete discretion to trade in the account, and these same trades were made on behalf of a ‘pool’ of several dozen clients—not for us individually.”

Mr. Molina left the EPA in January 2021. An EPA spokeswoman said the agency’s ethics office “counseled Mr. Molina on his ethics and financial disclosure obligations.” EPA officials signed Mr. Molina’s financial-disclosure statement in each year he worked at the agency, an indication they believed he was in compliance with the conflict-of-interest rules.

U.S. law leaves it to individual agencies to decide whether they need rules to beef up the federal conflict-of-interest law. The Federal Energy Regulatory Commission explicitly bars its officials from investing in natural gas, interstate oil pipeline, utility and other energy firms.

The EPA doesn’t have additional agencywide rules. A spokeswoman for the EPA said its officials may invest in energy companies so long as they aren’t working on policies that could affect their investments. Mr. Molina’s boss told ethics officials that he had no influence over public policy matters.

Greg Zacharias was the chief scientist for the Defense Department’s director of operational test and evaluation until last fall. He repeatedly bought stock in a defense contractor in the weeks before the Pentagon announced it would pay the company $1 billion to deliver more F-35 combat jets, while his division was overseeing testing of those planes.

Mr. Zacharias made five purchases of Lockheed Martin Corp. stock, collectively worth $20,700, in August and September 2021, according to figures he provided. On Sept. 24, 2021, the Defense Department said it was buying 16 F-35 jets from Lockheed for the Air Force and Marine Corps. Lockheed shares closed up 1.1% the next trading day. The stock made up a small part of Mr. Zacharias’s portfolio.

Mr. Zacharias’s office had been involved for years in overseeing testing of combat jets, and testing officials regularly met with the Pentagon’s F-35 Joint Program Office and with Lockheed directly, according to former defense officials. Mr. Zacharias, who provided scientific and technical expertise on how to assess the effectiveness of weapons systems, didn’t attend those meetings.

In an interview, Mr. Zacharias said he wasn’t involved in decisions on contracting and had no inside knowledge ahead of the contract, beyond the public information that the Pentagon remained committed to the F-35 program. He acknowledged that his role could have allowed him to access information about specific weapons systems. “I could always walk downstairs and ask them how it’s going. But that really wasn’t an interest of mine,” he said, adding that his focus was emerging technologies.

Mr. Zacharias said he wanted to buy stock in defense contractors, including Lockheed, because of their dominance of the defense market. He said he didn’t pay much attention to the timing of trades, adding: “I’m just the pipe-smoking science guy.”

The Lockheed investments were among more than 50 trades Mr. Zacharias reported in about a half-dozen defense contractors in 2020 and 2021, according to the Journal’s analysis.

“I apologize that things don’t look good on the buy side,” Mr. Zacharias added. Of the trades in defense contractors, he said: “I just decided that would be a good investment at the time.”

He said ethics officials didn’t raise concerns about his trades in Lockheed or any of the other defense contractors he reported investments in, beyond periodically sending a letter reminding him not to take part in contract negotiations involving the companies. He said ethics rules could be “a little tighter.”

A Pentagon spokeswoman said Mr. Zacharias “worked with his supervisor and ethics officials to implement appropriate disqualifications.” She said the department requires supervisors to screen their employees’ disclosures for conflicts in addition to the review conducted by ethics officials. Ethics officials certified that he complied with the law.

Some conflicts of interest stemmed from agencies’ misunderstanding of their own rules.

The FDA prohibits employees, their spouses and their minor children from investing in companies that are “significantly regulated” by the agency. The FDA maintains an online list of the prohibited companies for officials to check.

An FDA official named Malcolm Bertoni disclosed that he and his wife owned stock in about 70 pharmaceutical, diagnostics, medical device and food companies regulated by the agency in 2018 and 2019, including drug giants Pfizer Inc. and Takeda Pharmaceutical Company Ltd. All were on the prohibited list.

Mr. Bertoni, a career executive, ran the FDA’s planning office from 2008 to 2019, researching and analyzing agency programs. Most of the investments he reported were in the range of $1,001 to $15,000, but his 2019 disclosure showed he and his wife owned between $15,001 and $50,000 in each of Allergan PLC, Sanofi SA, Takeda and Zoetis Inc.

Mr. Bertoni’s lawyer, Charles Borden, said Mr. Bertoni and his wife held these stocks despite the bans because they got bad advice from the FDA ethics office.

The stocks were in accounts managed by professionals who had discretion to trade without the knowledge of Mr. Bertoni or his wife, the attorney said. He said that years ago, Mr. Bertoni asked the ethics office how he should treat the accounts and was told they fell into an exception to the rules for mutual funds.

They did not. The ethics office discovered its error in a routine review of Mr. Bertoni’s forms in early 2019, Mr. Borden said. “The FDA’s Office of Ethics and Integrity took full responsibility for the inaccurate guidance given to Mr. Bertoni,” the attorney said in an email.

After considering the tax and retirement-planning consequences of having to sell the stocks, and other personal factors, Mr. Bertoni chose to retire instead, his lawyer said.

An FDA spokesman said Mr. Bertoni was recused from matters involving the companies once he reported his family’s holdings in them. The spokesman declined to comment on the events leading up to his departure.

“The FDA takes seriously its obligation to help ensure that decisions made, and actions taken, by the agency and its employees, are not, nor appear to be, tainted by any question of conflict of interest,” said the spokesman.

When federal officials are found to have violated conflicts rules and are referred to criminal authorities, they often receive light punishment if any, according to records reviewed by the Journal.

Valerie Hardy-Mahoney, a lawyer who runs the National Labor Relations Board’s Oakland, Calif.-based regional office, held Tesla Inc. shares as her office pursued complaints against the auto maker and Chief Executive Elon Musk and considered whether to file more.

Members of the labor relations board, appointed by the president, review decisions made by agency administrative courts. Ms. Hardy-Mahoney acts as a prosecutor in those courts. She is a career employee who joined the NLRB in the 1980s.

Ms. Hardy-Mahoney’s office filed complaints against Tesla in 2017 and 2018. She reported holding Tesla shares worth $1,001 to $15,000 in 2019 while those cases were ongoing. The next year, her disclosure form shows, she owned Tesla shares valued at between $30,002 and $100,000 in E*Trade accounts. She purchased two chunks of Tesla stock in August 2020, each valued at between $1,001 and $15,000, according to her disclosure form.

The NLRB ruled in March 2021 that Tesla had illegally fired an employee involved in union organizing and that Mr. Musk, in a tweet, had coerced employees by threatening them with the loss of stock options if they unionized. It ordered Tesla to reinstate the employee and Mr. Musk to delete the tweet. Tesla has disputed the findings and has appealed the decision to a federal appeals court.

Ms. Hardy-Mahoney’s office has in other cases rejected charges against Tesla filed by employees, including allegations her office received in 2020, after she bought more Tesla stock, according to an NLRB case docket. An employee who worked at the Tesla Gigafactory alleged that the company interfered with workers’ rights. Ms. Hardy-Mahoney’s office dismissed the charge in January 2021.

Last November, an NLRB ethics official declined to certify that Ms. Hardy-Mahoney was in compliance with ethics laws and regulations, according to her disclosure form.

The NLRB’s inspector general said in a report that his office had substantiated an allegation of violating federal law by participating in a matter in which an employee had a financial interest. An agency spokeswoman confirmed that the report involved Ms. Hardy-Mahoney.

The report said that the matter was referred to the local U.S. attorney’s office, but that federal prosecutors declined to take it. The report said the subject of the report—Ms. Hardy-Mahoney—received additional training regarding financial conflicts of interest and the case was closed.

Ms. Hardy-Mahoney declined to comment. She recused herself from Tesla cases last year and now is in compliance with conflict-of-interest rules, the NLRB spokeswoman said.

At the Federal Reserve, an economist named Min Wei reported trades in stock of a marijuana company after the Fed sought clarity about whether banks could serve cannabis businesses. A Fed spokeswoman said the trades were made by Ms. Wei’s husband.

In June 2018, Fed Chairman Jerome Powell said publicly that the issue put the central bank “in a very, very difficult position.” Even though its mandate has nothing to do with marijuana, Mr. Powell said, he “just would love to see” a clear policy on the matter.

Because Mr. Powell didn’t dismiss the idea, investors saw the comment as bullish for cannabis companies such as Tilray Brands Inc., a leading producer. Tilray went public the following month, and its stock skyrocketed.

In early September 2018, Ms. Wei’s husband bought between $480,005 and $1.1 million of Tilray shares, according to her disclosure form and the Fed. The stock continued to surge.

It then became clear that neither the Fed nor the Treasury would take action; it would be up to Congress, with no quick fix in sight. In October, shares of cannabis companies began to fall.

Ms. Wei’s husband sold his Tilray stake in five sales in early October. By then, the shares had nearly doubled, worth between $800,005 and $1.75 million, according to Ms. Wei’s disclosure.

The Fed imposed new restrictions this year on investing by bank presidents, Fed board governors and senior staff after the Journal reported questionable trading by presidents of two Fed banks, who subsequently resigned. The new rules prohibit trading individual stocks and bonds and require that trades, even in mutual funds, be preapproved and prescheduled.

The new Fed rules for top people don’t apply to Ms. Wei because she isn’t senior enough. The trades were “permissible then and are permissible now,” said the Fed spokeswoman.

Ms. Wei referred questions to the Fed. The spokeswoman said Ms. Wei had “no responsibility or involvement with policy decisions related to bank supervision or the provision of banking services.” She said the Fed “did not assert any interest at the time in the Federal Reserve resolving the conflict between federal and state law in the area of cannabis companies and their access to banking services, but rather pointed out that the appropriate resolution of those issues should come from the Congress.”

Ethics lawyers said trading such large amounts of an individual stock while the Fed is publicly addressing an issue creates an appearance problem, even if Ms. Wei’s trades didn’t violate conflicts rules.

Roughly seven dozen federal officials reported more than 500 financial transactions apiece over the six-year period analyzed by the Journal. Some traded a single stock frequently, while others reported hundreds or even thousands of trades across a broad array of stocks, bonds and funds.

In one instance, the Commodity Futures Trading Commission permitted short sales contrary to one of the CFTC’s own rules.

The financial disclosure of Lihong McPhail, an economist at the CFTC, showed the most trading reported by any federal official in the Journal’s review. Her husband made more than 9,500 trades in 2020—an average of about 38 each trading day, according to her disclosure form and the CFTC.

About one-third of those reported 2020 trades—2,994—involved shorting stocks, or betting on a fall in their price. They ranged from Amazon to Ford Motor Co. to Zoom Video Communications Inc. The CFTC said all the short sales were made by her husband.

Over the years, to safeguard the CFTC’s integrity, Congress imposed tighter restrictions than at other agencies on employees’ investing. In amending the Commodity Exchange Act, Congress also declared that any breach by a CFTC employee of an investment rule set by the commission could be punishable by up to a $500,000 fine and five years in prison. The CFTC’s role doesn’t include regulating stocks, but in 2002, the agency adopted a rule banning short selling by its employees and their families.

Nonetheless, a CFTC ethics official approved short selling by Ms. McPhail’s husband, Joseph McPhail, a CFTC spokesman said, fearing that the commission “could possibly be sued by the employee if we said no.” The spokesman said the ethics office believed the regulatory provision exceeded the commission’s statutory authority.

Mr. McPhail referred questions to the CFTC. The CFTC spokesman said he didn’t speak for the McPhails. Ms. McPhail didn’t respond to requests for comment.

At the CFTC, “employees are required by statute and by regulations to adhere to strict ethical standards and to disclose personal investments to ensure that the work of the CFTC to oversee markets is free from any conflict of interest,” said the agency spokesman. “In this instance, several years ago the employee sought advice regarding their spouse’s investments and received approval from career ethics counsel.”

Mr. McPhail was a senior policy analyst at the Federal Deposit Insurance Corp. until September 2021. In a written statement, that agency said: “The FDIC expects our employees, as public servants, to devote their time and efforts to our mission to maintain stability and public confidence in the nation’s banking system.”

The Defense Department was among the federal agencies with the most officials who invested in Chinese stocks, even as the Pentagon in recent years has shifted its focus to countering China.

Across the federal government, more than 400 officials owned or traded Chinese company stocks, including officials at the State Department and White House, the Journal found. Their investments amounted to between $1.9 million and $6.6 million on average a year.

Reed Werner, while serving as deputy assistant secretary of defense for south and southeast Asia, in December 2020 reported a purchase of between $15,001 and $50,000 of stock in Alibaba Group Holding Ltd.

At the time, discussions were under way at the Pentagon over whether to add the Chinese e-commerce giant to a list of companies in which Americans were barred from investing because of their alleged ties to the Chinese government.

Defense and State officials pushed to add the company to the blacklist, while the Treasury feared this would have wide capital-markets ramifications. Mr. Werner had been involved over a period of months in some discussions about what companies to add to the blacklist, former defense officials said.

Nearly two weeks after the Alibaba purchase, the Treasury updated its list and didn’t include Alibaba. The company’s stock rose 4% that day.

Three days later, Mr. Werner’s financial-disclosure form shows a sale of between $15,001 and $50,000 of Alibaba stock.

The sale came a day before a meeting where defense officials planned to press their case for adding Alibaba and two other companies to the blacklist. Then-Treasury Secretary Steven Mnuchin ultimately blocked the effort.

In an interview, Mr. Werner acknowledged he was involved in discussions about adding Alibaba to the list, saying he attended a meeting in late 2020 and was on an email chain about the matter. He said that he wasn’t involved in blacklist discussions during the period the Alibaba trades were made, and that the trades resulted in a $1,556.51 gain. He declined to answer further questions.

The Pentagon spokeswoman said that the officials who formally compiled and approved the blacklist didn’t own stock in affected companies, and that supervisors and ethics officials review reports for holdings that could conflict with an employee’s duties. Ethics officials certified that Mr. Werner complied with the law.

At least 15 other defense officials in the office of the secretary reported that they or family members owned or traded Alibaba between 2016 and 2021, including Jack Wilmer, who served as senior cybersecurity adviser at the White House and then as the Pentagon’s top cybersecurity official.

Between 2018 and 2020, Mr. Wilmer reported at least six trades, which he said totaled around $10,000, in the Chinese companies Alibaba, search-engine giant Baidu Inc. and China Petroleum & Chemical Corp.

Mr. Wilmer said that a money manager handles his trades and that he didn’t direct any of those transactions. He said he wasn’t involved in policy-making decisions that would have affected those stocks and said he didn’t see a conflict between his job and investments. He left the government in July 2020, before Mr. Trump signed the executive order barring Americans from investing in certain Chinese companies.

Within federal agencies, ethics officials generally don’t consider it their job to investigate whether employees are making stock trades based on information they glean from their government jobs. Ethics officials’ ability to spot potential conflicts is limited because they usually don’t know what employees are working on.

When ethics officials do see a potential violation, they can refer it to their agencies’ inspectors general, who refer cases on to the Justice Department if they find evidence of wrongdoing.

A Journal review of inspector general reports showed that the offices rarely investigated financial conflicts. As more federal officials invest in the stock market, ethics officials say they have less time to look into possible wrongdoing. When findings have been referred to the Justice Department, prosecutors in most cases have declined to open an investigation.

One matter at the Securities and Exchange Commission involved an official who failed to report or clear his and his spouse’s financial holdings and trades for at least seven years. The trades included stocks that SEC employees and their families weren’t allowed to own, some of which the SEC inspector general determined posed a conflict with the official’s work, according to a report the inspector general provided to Congress.

When a U.S. attorney declined to prosecute, the SEC’s inspector general reported the findings to SEC management. The unnamed official ultimately was suspended for seven days and gave up 16 hours of leave time.

The SEC declined to comment. A Justice Department spokeswoman declined to comment on individual investigations but said: “We take all inspector general referrals seriously and bring charges when the facts and law support them, consistent with the principles of federal prosecution.”

Most federal agencies don’t have protocols to verify that officials’ financial disclosures are complete. One Agriculture Department official disclosed wheat, corn and soybean futures and options trades. The Journal discovered that he had made additional large trades in corn and soybean futures in 2018 and 2019 and omitted them from his reports.

The official, Clare Carlson, who is no longer at the USDA, said that he tried to be scrupulous in his disclosures, and that the omissions were honest mistakes. The Agriculture Department declined to comment.

At the EPA, Mr. Molina’s financial-disclosure reporting caught the attention of ethics officials.

The conflict-of-interest rules say executive-branch employees may not “participate personally and substantially” in matters that have a “direct and predictable effect” on their investments and those of family members.

When the ethics officials contacted Mr. Molina about energy stocks he reported on his forms, they were told he didn’t have any influence over environmental policy.

His “duties are administrative in nature,” his boss, the EPA’s chief of staff at the time, told the ethics officials. “He provides logistical support to the principal but does not participate personally and substantially in making any decisions, recommendations or advice that will have any direct or substantial effect” on his financial interests, the chief of staff said, according to Mr. Molina’s financial disclosure.

In his time at the EPA, Mr. Molina clashed with ethics officials. Many of his financial disclosure reports were inaccurate and tardy, according to EPA emails reviewed by the Journal. At one point, he didn’t file accurate monthly trading disclosures for 12 months, according to the EPA emails. Mr. Molina reported the stock trades on his annual financial reports, as required.

Ethics officials said they contacted Mr. Molina “scores” of times to press him to file timely reports, according to the emails reviewed by the Journal.

In one email, a senior ethics official said his office had “provided you with at least 3-5 times more personal assistance than for any other agency employee, yet the required ethics reports were still late.”

Mr. Molina told EPA officials that he initially didn’t know he was supposed to complete regular stock-trading reports. He later struggled to keep up with the EPA’s electronic-disclosure system, according to the emails reviewed by the Journal.

In September 2020, the EPA fined Mr. Molina $3,200 for numerous failures to disclose stock trades to the agency on time. Mr. Molina refused to pay.

“We have never before had an employee refuse to pay the late fee,” wrote one ethics officer in an email to Mr. Molina on Oct. 21, 2020, “so I will have to inquire about how to commence garnishment proceedings.”

The next month, Mr. Molina accused ethics officials of discriminating against him. “I feel that I am being targeted and have been asked to report more than anyone else,” he wrote in a Nov. 3, 2020, email.

“If the intent of these filings is to curb any corruption or misbehavior,” Mr. Molina wrote, the EPA should open an investigation. “I believe that paying such an outrageous fine would be an admission that I have done something wrong in this regard.”

Ethics officials didn’t investigate Mr. Molina’s trades or refer the matter to internal investigators.

On the evening of Jan. 19, 2021, Mr. Molina’s final day working for the government, EPA ethics officials offered to end the matter if he paid a discounted fine of $1,067.

Mr. Molina wrote out a personal check to “U.S. Treasury” and sent it to officials in the EPA’s ethics office, including to Justina Fugh, an official with whom he had clashed.

In the memo line of his check, Mr. Molina wrote: “Justina tax.”

Coulter Jones contributed to this article.

A color filter has been used on photos.

Design by Andrew Levinson.

Graphics by Rosie Ettenheim and Elizaveta Galkina.

Photographs by Eric Lee for The Wall Street Journal.

Portrait Photo Sources: Environmental Protection Agency (Michael Molina); William Birchfield/U.S. Air Force (Greg Zacharias); Michael J. Ermarth/Food and Drug Administration (Malcolm Bertoni); National Labor Relations Board (Valerie Hardy-Mahoney); Federal Reserve (Min Wei); Commodity Futures Trading Commission (Lihong McPhail); Department of Defense (Reed Werner)

The Federal Trade Commission’s officials traded stocks and funds more than those at any other major agency, including going heavily into tech shares, The Wall Street Journal found

By Brody Mullins, Rebecca Ballhaus, Chad Day, John West and Coulter Jones

The top watchdog of American business is also home to Washington’s most active Wall Street investors.

The Federal Trade Commission in recent years has opened investigations into nearly every major industry. It has launched antitrust probes into technology companies, examined credit card firms and moved to restrict drug, energy and defense-company mergers.

At the same time, senior officials at the FTC disclosed more trades of stocks, bonds and funds, on average, than officials at any other major agency in a Wall Street Journal review of financial disclosures at 50 federal agencies from 2016 to 2021.

Many of the investments overlapped with the FTC’s work.

A third of its 90 senior officials owned or traded stock in companies that were undergoing an FTC merger review or investigation, based on actions the agency has made public.

FTC officials owned stock in 22 of the roughly 60 large companies the FTC brought cases against in the period reviewed.

The officials were most heavily invested in technology, an industry that has come under increasing scrutiny by the agency. Nearly one in four top FTC officials owned or traded individual stocks of tech companies such as Amazon.com Inc., Meta Platforms Inc.’s Facebook, Alphabet Inc.’s Google, Microsoft Corp. and Oracle Corp.

An FTC chairman owned Microsoft, Oracle and AT&T Inc. while the agency was conducting sensitive reviews affecting the tech and telecom sectors.

The head of the FTC’s international division bought and sold Facebook stock through a financial adviser as his office coordinated with overseas enforcement officials on an investigation involving Facebook.

And an FTC consumer-protection official owned stock in more than 10 companies as the agency scrutinized mergers or acquisitions involving the firms.

The FTC’s mandate gives it broad oversight over American business. Nearly every large U.S. company has interests that run through the hallways of the agency.

U.S. law prohibits federal employees from participating in policy matters in which they have a significant financial stake. Additional regulations direct federal employees to avoid even the appearance of a conflict.

The Journal obtained and analyzed financial disclosures for about 12,000 senior career employees, political staff and presidential appointees at 50 agencies who ranked high enough that they were required to file public reports.

The stock holdings the Journal identified among FTC officials were legal because the rules contain exemptions that often permit officials to own stocks that overlap with their agencies’ work. An investment of $15,000 or less in an individual stock, or of $50,000 or less in an industry-specific mutual fund, isn’t deemed a conflict of interest under federal regulations.

An FTC spokesman said the agency officials had followed the law.

The spokesman said the agency has a “robust ethics program” and follows the rules set by Congress and the Office of Government Ethics. He said its ethics office reviews senior employees’ disclosures and counsels them on how to comply with the rules.

Before ethics officials will certify compliance, they require filers to confirm they have reviewed guidance on potential conflicts and aren’t aware of any actual conflicts. “Ultimately, it is the filer’s obligation to comply with the rules,” the FTC spokesman said. Ethics officials certified that the employees in the Journal’s review were in compliance with the law.

The spokesman said the ethics office reports any conflicts it identifies to the agency’s inspector general. Its inspector general referred four such matters to the Justice Department between 2016 and 2020. Prosecutors declined to investigate any of them.

The law doesn’t require ethics officials to examine qualitative issues, such as the timing of trades, the number of transactions and how stock prices change over the course of the reporting period. Nor do they examine broad patterns of stock ownership by officials throughout the agencies they help oversee.

Longtime ethics officials said the investing by FTC employees undermines the agency’s mission, even though in legal compliance. It “hurts the reputation of the agency and the government in general,” said Kent Cooper, a former government official and expert on ethics issues. “Are these decisions being made for the benefit of the public or the officials who have a personal benefit in the outcome?”

Ethics lawyers said the investments suggest the FTC might need to adopt tighter rules on what stocks officials are allowed to own and trade. The Securities and Exchange Commission, for example, imposes additional restrictions, including barring officials from trading companies under SEC investigation regardless of whether they have personal knowledge of the probe. The FTC has no such rules beyond the federal conflict-of-interest law.

For years, the FTC has faced bipartisan criticism for not more aggressively enforcing competitive practices in corporate America. Now it is poised to take a far higher profile. President Biden has signaled tougher antitrust scrutiny and appointed as chairwoman a vocal critic of large companies.

Randolph Tritell, the recently retired head of the FTC’s Office of International Affairs, reported more stock trades than any other FTC official in the period the Journal examined. The office coordinates with foreign counterparts to make sure rules, merger conditions and enforcement actions are applied consistently, and coordinates the sharing of evidence and other information on overlapping investigations.

Mr. Tritell reported large holdings in technology stocks. He owned Apple Inc. stock valued at between $100,001 and $250,000, Amazon shares worth $15,001 to $50,000, and $1,001 to $15,000 of Microsoft stock, according to his most recent financial-disclosure form. Since 2016, he has reported a total of more than three dozen trades in Facebook, Amazon, Microsoft and Oracle.

One of Mr. Tritell’s best-timed stock trades was an 80% gain in Amazon over nine months as the European Commission investigated whether the company violated antitrust rules.

Mr. Tritell said he followed the law. Ethics officials certified his disclosures each year as complying with the rules.

Mr. Tritell said a financial adviser handles his trading. He said he has the authority to provide some direction to the adviser, but rarely does. He said he had “no role whatsoever” in Amazon, Oracle, Apple and Microsoft trades.

An exception was Facebook, where Mr. Tritell said he didn’t have any role in the trades “other than for one transaction.” He declined to provide details.

Mr. Tritell disclosed six trades in Facebook amid a high-profile investigation into whether the company had abused consumers’ privacy.

His office coordinated with U.K. officials on the exchange of evidence and confidential information on an investigation involving Facebook and U.K.-based Cambridge Analytica. The FTC announced they were examining Facebook’s privacy practices in March 2018.

Two officials in Mr. Tritell’s office took the lead in the talks with U.K. counterparts, and one of his deputies acted as a supervisor, according to former officials. Mr. Tritell had informal conversations with colleagues about the probe, but wasn’t briefed on the details of conversations with the U.K., according to the officials.

At the end of 2017, Mr. Tritell owned between $15,001 and $50,000 of Facebook shares, according to his financial disclosure. In April 2018, Mr. Tritell reported two purchases of Facebook shares.

He bought additional shares in June and December. In all, Mr. Tritell invested a total of just under $11,000 in Facebook that year, according to figures he provided the Journal.

Facebook shares rose in the early part of 2019, partly on news that a settlement of the investigation was near. On April 15, 2019, Mr. Tritell reported selling $5,327 worth of the stock, which was up 35% from the December purchase. He sold the rest of his Facebook shares, $22,886 worth, on June 4, he said.

In July 2019, the FTC said it was imposing a $5 billion penalty on Facebook over its practices involving users’ data.

The same day it announced this penalty, the FTC sued Cambridge Analytica and said it had settled with the firm’s former chief executive. In its news release, the agency credited the cooperation with U.K. regulators overseen by Mr. Tritell’s office.

In an interview, Mr. Tritell said that his deputies largely handled fraud and deception matters such as the Facebook probe, and that for most such cases, “I was less briefed in detail because I knew they were doing a great job.”

Mr. Tritell said he didn’t discuss his office’s involvement in the case with ethics officials. He said they didn’t flag any potential conflicts to him. He also said it doesn’t make “any practical sense” for ethics lawyers to know what matters officials are working on.

Mr. Tritell said of the Facebook probe: “I wasn’t personally and substantially involved, so there’s no issue.” The law doesn’t consider stock holdings to be a conflict unless officials work “personally and substantially” on an issue that can affect their investments.

He said he meets with his financial adviser to discuss his portfolio roughly every six months. He said he saw his trades when he reviewed his statements to file monthly transaction reports with the FTC ethics office, as required by a 2012 law known as the STOCK Act.

Mr. Tritell said he finds stock trading “horribly tedious” and “the last thing I want to spend my time on.”

Among officials with large holdings in companies affected by FTC decisions was James Kohm, associate director of the FTC Bureau of Consumer Protection’s enforcement division. His job includes making sure companies comply with agreements reached with the agency to settle charges of unfair or deceptive practices.

Mr. Kohm disclosed owning between $15,001 and $50,000 in both Comcast Corp. and AT&T shares when the FTC’s consumer protection bureau issued orders in March 2019 to several U.S. broadband providers, including those two companies, seeking information about their privacy practices.

He also reported owning stock in more than three dozen companies, including more than 10 while they were undergoing FTC merger or acquisition reviews.

Mr. Kohm held Allstate Corp. shares worth between $100,001 and $250,000 in 2018 when the FTC cleared an Allstate takeover of a company called InfoArmor Inc.

Mr. Kohm held $50,001 to $100,000 in AstraZeneca PLC when the company announced a $39 billion plan to acquire drug firm Alexion Pharmaceuticals Inc. in late 2020. The FTC cleared the deal the following April.

In an email, Mr. Kohm said he didn’t work on any issues involving the companies he owned. He also said he hasn’t realized a profit on any of the stocks he owns because he hasn’t sold them.

Joseph Simons, the FTC chairman from 2018 until January 2021, disclosed more than 1,300 trades during his tenure. Fewer than a dozen were trades in individual stocks; the rest were in mutual funds and exchange-traded funds.

Half of the individual stocks he reported owning were technology and telecommunications companies involved in FTC reviews.

The FTC spokesman said Mr. Simons’s investments weren’t ethics violations because stock investments of $15,000 or below aren’t considered a conflict. “He sought and received counsel and took steps that were needed in order to comply,” the spokesman said.

When the FTC issued orders in March 2019 to the several broadband providers seeking information, Mr. Simons held between $1,001 and $15,000 in AT&T shares. He held onto the stock until August of that year, when he sold his stake.

The same day he sold his AT&T stock, Mr. Simons reported the sale of a stake in Charter Communications Inc., worth between $1,001 and $15,000. Less than two weeks later, the FTC broadened the examination of privacy rules to include Charter.

Mr. Simons also held some technology stocks when the FTC on Feb. 11, 2020, ordered the industry’s largest players—Alphabet, Amazon, Apple, Facebook and Microsoft—to provide more information about their previous acquisitions, as part of its examination of the tech sector’s growth.

In a news release announcing the orders, Mr. Simons said they would “help us continue to keep tech markets open and competitive, for the benefit of consumers.”

The next day, Mr. Simons sold between $2,002 and $30,000 worth of stock in Oracle, a rival tech company, according to his disclosures. He didn’t sell his Microsoft stock.

By the time he left office, the price of his Microsoft shares was up 140% from when he became chairman.

Mr. Simons declined to comment on his holdings.

A former acting director of the FTC office that enforces antitrust laws owned stock in three companies that came under scrutiny by the agency during his tenure.

Abbott Lipsky, a longtime antitrust attorney, was named acting director of the FTC’s Bureau of Competition in February 2017.

In a financial disclosure he filed later that year, Mr. Lipsky reported owning nearly 90 individual stocks, some of which were in a family trust of which he was a trustee and a beneficiary. He reported that the trust held between $50,001 and $100,000 in stock of Emerson Electric Co., one-fifth of which was his share.

At the time, FTC competition officials were investigating Emerson’s planned $3.15 billion acquisition of a unit of Pentair PLC.

In April 2017, nearly two months after Mr. Lipsky started running the competition bureau, the FTC said it had reached an agreement with Emerson in which the company would sell Pentair’s switchbox business to settle the FTC’s charges that the acquisition would violate antitrust law.

In early May, Mr. Lipsky reported buying between $1,001 and $15,000 in JPMorgan Chase & Co. stock. He already owned shares in the company, according to his disclosure.

Seven weeks later, on June 29, the FTC cleared an acquisition involving JPMorgan.

Mr. Lipsky left the FTC on July 3, 2017. He didn’t respond to requests for comment. Ethics officials certified that he was in compliance with the law.

A pamphlet the FTC wrote for new employees in 2019 cautioned them against conflicts and urged them to stay abreast of their financial holdings. “Cheese gets better with age—financial data doesn’t,” it said.

The pamphlet added: “Some things are more precious than others—the public’s trust is one example.”

An FTC ethics lawyer who helped produce the pamphlet owned stocks herself in companies the agency investigated.

Lorielle Pankey and family members owned between $65,002 and $150,000 of Visa Inc. shares at the outset of an FTC inquiry into whether Visa and Mastercard Inc. had prevented retailers from using competing debit networks. The card companies have said they comply with the law.

On July 13, an account controlled by Ms. Pankey’s family sold $5,613 of Visa stock, according to her disclosures and the FTC spokesman. On July 31, Visa disclosed in a quarterly report that the FTC had requested documents in June.

Ms. Pankey and her family kept most of their Visa shares, which were valued at between $100,002 and $200,000 at the end of 2020. Shares of Visa more than doubled from the time Ms. Pankey started at the FTC in June 2016 to the end of 2020. The FTC investigation is continuing.

Ms. Pankey said she had fully complied with ethics requirements and said any suggestion she had violated the rules was “completely false.”

“I am not now and have never in the course of my FTC tenure personally and substantially participated in any FTC particular matter affecting the financial interests of Visa,” she said in an email. “Further, I have never used nonpublic information acquired in the course of my FTC duties for the private gain of myself or others.”

The FTC spokesman said that Ms. Pankey doesn’t work on FTC investigations of companies and that the stocks she owns are held in brokerage accounts opened by her father when she was a child. He said Ms. Pankey didn’t direct any stock trades and that the Visa sale was made by a financial adviser who manages the account.

Another FTC official made large trades in Visa and Mastercard during the investigation.

When the probe became public in November 2019, FTC Chief Administrative Law Judge D. Michael Chappell held between $1 million and $5 million in Mastercard stock and between $100,001 and $250,000 in Visa shares, according to his disclosure form.

On Jan. 2, 2020, Mr. Chappell sold all of his Visa stock and between $250,001 and $500,000 of his Mastercard holdings. It was the first time he had sold shares in the companies in at least four years.

Since then, Mr. Chappell has sold Mastercard stock three more times, totaling between $400,003 and $850,000. At the end of last year, he reported owning between $500,001 and $1 million in Mastercard shares.

The FTC spokesman said Mr. Chappell “operates independently from the agency” and “has no knowledge of or involvement with FTC investigations or enforcement actions and in fact is strictly separated from any agency actions with respect to matters that come or could come before the Commission since he may be tasked with adjudicating these matters.”

In an interview, Mr. Chappell said that he didn’t work on the FTC’s investigation into Visa and Mastercard and that in his role, he is made aware of FTC investigations only once the agency files a lawsuit. “I don’t know who they are investigating and I don’t care,” Mr. Chappell said.

He said he adheres to agency rules on stock ownership and attends the FTC’s annual training sessions.

He said he didn’t know the FTC was investigating Mastercard or Visa until the Journal brought it to his attention. Said Mr. Chappell: “I can assure you that I don’t know anything about that.”

Design by Andrew Levinson. Graphic by Rosie Ettenheim. A color filter has been used on photos.

Seven dozen senior executive-branch employees disclosed a total of 80,000 stock and fund trades in the past six years

By James V. Grimaldi, James Benedict, Coulter Jones and Chad Day

It’s the kind of rapid-fire trading you see on Wall Street: hundreds of stock-market wagers, sometimes peppered with options and other aggressive trades.

But this wasn’t done on behalf of professional traders. The transactions came from about seven dozen senior federal-government officials who disclosed that they or their families each made more than 500 trades from 2016 through 2021. That totals more than 80,000 transactions while these officials worked in government.

These officials accounted for roughly a quarter of all transactions while representing less than 1% of filers in a Wall Street Journal review of financial disclosures by federal officials.

An Internal Revenue Service official reported 1,525 trades on the disclosure forms. A Justice Department attorney listed 2,763 trades, including hundreds involving options, according to the Journal’s review.

And a Commodity Futures Trading Commission economist, Lihong McPhail, reported more than 9,500 trades in 2020 alone by her husband, also a federal employee, according to the CFTC and her disclosure forms, which report values of holdings in broad dollar ranges. That’s an average of 38 trades per trading day.

The CFTC, which regulates the U.S. derivatives markets, including futures, options and swaps, gave Ms. McPhail approval for her husband to do short selling despite a CFTC ban on such trading. An ethics official believed the rule was unenforceable and feared the agency could be sued if it didn’t allow the trading, according to a CFTC spokesman.

Ms. McPhail didn’t respond to requests for comment about the trades. Her husband, Joseph McPhail, referred calls to the CFTC. The CFTC said it didn’t speak for the McPhails. The former ethics official who allowed short selling by Ms. McPhail’s husband couldn’t be reached for comment.

Let’s look at the McPhail trades over time, beginning in February 2020:

(See link for interactive graphic.)

Trading in ETFs holding Treasury bonds or commodities such as gold is similar to directional bets on commodities and futures contracts that the CFTC regulates. Some specialists said such transactions pose concerns.

“The idea that they are regulating a market that has a dramatic impact on” some of Mr. McPhail’s trades “struck me as pretty disturbing,” said Dave Lauer, chief executive of a fintech startup who examined the transactions for the Journal.

A CFTC spokesman said: “Employees are required by statute and by regulations to adhere to strict ethical standards and to disclose personal investments to ensure that the work of the CFTC to oversee markets is free from any conflict of interest. In this instance, several years ago the employee sought advice regarding their spouse’s investments and received approval from career ethics counsel.”

The Federal Deposit Insurance Corp., where Mr. McPhail worked until September 2021 as senior policy analyst, said it “expects our employees, as public servants, to devote their time and efforts to our mission to maintain stability and public confidence in the nation’s banking system.” The agency said Mr. McPhail wasn’t required to file a public financial disclosure form and didn’t elaborate.

The Journal, in a series examining the stock holdings of senior federal officials, reviewed the financial disclosures of about 12,000 federal employees from 2016 through 2021 and tabulated those who reported the most frequent trades.

U.S. law prohibits federal employees from participating in policy matters in which they have a significant financial stake. Additional regulations direct federal employees to avoid even the appearance of a conflict. Under federal regulations, an investment of $15,000 or less in an individual stock is not considered a conflict of interest, and the law contains exemptions that often permit officials to own stocks that overlap with their agencies’ work.

Frequent trading is what led Congress in recent years to tighten rules relating to trading by lawmakers and the judiciary.

Some officials use investment advisers who direct their stock trading. Such trades still can create conflicts, legal and ethics specialists said, because the officials could benefit, no matter who makes the trades. Senior officials must report all trades in their and their family’s accounts within 30 days of receiving notice of them and thus have to be aware of them all.

Legislation proposed in September by House Democrats would have banned many of the trades disclosed by many of the senior federal officials in the Journal analysis—shorting stocks, trading stocks or owning most securities, commodities, futures, cryptocurrency and other similar investments.

The bill, which essentially would have restricted holdings to government bonds, mutual funds and the like, has failed thus far to gain traction in Congress. Similar legislation is expected to be introduced next year.

The following is a sample of the most active trading reported in financial-disclosure forms for the years 2016 through 2021. They include trades made by the officials, their spouses, dependent children or investment advisers.

The officials and their responses

Rene Augustine—Justice Department official 2018-21, serving as deputy assistant attorney general for the antitrust division from December 2019 to January 2021.

Most of the trades were in index funds, and of those, more than 750 were options trades of index funds.

“My family’s investment activities were performed by third-party advisors and, in compliance with Department of Justice regulations, were disclosed, reviewed and approved by Department of Justice Ethics Officials,” Ms. Augustine said in a statement.

Holly Ham—Acting executive director, Center for Faith and Opportunity Initiatives at the Department of Education, 2017-19; senior adviser at the Minority Business Development Agency at the Commerce Department, 2019-21; director of special projects at the Department of Housing and Urban Development from July 2020 to January 2021.

Most of her trades were in 2018. They included biotech, retail and manufacturing stocks and other investments.

In an interview, Ms. Ham said all her transactions were made by her husband, who works for Morgan Stanley, in consultation with her and with care to avoid any real or apparent conflict of interest. When she worked at the Education Department, for example, she avoided education stocks.

“I am very aware of my entire portfolio,” Ms. Ham said. “Whenever there are changes, I have to authorize them and to make sure that they are compliant and certified by the ethics official at the agency where I served.” The Education Department and Commerce Department declined to comment; HUD didn’t respond to a request for comment.

Shanna Webbers—Chief procurement officer, Internal Revenue Service, from 2015 to March 2022. Currently works for the FDIC.

While at the IRS, Ms. Webbers oversaw annual contract obligations of more than $3 billion, according to her LinkedIn page.

“The transactions you are referring to were conducted during my tenure at IRS and are not related to my position at the FDIC,” Ms. Webbers said by email. “These transactions were conducted by a financial advisor on my behalf. I followed all relevant IRS ethics rules and I reported these transitions on a monthly and annual basis as the law requires.”

She added: “I take my responsibility as a procurement officer seriously. I followed the IRS ethics rules and reported, for full transparency, the transactions conducted by my financial advisor on my behalf both monthly and annually.”

The IRS didn’t respond to requests for comment.

Malcolm Bertoni—Director of the Office of Planning, Food and Drug Administration, 2004 to 2019.

Mr. Bertoni disclosed more than 170 trades of roughly 70 companies on an FDA list of companies senior agency officials weren’t allowed to own because they were deemed significantly regulated by the FDA.

Mr. Bertoni’s lawyer, Charles Borden, said Mr. Bertoni and his wife held these stocks despite the ban because they got bad advice from the FDA ethics office. The stocks were in accounts managed by professionals who traded without the knowledge of Mr. Bertoni or his wife, the attorney said. He said the ethics office mistakenly said they fell into an exemption for mutual funds.

Mr. Borden said that because of tax and retirement-planning consequences of having to sell the stocks, and other personal factors, Mr. Bertoni chose to retire. The FDA declined to comment on the events leading up to his departure.

“The FDA takes seriously its obligation to help ensure that decisions made, and actions taken, by the agency and its employees, are not, nor appear to be, tainted by any question of conflict of interest,” an FDA spokesman said.

The FDA spokesman said Mr. Bertoni was recused from matters involving the companies once he reported his family’s holdings in them.

Carrie Lindig—Easement programs division director, Natural Resources Conservation Service of the USDA.

Ms. Lindig reported trades in companies including Alibaba Group, Caterpillar Inc., Procter & Gamble Co. and UnitedHealth Group Inc.

“The individual being requested for the interview properly reported trades, and there is no reason for an interview,” USDA Press Secretary Marissa Perry said. Ms. Lindig didn’t respond to requests for comment.

—Joe Palazzolo contributed to this article.

Some sold in January 2020 when the government began mobilizing against the threat. Others bought shares as a market-rescue plan was taking shape.

By Rebecca Ballhaus, Joe Palazzolo, Brody Mullins, Chad Day and John West

Federal officials working on the government response to Covid-19 made well-timed financial trades when the pandemic began—both as the markets plunged and as they rallied—a Wall Street Journal investigation found.

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.

Dr. Redd said that ethics officials later told him he hadn’t reported the trades in the required 30-day period, but that the officials didn’t raise any questions about the trades’ timing. Dr. Redd, who retired in the fall of 2020, said he wasn’t aware of any guidance about trading during the early months of the pandemic.

“I don’t know that there’s anything that said, ‘If you think that something bad is going to happen, you shouldn’t trade,’” he said. “It’s mostly about disclosure.”

The CDC didn’t respond to multiple requests for comment.

In late February 2020, as awareness of the viral threat grew, officials in the Trump administration faced a different problem: turbulent financial markets. Treasury and Federal Reserve officials began to coordinate on measures to stabilize them.

U.S. stocks sank on Feb. 20, and over the next week, equity markets worldwide recorded their largest single-week declines since the 2008 global financial crisis. Yields on 10-year and 30-year U.S. Treasury securities fell to record lows, as investors fled to these relatively safer assets.

On Feb. 28, Fed Chairman Jerome Powell signaled in a written statement that the central bank was prepared to cut interest rates, a stimulatory move aimed at quelling the economic disruption.

In the seven days preceding that statement, officials at the Treasury and Fed reported more than twice as many trades as they made during the same seven days of 2019.

They reported more than three stock or fund purchases for every sale from Feb. 21 to Feb. 27, 2020, according to the Journal analysis of financial disclosures.

Treasury Department officials as a group reported about 30% more stock and fund purchases in February than the average over the previous 12 months.

Two Fed bank presidents resigned last year after they disclosed a series of investments during Fed market interventions in response to Covid-19. The central bank in February 2022 prohibited its top officials from buying individual stocks and sector funds and barred trading during periods of “heightened financial market stress.”

At emergency meetings on March 3 and March 15, 2020, the Fed slashed short-term rates to near zero and imposed other market-supporting measures.

On March 13, then-President Donald Trump announced a federal partnership with the private sector to increase the nation’s testing capability for Covid, inviting top executives at 10 companies, including Target Corp., Walmart Inc., CVS Pharmacy Inc. and Walgreens Boots Alliance Inc., to the White House for the announcement.

Roughly 300 federal officials reported owning stock in at least one of the 10 companies at the time, their financial disclosures show.

As the pandemic’s toll mounted, Congress in mid-March was negotiating with the administration over a package providing funds for individuals and companies hit by the fallout.

The rate cuts hadn’t immediately calmed investors. Stock trading was halted for 15 minutes on the morning of March 16 when the S&P 500 fell 7%, triggering a so-called circuit breaker. The index staggered to the closing bell, down 12%.

That same day, Ms. Chao, the transportation secretary, made three purchases in stock funds that track the S&P 500 and the U.S. stock market broadly, totaling between $600,003 and $1.2 million, according to her financial disclosures.

After Republican frustration with a previous piece of relief legislation, Ms. Chao’s husband, then-Senate Majority Leader McConnell, had taken the reins in Congress on a much larger bill. He released his first draft on March 19.

Ms. Chao was also working on the pandemic response. Her agency—part of the White House Coronavirus Task Force—was helping repatriate Americans abroad, conducting screenings at airports, establishing health protocols for airlines and cruise ships and coordinating with international counterparts, she told a House committee.

The S&P 500 hit bottom on March 23. From its high on Feb. 19, it had dropped nearly 34%.

The next day, the administration and Congress neared a deal on the stimulus bill. The stock market soared on the news—and with it Ms. Chao’s mutual fund investment from eight days earlier.

Mr. Trump signed the Coronavirus Aid, Relief, and Economic Security Act, or Cares Act, on March 27, handing out pens to guests, including Ms. Chao and Mr. McConnell. Ms. Chao released a statement praising the administration’s pandemic response, saying the bill “ensures that critical federal resources will soon reach where they are needed.”

By the end of the month, her investment in the S&P fund had gained 8%. By the end of the year, it was up 57%, according to its net asset value.

Ms. Chao’s total disclosed purchases in March 2020 were between $669,009 and $1.5 million, her second-highest monthly total in the Journal’s review of her four years as transportation secretary.

A spokesman for Ms. Chao said she periodically adjusts her investments in mutual funds based on the advice of financial professionals. “These funds are held separately from her husband and managed without his consultation,” the spokesman said.

A spokesman for Mr. McConnell referred the Journal to the statement by Ms. Chao’s representative.

At around the same time, a Treasury official later involved in administering the stimulus package made a series of well-timed trades.

Early on, the Trump administration made it clear it wouldn’t leave Boeing or the rest of the aviation and airline sector hanging, as the travel industry was thrown into turmoil. “We have to protect Boeing,” Mr. Trump said March 17. “We’ll be helping Boeing.”

The Treasury Department publicly detailed what it wanted to see in the stimulus legislation on March 18, including $50 billion in loans for airlines and $450 billion for “severely distressed sectors” and small businesses.

Two days later, Treasury domestic finance counselor Jeff Goettman reported purchases of 15 stocks, including Boeing and General Electric, totaling between $29,015 and $260,000, according to his financial disclosure.

Boeing was in close contact with Treasury officials as it lobbied the administration and Congress for federal aid.

Days after Mr. Goettman’s stock purchases, lawmakers inserted a $17 billion provision for companies deemed essential to national security, which congressional officials said at the time was partly designed to help Boeing.

The provision stayed in the final legislation, authorizing the Treasury to administer the loan fund. Then-Secretary Steven Mnuchin later said the fund had been created with companies including Boeing and GE in mind.

Mr. Goettman convened the group that administered the legislation’s $80 billion for airlines—which included the national-security loan fund—according to his bio on the website of Virginia Gov. Glenn Youngkin, for whom he now serves as chief of staff. Boeing didn’t ultimately apply because it objected to the condition that the U.S. take an equity stake or warrants for shares in loan recipients, its chief executive said at the time.

A week after Mr. Goettman’s March 20 stock purchases, Boeing’s shares were up 70%, and GE’s were up 17%.

Mr. Goettman declined to comment.

The Treasury declined to comment on his trading. A spokesman said: “The Treasury Department follows regulations issued by the Office of Government Ethics and we expect all employees to follow them. These regulations include the disclosure of stock purchases, recusals to avoid conflicts of interest and a prohibition against using nonpublic information to inform financial activities.”

Mr. Goettman disclosed more GE stock purchases on March 27 and April 1, totaling between $2,002 and $30,000.

On April 2, Mr. Trump, using authority granted in a Korean War-era law, ordered the federal government to help six medical-device manufacturers, including GE, secure supplies they needed to make ventilators for hospitalized Covid patients.

Mr. Goettman reported additional GE share purchases that day, bringing his GE investment to the range of $3,003 to $45,000.

Two weeks later, HHS disclosed a $336 million government contract with GE to produce 50,000 ventilators. The stock rose more than 5% on the news.

Design by Andrew Levinson. Graphics by Stephanie Stamm. A color filter has been used on photos.

The U.S. has rules limiting federal officials’ stock-market investing. They can be waived.

By Brody Mullins, Rebecca Ballhaus and Joe Palazzolo

Mark Wu held more than $1 million of Amazon.com Inc. stock when President Biden tapped him to help craft a trade policy that would benefit U.S. technology companies and online retailers.

Ethics officials at the Office of the U.S. Trade Representative said they gave Mr. Wu two options: Get rid of the stock or recuse himself from digital trade issues.

He did neither.

For several months, Mr. Wu continued working on the trade matter while keeping the shares. He had “not followed the requirements,” the U.S. Trade Representative’s chief of staff told him in a June 2021 phone call, an email describing the call shows.

Eventually, Mr. Wu quit, citing family issues. He kept his Amazon stock.

Mr. Wu said he didn’t work on trade issues specific to Amazon and left the government when the restrictions became too much of a burden on his family.

The U.S. has a law aimed at preventing the nation’s thousands of obscure but powerful federal officials from using their influence on regulations, policies and investigations to benefit themselves.

With penalties up to $50,000 and five years in prison, the law is supposed to ensure that officials in the executive branch don’t work on any matter that could affect their personal finances.

It doesn’t. It has exceptions. Violations often go unpunished. When a problematic holding is identified, if the official resists selling it, the rules often are waived. The result is a system that largely relies on government employees to police their own stock investing.

A Wall Street Journal investigation revealed how more than 2,600 federal officials invested in companies that stood to benefit from their agencies’ work from 2016 through 2021. The Journal reviewed annual financial disclosure reports filed for those years by about 12,000 senior executive-branch officials at 50 federal agencies, from career employees to political staff to presidential appointees.

The investigation found that some federal officials received waivers from conflict-of-interest rules because they were considered too important in a particular job. In other cases, officials were permitted to keep holdings because they weren’t large enough to be a problem under the law. Owning $15,000 or less in a stock isn’t considered a conflict.

The Federal Energy Regulatory Commission allowed an official who reported a financial interest of between $50,001 and $100,000 in a hydroelectric company to work as director of the agency’s hydropower administration and compliance division.

The Environmental Protection Agency in 2021 let an official work on renewable fuel standards involving oil refineries while his wife held a financial interest of between $35,007 and $175,000 in oil and gas wells. In a letter provided in response to a public-records request, the EPA stated that the official didn’t have a financial conflict and that the “interest of the United States Government in your participation outweighs any concerns about your impartiality.”

The EPA said its employees follow the rules. FERC said the hydropower official, who left in 2017, had a passive interest in the facility and was recused from any matters that could affect the interest.

Federal agencies have ethics officials who check compliance, but they often lack the tools to investigate potential conflicts of interest. Instead, they primarily focus on whether required financial disclosure forms are consistent and timely.

Ethics officials typically consider themselves legal advisers to employees more than enforcers, often referring to those whose reports they review as “clients,” former ethics officials say.

On Capitol Hill, Congress lets lawmakers own stock in companies they help oversee because, its rules say, members shouldn’t be divorced from the economic realities of their constituents. Congress has no recusal requirement, on the notion that such a rule would at times deprive constituents of a voice in the legislature.

The executive branch doesn’t adopt such reasoning. Its officials are required to avoid any financial conflict of interest by selling a stock that poses one, by abstaining from matters affecting their holdings—or by obtaining an exemption.

In 2020, ethics officials at the Office of the U.S. Trade Representative, or USTR, noticed that Michael Nemelka, a new trade adviser, owned a stake worth roughly $2.6 million in Sanuwave Health Inc., a company that uses energy waves to heal injuries.

The ethics officials said this could conflict with Mr. Nemelka’s work as a deputy U.S. trade representative in charge of global trade policy for intellectual property, industrial competitiveness and several other matters. In his role negotiating trade agreements, he wouldn’t be allowed to work on policy that could impact Sanuwave or its rivals in the medical device or pharmaceutical industry.

They recommended Mr. Nemelka get rid of the shares.

He didn’t want to, “because he considers this investment to be the future financial nest egg for his family,” according to an email from an ethics official to then-U.S. Trade Representative Robert Lighthizer that was reviewed by the Journal.

Mr. Nemelka said he sold other stocks to avoid financial conflicts, but said it wouldn’t be possible to sell the roughly 9 million Sanuwave shares without hurting the company’s stock price. “It was an illiquid penny stock,” he said in an email.

Mr. Nemelka sought to be recused from working on policy issues related to Sanuwave while keeping the shares. He told ethics officials he could instruct his assistant to make sure he didn’t see any materials that might lead to his working on a matter affecting the company.

“I am not sure how this is going to work,” one USTR ethics officer wrote to another, according to emails they exchanged that were reviewed by the Journal. “How is his assistant going to determine whether he can participate?”

Janice Kaye, the senior ethics counsel at the USTR, wrote to the other ethics official: “I am still very wary about this.”

She sought advice from Mr. Lighthizer, telling him that numerous recusals might hurt Mr. Nemelka’s ability to be effective in trade negotiations. Since 2000, she wrote, no senior USTR official “has been permitted to retain this kind of stock interest.”

Ultimately, Mr. Nemelka was permitted to keep the Sanuwave shares so long as he didn’t work on issues that related to the company, a decision made at a level above the ethics officials.

Mr. Nemelka said the recusal “never affected my ability to perform my duties.”

A USTR spokesman declined to comment on Mr. Nemelka. Ms. Kaye didn’t respond to requests for comment.

When John Abizaid, a retired Army general and former head of the Central Command, was nominated in November 2018 to be ambassador to Saudi Arabia, he owned nonpublic shares in Palantir Technologies Inc., a data-mining company that does business with the U.S. government. At the time, the company was discussing going public the following year, the Journal reported.

An ethics agreement Mr. Abizaid signed shows that he promised to get rid of his shares in the private company within 180 days of his April 2019 confirmation.

More than six months after he was supposed to have sold them, he still held them, according to a financial disclosure form Mr. Abizaid signed in April 2020.

“Palantir was not divested as required by the ethics agreement, because the stock is not currently marketable,” said a note appended to the form by an employee of the U.S. Office of Government Ethics, the government body that oversees the conflict-of-interest law.

More than 23 million shares of the company changed hands on private markets in 2019, according to Palantir’s regulatory filings. They said the average price was $5.42. In the first eight months of 2020, they were trading privately at an average price of $5.35.

Mr. Abizaid said in an email to the Journal that he wasn’t able to meet the selling deadline because Palantir put restrictions on private sales of its shares. It required approval of a buyer, a right of first refusal and “significant time” to approve a sale, he said.

“I tried several ways to privately sell the stock in a manner that would satisfy Palantir, State and myself, and was unable to do so,” Mr. Abizaid said.

Ethics officials accepted Mr. Abizaid’s explanation and revised his agreement to allow him to own Palantir stock so long as he abstained from any matters involving the company, he said. In his email, Mr. Abizaid said Palantir ended up having no business with Saudi Arabia during his tenure.

The State Department said Mr. Abizaid was required to get rid of Palantir shares because the company was pursuing business in the Middle East around the time of his nomination. “With the passage of time, it became clear that owning Palantir stock was unlikely to present a conflict of interest for the U.S. Ambassador to Saudi Arabia after all and that any potential conflict of interest could be managed via recusal,” the department said.

In September 2020, Palantir went public at $10 a share. The following month, Mr. Abizaid sold three chunks of the stock on days when it closed at as low as $9.95 and as high as $10.75—nearly double Palantir’s average share price in 2019, when he was required to sell under his original ethics agreement.

The sales totaled between $1 million and $2 million, according to his financial disclosure. Mr. Abizaid continued to hold $5 million to $25 million in Palantir stock in 2020, according to his financial disclosure. He had received the shares as compensation for consulting work he did for the company from 2008 to 2014, his disclosure form says.

“Once the determination was made that I didn’t need to divest I proceeded as I normally would with regard to any sales in my portfolio,” Mr. Abizaid said. “I reported the sales as required, and the sales I did make were in line with Palantir policy and State Department guidelines.”

The Office of Government Ethics declined to comment. Palantir didn’t respond to requests for comment.

The way ethics officials handle the conflict-of-interest law can be inconsistent.

When Andrew Maloney was nominated to a top position at the Treasury Department in 2017, ethics officials reviewed his holdings and saw several that would conflict with his duties.

His job would be to advocate for then-President Donald Trump’s economic agenda, chiefly a major tax-cut proposal for corporations and individuals. The Treasury Department says officials may not work on narrow policy matters that stand to benefit stocks they own, but they may work on broad economic policy, even if it might affect their personal portfolio.

Lawyers at the Office of Government Ethics advised Mr. Maloney to shed some stocks. But it let him keep certain others that also stood to be affected by his work.

Mr. Maloney followed the advice. After the Senate voted to confirm him in August 2017, he sold about a dozen stocks, including between $250,001 and $500,000 in Hess Corp., $50,001 to $100,000 in Cigna Corp. and $15,001 to $50,000 of Bank of America Corp., according to his financial disclosure report.

As permitted, he kept between $250,001 and $500,000 of Amazon stock, $100,001 to $250,000 of Apple Inc. and between $250,001 and $500,000 of stock in Facebook, now called Meta Platforms Inc. He also kept a $100,001-to-$250,000 call option on Amazon, a bet on a rise in its stock price.

Mr. Maloney set off to rally support for the tax cuts in Congress. In December 2017, Congress passed a $1.5 trillion bill reducing the corporate tax rate to its lowest point since 1939. The bill saved billions of dollars collectively for large companies, including those that ethics officials allowed Mr. Maloney to retain.

When he left the government in June 2018, the share prices of Amazon, Apple and Facebook were up 74%, 21% and 16%, respectively, from the time of his confirmation.

Mr. Maloney said that he had followed the law. He said he wasn’t told why he was permitted to keep certain stocks.

The Office of Government Ethics said it couldn’t comment on the rationale of specific decisions.

The Treasury Department said the officials who worked on Mr. Maloney’s case are no longer there. A Treasury spokesman said its ethics officers help officials comply with the rules.

Under federal law, agencies can grant waivers from the conflict-of-interest rules if an ethics official determines that an investment is “too remote or too inconsequential to affect the integrity of the services of the Government officers or employees.”

Susan Morris was an assistant manager at the Production Office of the Energy Department’s National Nuclear Security Administration, or NNSA. Among matters she worked on were some related to science and engineering company Leidos Holdings Inc.

Her husband owned stock in and worked as a consultant for Leidos. His job involved working with several federal agencies, including the Energy Department, and he was eligible to receive a bonus linked to Leidos’s performance, according to a waiver Ms. Morris ultimately was given.

Part of Ms. Morris’s job was to be lead adviser on environment, safety, health and quality matters affecting the NNSA Production Office and its contract with a consortium that runs nuclear-related facilities for the government. Ms. Morris was the agency contracting officer’s representative on the matter and was required to deal regularly with the consortium’s representatives. A Leidos unit was joining the consortium at the time.

She discussed the matter with ethics officials in 2017. In a six-page waiver, her boss, NNSA Production Office deputy manager Teresa Robbins said she didn’t believe that Ms. Morris’s ties to Leidos were significant enough to prevent her from working on the contract.

Among reasons Ms. Robbins cited was that Leidos’s expected annual revenue from the consortium would be $13.5 million at most, an amount she said was “extremely small” relative to Leidos’s roughly $5 billion revenue in fiscal 2015.

In addition, Ms. Robbins wrote, the need for Ms. Morris to work on the matter “can’t be overstated.”

The waiver allowed Ms. Morris to work on matters that would affect Leidos as part of a group, but not on matters that would have any “special or distinct effect” on the company’s finances.

Ms. Morris didn’t respond to requests for comment. A spokesman for the Energy Department said that it and the Biden administration take “ethics very seriously and work diligently to ensure staff are following both the letter and spirit of ethics laws and regulations.” Ms. Robbins didn’t respond to requests for comment.

Because the federal ethics system grants substantial leeway to individual agencies to determine their own rules, a patchwork has emerged. The Consumer Financial Protection Bureau and FERC bar officials from owning specific companies the agencies regulate. The Defense Department doesn’t let certain senior officials own stock in the top 10 defense contractors, measured by their revenue from Pentagon contracts over the previous five years. The Securities and Exchange Commission bars its officials from owning shares in any company it is investigating or from doing short-term trading.

Other agencies let employees own stock in any companies so long as they don’t work on matters related to them.

Some agencies require that officials’ financial disclosure forms be reviewed not just by the ethics office but also by officials’ supervisors, who know what they’re working on.

The USTR doesn’t have additional stock-ownership rules for officials but leaves it to ethics officers to flag potential problems.

On Mr. Biden’s first day in office, Mr. Wu, a Harvard University law professor, joined the USTR as a senior adviser.

Among other duties, Mr. Wu worked on one of Mr. Biden’s international priorities—a digital trade agreement with Asian countries that would seek to lower impediments to U.S. technology companies doing business overseas. One goal was to promote U.S. tech companies and online retailers.

In March 2021, when Mr. Wu filed a financial disclosure report for him and his wife, ethics lawyers at the USTR noted several potential conflicts. He and his wife owned between $1 million and $5 million of stock in Amazon, a company that stood to benefit from the hoped-for new digital trade pact.

The shares were stock Mr. Wu’s wife acquired when she helped sell a company to Amazon, Mr. Wu told the Journal.

Ethics officials told Mr. Wu that to comply with the federal conflicts rule, he should sell the Amazon stock or stop working on the digital trade pact, according to emails between the USTR’s ethics officials and Mr. Wu.

Mr. Wu said he would look into selling the Amazon shares. In the meantime, ethics officials advised him to stop working on digital trade issues, according to the emails.

The USTR’s ethics officials didn’t sign Mr. Wu’s disclosure form, because they needed more information about his other assets to determine whether he was in compliance with the conflict rules.

About that time, Mr. Wu requested a “certificate of divestiture” from the Office of Government Ethics in order to defer capital-gains taxes on a potential sale of Amazon stock, a perk offered to federal employees who sell shares to avoid conflicts with their government roles.

The USTR’s ethics officials pressed Mr. Wu to resolve his financial conflict.

Mr. Wu said in an interview that the Office of Government Ethics advises employees not to sell stock until it makes a decision on the preferential tax matter. That advice is on its website.

“Given that there was a possibility that I might get a certificate of divestiture,” Mr. Wu said, it was “financially prudent” not to sell the stock at that point.

Mr. Wu continued working on general matters related to the trade pact, emails show.

In June, he gave a briefing to a Washington-based association that lobbies for technology companies, including Amazon. He provided tech executives and lobbyists an overview of the administration’s priorities, including the digital trade matter.

Mr. Wu said that USTR officials asked him to speak and that “no one ever mentioned anything to me about the presentation as inappropriate.”

Around that time, another USTR official noticed that Mr. Wu was included on emails regarding digital trade policy. Ethics officers were alerted.

In late June 2021, ethics officials confronted Mr. Wu.

“It has come to my attention that you may have been participating in digital trade issues that raise conflict of interest concerns,” wrote Ms. Kaye, the USTR’s chief ethics official, to Mr. Wu in an email on June 21, 2021.

“I want to remind you again about the criminal conflicts of interest law,” she wrote.

The next day, Mr. Wu asked in a phone call “if he needs to recuse himself if the immediate topic is about the broader area of digital trade and not Amazon specifically,” according to an email summarizing the call.

Ms. Kaye recommended he “go nowhere close to the COI line,” referring to the conflict-of-interest law, according to the email.

Ms. Kaye alerted U.S. Trade Representative Katherine Tai and her chief of staff about the situation.

A week later, Mr. Wu learned that the government had denied his request to defer capital-gains taxes on a sale of Amazon stock.

Then, Mr. Wu disclosed another potential conflict: His wife had recently joined the board of CarGurus Inc. This raised questions about whether he could work on trade issues involving the auto industry.

USTR Chief of Staff Nora Todd had a phone call with Mr. Wu on June 29. On the call, Ms. Todd told him she was unwilling to grant further recusal agreements because of his failure to comply with his prior restrictions.

“Recusal has not worked to date,” Ms. Todd told Mr. Wu, according to notes of the call, because he “has not followed the requirements.”

Ms. Todd told Mr. Wu that recusing himself from digital trade issues “should have been mentally easy to understand,” according to the call notes.

“I did recuse myself from all matters where Amazon was discussed,” Mr. Wu told the Journal.

Ms. Todd didn’t respond to emails seeking comment. A USTR spokesman said, “Our ethics officials acted to ensure that all staff followed existing federal rules and policies designed to avoid conflicts of interest.”

Mr. Wu was given 10 days to sell his Amazon shares and 90 days to resolve other conflicts.

To avoid conflicts with his wife’s work, he was advised that she should sell all stock received for her board service soon after receiving it.

Mr. Wu decided to quit. He cited his mother’s failing health and the rule’s impact on his wife’s career.

“My wife could not sit on the board of the company and always be selling the stock the minute she is being issued the stock,” Mr. Wu said.

“When one of the goals of the progressive movement is to get more women of color onto company boards, I didn’t want my wife to have to sacrifice what she was doing,” he said. “So it was obviously a bit disappointing for me.”

Mr. Wu’s final day at USTR was July 16, 2021.

Between Mr. Wu’s first day and last day at USTR, Amazon’s stock price rose nearly 10%, increasing the value of his Amazon stock by between $100,000 and $500,000.

Design by Andrew Levinson. Graphics by Stephanie Stamm. A color filter has been used on photos.

Campaign Legal Center files complaints with federal agencies following WSJ series

By Brody Mullins and Rebecca Ballhaus

A nonpartisan group that monitors government ethics filed a series of legal complaints alleging the federal government is failing to adequately enforce conflict-of-interest rules.

The Campaign Legal Center called on the executive-branch agency that oversees ethics rules to investigate what it called deficiencies in enforcement at several agencies. The group also requested that internal investigators at four federal agencies examine whether their ethics programs complied with federal rules.

The legal filings were prompted by a series of articles in The Wall Street Journal revealing that thousands of federal employees at 50 federal agencies held stock in companies that were regulated by the agencies where those employees worked.

The agencies “have repeatedly allowed senior officials to own and trade stock in companies that appear to create conflicts of interest with their official duties,” the complaint said. “An investigation can determine whether the scope and severity of deficiencies in the ethics programs’ guidance on financial conflicts of interest is greater than currently publicly known.”

Separately, some lawmakers on Capitol Hill say that changes in the political landscape in Washington could make it more likely that Congress takes up legislation next year to overhaul the government’s rules regarding stock ownership by federal officials.

Rep. Kevin McCarthy of California, the Republican lawmaker who is the front-runner to serve as House speaker, is considering a sweeping ethics-reform package aimed at restoring public trust in the government, an aide told the Journal.

Under consideration is legislation to ban or restrict members of Congress and senior executive branch employees from owning or trading stock, the aide said. Earlier this year, Mr. McCarthy said that if Republicans took control of the House, he would consider prohibiting lawmakers from holding or trading stocks. He didn’t support any Democratic bills proposing such a ban.

The Campaign Legal Center filed complaints with the inspectors general for the Environmental Protection Agency, Defense Department, Federal Trade Commission and Health and Human Services Department, in addition to the Office of Government Ethics.

Among the examples the group cited from the Journal’s reporting was an EPA official who reported owning oil and gas stocks with his husband; a defense official who traded stock in a Chinese company while the agency deliberated over whether to add the company to a blacklist; and an FTC official who traded stock in Facebook, now Meta Platforms Inc., while his office coordinated an investigation involving the company.

“The public has a right to know that the officials tasked with protecting the security of our country are always acting in the public’s interest, not in their own private financial interest,” said the complaint filed with the Defense Department.

The EPA official said he and his husband didn’t know about or direct trades in oil-and-gas companies, which were made by a financial adviser. The defense official said he wasn’t involved in blacklist discussions at the time his trades were made. The FTC official said a financial adviser handled his trading.

Some agencies defended their ethics programs. The Defense Department said it has “extensive guidance” on implementing ethics laws and regulations and said the Office of Government Ethics conducts detailed reviews each year of its ethics program.

An FTC spokesman said the agency refers possible ethics violations to the inspector general for investigation. The EPA has said officials are allowed to invest in energy companies so long as they aren’t working on policies that could affect their investments. HHS didn’t respond to questions about its ethics programs.

Efforts to pass a stock-trading ban—which has broad public support—briefly gained momentum this fall before stalling out.

Rep. Hakeem Jeffries (D., N.Y.), the top contender to succeed California Rep. Nancy Pelosi as the top Democrat in the House, in September said he supported efforts to restrict stock trading, although he pushed back on criticism that Democrats were moving too slowly on the measure.

Now, some on Capitol Hill believe the Republican takeover of the House could breathe new life into those efforts, although they also will face steep odds in the Senate.

Any effort aimed at strengthening executive-branch ethics rules could gain support among Republicans because President Biden oversees much of the executive branch. The Journal found that conflicts pervaded across three administrations, both Democrat and Republican.

Republican control of the House “creates an opportunity” for approving a stock ban, because the GOP’s slim majority will necessitate bipartisan cooperation, said Nick Zeller, a spokesman for Rep. Jared Golden (D., Maine), an author of such a bill.

Mr. Golden and Rep. Michael Cloud (R., Texas) hope to advance a bipartisan bill they introduced in August that would prohibit senior executive branch officials from owning and trading stock and encourage lawmakers to hold their investments in blind trusts.

Mr. Cloud said he plans to make the bill a priority next year. “As a senior member of the House Oversight Committee, a key focus of mine will be to work with both sides of the aisle to advocate for my bipartisan DIVEST Act to put an end to the decadeslong abuse senior level bureaucrats have gotten used to,” he said Monday in a statement to the Journal.

In October, in response to the Journal’s reporting, Rep. David Schweikert (R., Ariz.) introduced a similar bill banning lawmakers and federal employees from individual stock-trading. He said he has had running conversations with GOP leadership on ethics issues and expects them to gain greater traction next year.

Mr. Schweikert said in an interview that he has long supported a ban on lawmaker stock trading but that he hadn’t “given deep thought to the scale at which this sort of thing could be going on in the regulatory state.” After reading the Journal’s stories, he said he realized, “This is a big problem.”

In the Senate, Sen. Elizabeth Warren (D., Mass.) has introduced a set of government reform measures, including one that has won support from Republican Sen. Marsha Blackburn of Tennessee.

“I am committed to working with Republicans and Democrats to finally ban this alarming practice, end the stock trading, and start restoring trust,” Ms. Warren said in a statement to The Journal.

In a separate statement, Ms. Blackburn said: “It is extremely concerning that federal employees are trading stocks in the same sectors they are involved in regulating.”

Ms. Blackburn added that “Congress would be well suited to closely examine any potential conflicts of interest in the executive branch.”

A White House official declined to say whether Mr. Biden would support restrictions on lawmakers’ and executive-branch officials’ stock investments.

Joe Palazzolo and James V. Grimaldi contributed to this article.