WASHINGTON — Seeking to move past allegations that she has tried to profit from the coronavirus crisis, Senator Kelly Loeffler, Republican of Georgia, announced on Wednesday that she and her husband would divest from all individual stocks and move their money into mutual and exchange-traded funds.
Ms. Loeffler, a freshman senator who was already in a competitive race to keep her seat, has faced weeks of attacks from her rivals in both parties and scrutiny from the news media over millions of dollars’ worth of stock trades her portfolio made just before the coronavirus pandemic roiled the financial markets. Her critics questioned whether Ms. Loeffler — and a handful of other lawmakers who actively traded stocks during the same period — had used nonpublic information they received from their jobs as senators to make money or avoid financial losses suffered by other investors as the pandemic spread.
Ms. Loeffler adamantly denied that again on Wednesday, insisting that she had done nothing wrong, legally or ethically. The stock trades were all made by outside financial advisers at Morgan Stanley, Goldman Sachs, Sepio Capital and Wells Fargo, who independently manage her investments “without our input, direction or knowledge,” she said. Ms. Loeffler added that she was not privy to any meaningful nonpublic information about the virus because of her job in the Senate.
Still, the decision underscored how Ms. Loeffler’s vast wealth, once thought to be an asset for her campaign, had become a political distraction and a potential liability as she seeks to hold her Senate seat this fall against Democratic and Republican challengers. A former businesswoman with no political experience, Ms. Loeffler was appointed to fill Georgia’s vacant Senate seat late last year and pledged to put at least $20 million into her own campaign.
“I’m doing this because this transparency is being abused for political gain, and the steps I’ve taken to distance myself from these accounts are being ignored,” she said. “I left the private sector to serve the people of Georgia, not make a profit.”
Unlike stocks, which represent ownership slices of individual companies, mutual funds and exchange-traded funds are buckets of individual assets — filled up with stocks or bonds — that gain or lose value based on the aggregate value of what is in the bucket. By moving money from stocks to such investments, Ms. Loeffler can insulate herself more easily from the appearance that she may be buying and selling individual stocks based on information about specific businesses or the environment in which they operate.
Though they have drawn the bulk of public attention, individual stocks represent only about 5 percent of Ms. Loeffler’s vast wealth, according to people familiar with her finances, even though her husband, Jeffrey Sprecher, founded the firm that owns the New York Stock Exchange. The pair is estimated to be worth more than $500 billion.
Ms. Loeffler said the same outside financial firms would handle the stock sales and fund purchases. The sales are expected to be completed by the end of the week, Ms. Loeffler said, and she plans to report the transactions in Senate filings this month.
Ms. Loeffler is not the only senator whose financial transactions in January and February have drawn scrutiny. The Securities and Exchange Commission and the Justice Department are reviewing sales made in February by another Republican, Senator Richard M. Burr of North Carolina, who is the chairman of the Intelligence Committee, and could expand the inquiry to other lawmakers. Unlike other senators, Mr. Burr has not denied that he sold off a large portion of his holdings out of fears of the coronavirus, but he insists that he did so legally, based only on public information.
Under the Stock Act, it is illegal for lawmakers or their staff aides to make investment decisions based on nonpublic information they receive in the course of their work. Trades based on publicly available information are considered fine.
Experts say Ms. Loeffler’s problems are probably more political than legal given the state of her race to maintain the Senate seat this fall.
Polling commissioned by Representative Doug Collins, a fellow Republican challenging Ms. Loeffler, indicated that weeks of headlines over the stock trades had rapidly worn away at her public image. The most recent survey, conducted last week, showed Ms. Loeffler in third place, behind Mr. Collins and a leading Democratic candidate, the Rev. Dr. Raphael G. Warnock. There have not been recent public surveys to confirm the findings.
Despite Ms. Loeffler’s admonition, her opponents continued to pile on Wednesday, questioning why she would not put all of her assets into a blind trust to eliminate any doubt about the propriety of her family’s investments.
Dan McLagan, a spokesman for Mr. Collins, compared Ms. Loeffler’s decision to a guilty plea and said the senator was “less credible than the Chinese government,” which has been accused of hiding the full extent of the coronavirus’s impact on their country.
“Same advisers, different funds and no blind trust?” he said. “We’re not buying it.”
Helen Kalla, a spokeswoman for Senate Democrats’ campaign arm, said the damage had been done to public trust in Ms. Loeffler.
“Senator Loeffler is an unelected political megadonor who was appointed through a corrupt process, and her short tenure raised ethical questions even before this stock scandal,” she said.