House Committee Ordered To Hearing As SEC Probes Insider Trading
(Reuters) - A U.S. judge on Friday directed the House Ways and Means Committee and a staffer to appear at a July 1 hearing to address their alleged refusal to respond to U.S. Securities and Exchange Commission subpoenas as part of an insider trading probe.
The order by U.S. District Judge Paul Gardephe in New York covers both the committee and Brian Sutter, staff director for its healthcare subcommittee and came at the SEC's request.
The SEC said it is examining whether material nonpublic information concerning an April 1, 2013 announcement by the Centers for Medicare and Medicaid Services of 2014 reimbursement rates for a Medicare program was leaked improperly, and whether anyone traded on that information.
"This cannot be good for inter-governmental relations between the SEC and Congress," said Bradley Bondi, a partner at Cadwalader, Wickersham & Taft and former counsel to two SEC commissioners. He called the matter a "rare dispute."
According to the SEC, the House committee has resisted the subpoenas, in part by arguing that the U.S. Constitution shields lawmakers from having to testify or turn over documents.
A lawyer for the committee was not immediately available for comment. Sutter's lawyer declined to comment.
The motion followed earlier reports of an insider trading investigation into whether congressional staff helped tip traders about the CMS announcement.
"Immunity will be the focal point of the legal controversy," said Karl Manheim, a professor at Loyola Law School in Los Angeles.
The initial SEC subpoena to the House committee was previously disclosed by the committee's chairman, Rep. David Camp (R-Michigan), according to the May 9 Congressional Record.
That same day, Sutter disclosed receiving subpoenas from the SEC and a grand jury in Manhattan.
In court papers on Friday, the SEC said it was looking into an email that a lobbyist at the law firm Greenberg Traurig sent to broker-dealer Height Securities regarding a deal struck in Congress about the Medicare rates.
It said that email was 70 minutes before CMS announced the rates after U.S. markets closed, and about 30 minutes before Height issued a report suggesting that the change could help companies such as Humana Inc (HUM.N) and Health Net Inc (HNT.N).
The SEC said the share prices of both companies jumped after the report, with Humana's rising 7 percent in the last 15 minutes of trading.
Sutter, meanwhile, had on the day of the announcement been emailing the Greenberg Traurig lobbyist about the termination of a client from the Medicare program, the SEC said. Both then spoke on the phone for three minutes, which was 10 minutes before the lobbyist emailed Height, the SEC said.
Greenberg Traurig spokeswoman Jill Perry said; "We are cooperating with the inquiry and will continue to do so." A Height spokesman did not respond to a request for comment.
The case is SEC v. Committee on Ways and Means of the U.S. House of Representatives et al, U.S. District Court, Southern District of New York, No. 14-mc-00193.
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