The powerful chairman of the Senate Intelligence Committee is under federal investigation after selling millions of dollars in stocks after he received intelligence briefings in late January about the emerging economic impact of the coronavirus outbreak, according to news accounts that were first reported Monday by CNN.
Sen. Richard Burr is one of four lawmakers to face accusations of insider trading but now becomes the first to face a criminal probe in the matter.
The three others include Republican Sens. Kelly Loeffler of Georgia, James Inhofe of Oklahoma, and Democratic Sen. Dianne Feinstein of California.
What’s the issue?
Reports say the four senators, as members of the Intelligence Committee, received a confidential Jan. 24 briefing about the toll the coronavirus outbreak would have on cargo shipments and supply chains. The briefing was more than a month before the virus was declared a pandemic March 11. In the days afterward, reports say stocks owned by the senators or their spouses were sold off in industries that were later most stricken by the outbreak.
There is no early indication that any of the sales, including Burr’s, broke any laws or violated Senate rules, CNN reported.
Each has denied any wrongdoing.
The Justice Department and the Securities and Exchange Commission are only in the early stages of looking into Burr’s transactions in which he sold between $628,000 and $1.7 million in stocks Feb. 13, CNN reported, citing people familiar with the investigation.
A separate lawsuit
The North Carolina Republican was already facing a separate federal lawsuit by an investor in the Wyndham Hotel chain who accused Burr of selling off as much as $150,000 in stock before it plunged nearly two-thirds in value.
The lawsuit, filed by Thomas P. O’Brien, a former federal prosecutor on behalf of an investor named Alan D. Jacobson, states the intelligence briefings Burr received as chairman of the Senate Intelligence Committee would have provided he and others on the panel an unfair market advantage.
“Senator Burr owed a duty to Congress, the United States government, and citizens of the United States, including Plaintiff, not to use material nonpublic information that he learned by virtue of his duties as a United States Senator in connection with the sale or purchase of any security,” the lawsuit says, according to ABC. “Senator Burr breached that duty by selling stock, including Wyndham stock, based on that material nonpublic information.”
A firestorm in Washington
The first news account of the selloff last week caused a firestorm in Washington.
The liberal watchdog group Citizens for Responsibility and Ethics in Washington, D.C., filed an ethics complaint against Burr and Loeffler on March 20, alleging possible violations of the Stock Act and insider trading laws.
On Monday, U.S. Rep. Matt Gaetz of Florida called on Senate Majority Leader Mitch McConnell to remove Burr from his role as Intelligence Committee chairman while he is under investigation.
“Republicans need to do a better job cleaning our own house,” Gaetz wrote Monday on Twitter, using the hashtag #wheresmitch.
The Stock Act
The Stock Act, passed in 2012 under the Obama administration, makes it illegal for lawmakers to use their access to guide investment decisions.
Insider trading is subject to a maximum of $5 million in fines (up to $25 million for a business entity), and up to 20 years imprisonment, or both.
Legislators deny wrongdoing
Last week, Burr defended the stock sale and invited a Senate Ethics Committee investigation to look into his actions.
“I relied solely on public news reports to guide my decision regarding the sale of stocks on Feb. 13,” Burr said, according to ABC. “Understanding the assumption many could make in hindsight, however, I spoke this morning with the chairman of the Senate Ethics Committee and asked him to open a complete review of the matter with full transparency.”
The Washington Post quoted Burr’s lawyer, Alice Fisher, who said in a statement the law allows any American, including a senator, to “participate in the stock market based on public information, as Senator Burr did. When this issue arose, Senator Burr immediately asked the Senate Ethics Committee to conduct a complete review, and he will cooperate with that review as well as any other appropriate inquiry. Senator Burr welcomes a thorough review of the facts in this matter, which will establish that his actions were appropriate.”
Burr and Loeffler have also issued public statements on social media, declaring they have done nothing wrong.
According to Senate records, Feinstein’s husband sold between $1.5 million and $6 million in stock of Allogene Therapeutics, a biotech company, in January and February.
Feinstein’s spokesperson said the senator denies any wrongdoing and “has no involvement in any of her husband’s financial decisions.”
Inhofe has since said he was not at the briefing. Records show he sold five stocks, worth between $180,000 and $400,000, in January, and another for $50,000 to $100,000 in February, according to CNN.
“I do not have any involvement in my investment decisions,” he wrote in a statement addressing the allegations first reported by The New York Times. “In December 2018, shortly after becoming chairman of the Senate Armed Services Committee, I instructed my financial advisor to move me out of all stocks and into mutual funds to avoid any appearance of controversy. My advisor has been doing so faithfully since that time ...”
Loeffler, Feinstein and Inhofe all say they have not been contacted by the FBI.
Kelly Loeffler’s involvement
Loeffler had been on the job less than three weeks when she attended the private, senators-only briefing on the spread of COVID-19.
In the days and weeks after, financial disclosures show that either she or her spouse sold 27 stocks valued between $1.275 million and $3.1 million from Jan. 24 through Feb. 14, according to Senate records.
They also purchased three stocks at a value of $450,000 to $1 million, including shares in Citrix, a software company that has gained about 15% in value since Loeffler and her husband bought the stock last month, according to CNN.
Scrutiny of her financial deals have led Democrats and Republicans to ask for her to resign or be investigated.
Loeffler is married to Jeffrey Sprecher, the chairman of the New York Stock Exchange and CEO of Intercontinental Exchange, a financial and commodities markets company.
Intercontinental Exchange, also Loeffler’s former employer, has since said the transactions made on her behalf were in compliance with its policies.
Another case in U.S. House
Last week, Tribune News Service reported Rep. Susan Davis of California and her husband sold stocks related to travel and tourism less than two weeks after members of the House of Representatives received a closed-door briefing on the outbreak of the novel coronavirus.
The House had a briefing on the coronavirus threat that was exclusive to all members Jan. 29, according to an invitation obtained by Tribune. Briefers included Centers for Disease Control and Prevention Director Dr. Robert Redfield and Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases.
Tribune’s analysis of financial disclosure reports of members of Congress found that Davis, a retiring Democrat who represents the San Diego area, sold part of her stocks of Miami-based cruise line giant, Royal Caribbean Cruises, and her husband sold his stocks of Alaska Air on Feb. 11 — 13 days after the briefing.
— Information provided by Tribune News Service was used to supplement this report.
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