Tom Williams/CQ Roll Call via AP Images
FTC Chair Lina Khan testifies during a House Energy and Commerce Subcommittee hearing, April 18, 2023, on Capitol Hill.
The Revolving Door Project, a Prospect partner, scrutinizes the executive branch and presidential power. Follow them at therevolvingdoorproject.org.
Two weeks ago, Bloomberg published new reporting on FTC ethics official Lorielle Pankey’s recommendation that chair Lina Khan recuse herself from the agency’s case against Meta. Bloomberg released an unredacted memo written by Pankey, wherein she states, “In my opinion, there is a reasonable appearance concern with her participation in this matter,” while conceding that it would not “constitute a per se federal ethics violation.”
In other words, the Federal Trade Commission’s top official thought that the catchall ethics provision (“this looks bad,” basically) applied to Khan because of her long-standing explicit commitment as both a public servant and intellectual to the notion that existing antitrust laws should be applied to Big Tech platforms.
This ethics judgment was music to the ears of the media organizations, Republicans, and antitrust hacks who have been attacking Lina Khan throughout her leadership. Beyond being wrong and selective in singling out FTC officials for ethics concerns, the problem with Pankey’s opinion is deeply ironic. Pankey herself has a legitimate conflict of interest in relation to Meta.
As The Wall Street Journal reported last Friday, Pankey’s financial disclosures reveal that she owns somewhere between $15,001 and $50,000 in Meta stock—a pretty significant financial interest in a company that wants to derail Khan’s efforts and pursue acquisitions with impunity. The stock is held in a joint account with Pankey’s father, but she retains ownership of it. She claims not to have “control or influence” over the holdings, though how that works is unclear.
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Media organizations that jumped at the opportunity to take shots at Khan did not bother to look into the ethics official who made their stories work. In its initial reporting, Bloomberg quoted former Republican FTC chair William Kovacic, who described Khan’s actions as unprecedented and “playing with fire.” The Wall Street Journal editorial page published its 67th op-ed attacking Khan, claiming that the memo “raises questions about Ms. Khan’s transparency.” The Washington Examiner called on Congress to investigate Khan for supposedly ignoring ethics officials. While the Examiner is the only outlet explicitly calling for a congressional investigation, the purpose of each article is to lay the groundwork for a congressional inquiry that appears objective and nonpartisan—and it worked.
Indeed, the day before Pankey’s conflict was revealed, House Republicans Jim Jordan and Cathy Rodgers seized on her memo to pen a letter to Chair Khan announcing an oversight investigation regarding her nonrecusal in the Meta case. Jordan—who is accused of his own unethical cover-up of ongoing sexual abuse by a team doctor during his time as assistant coach of Ohio State University’s wrestling team—used Pankey’s memo to claim that Khan provided “misleading testimony” to his subcommittee in April. In fact, Khan had accurately testified to the subcommittee that she made recusal decisions “consistent with the legal statements” made by Pankey, referring to the fact that Pankey said Khan’s participation would be legally allowable.
Media organizations that jumped at the opportunity to take shots at Khan did not bother to look into the ethics official who made their stories work.
The revelation about Pankey’s finances dismantles any pretense that the attacks on Khan are anything but another round of hypocritical, manufactured outrage targeting progressive antitrust enforcement. While Pankey agreed that Khan’s adjudication of the Meta case would not represent a per se violation of ethics, the fact is that Pankey holding Meta assets while weighing in on the Meta case could represent a per se violation, which is why we at Revolving Door Project have asked the FTC inspector general to investigate.
It should come as no surprise that Pankey appears to have ulterior motives in this affair, as Bloomberg’s own reporting raised several red flags. Per Bloomberg’s reporting, Pankey’s memo wasn’t a document produced for Khan’s review—their meeting consisted of oral advice. In fact, the memo was produced at the behest of former FTC Commissioner Christine Wilson, a known Khan-hater and flouter of ethics concerns. The memo was not even provided to Khan. Nevertheless, media organizations and Republicans ran with the opportunity to pretend that it was a smoking gun that could finally take down the chair. The fact that Wilson essentially commissioned Pankey’s written remarks should’ve been enough to dispel any pretext that this was a legitimate ethical concern rather than partisan hackery. Thankfully, Pankey’s own financial disclosures have made that clear.
It’s worth pointing out that Khan’s alleged ethics concern does not involve any monetary conflicts, in contrast to the long history of corporate revolvers souring the reputation of the FTC. While reporting on the matter conveniently obfuscates the matter, Khan’s grave sin was merely voicing an opinion as a private individual prior to her time at the FTC about Facebook’s acquisition strategy. Those comments were unrelated to Meta’s acquisition of Within, which was not proposed until Khan joined the FTC. This is why Pankey had to admit that Khan did not engage in an ethics violation.
The irony is that Pankey did have a monetary conflict in the matter, which, according to experts, was not in line with federal regulations. How can an ethics official’s recommendation be taken seriously when she is not up-front about her own conflict in the same matter?
Pankey never should have been the ethics official in any situation involving Meta. The bigger issue, to be clear, is that no senior regulatory officials—especially those overseeing ethics decisions—should be permitted to hold individual stocks. Officials could simply hold shares in investment funds, with a negligible difference in return on investment, to avoid these types of unethical-but-not-illegal conundrums. Pankey is not uniquely guilty in this regard, but her stock holdings erode any and all credibility of both the oral advice and written memo. In light of her finances, and the fact that Wilson requested it be drafted, the memo is not worth the paper it was written on.
The media outlets that chose to take Pankey’s words at face value without the slightest bit of digging or inclusion of independent experts should be embarrassed, though the general public can be forgiven for expecting an ethics official to act ethically.
Pankey’s memo is merely the latest piece of ammunition in a Republican witch hunt aimed at Khan to protect their corporate constituency, which will culminate in her testimony before the House Judiciary Committee on July 13th. The real story, it seems, is not that Khan (properly) ignored Pankey’s recommendation. Rather, this is yet another instance proving that the standards for, and oversight of, recusals across the government, from SCOTUS to executive agencies, are far too lax. It’s time for an ethical regime that prevents corporations from exerting influence, directly or indirectly, over the nation’s regulators, judges, and lawmakers.
