The Department of Justice is investigating whether lawmakers engaged in insider trading just before the coronavirus caused the stock market to plummet.
Republican congressman from North Carolina, Richard Burr, who made national headlines for selling $1.7 million in stock that saved him at least $250,000, is now the target of a DOJ review, CNN first reported.
Other lawmakers sold huge amounts of their stock weeks prior to the bear market, including Democrat Senator Dianne Feinstein of California, and Republicans Kelly Loeffler and David Perdue of Georgia, and James Inhofe of Oklahoma. It isn’t known if they are currently under investigation, however.
Burr sits on two committees that received detailed briefings about the growing coronavirus epidemic, one of which occurred on Jan. 24. Burr sold his shares on Feb. 13. Considered the Senate’s leading authority on pandemics, Burr is the author of the 2006 Pandemic and All-Hazards Preparedness Act. He sits on the Senate health and intelligence committees, which were briefed on the coronavirus.
Congress passed a law in 2012 that explicitly barred lawmakers from insider trading, which Burr voted against at the time. He says that there were already laws against insider trading, but experts believe that they were unclear as to whether they applied to lawmakers.
Burr insists that his actions were based on publicly available information. He, unlike the aforementioned lawmakers, directly handles his trading. The other lawmakers say they have advisers who handle the trading for them. Burr has requested the Senate ethics panel to review his trading.
An attorney for Burr, Alice Fisher, said he would cooperate in the Senate 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,” Fisher said.
Most insider trading cases involved information about a specific company or industry that can be considered “material” information. Burr owned a diverse range of stocks that ranged from the hotel industry to technology and pharmaceuticals.
The material information would have to be highly specific. Conversely, non-material information would be more general and opinion-based.
“The more general was the information, the easier it is to argue it wasn’t insider trading,” said Doug Davison, a former enforcement attorney at the Securities and Exchange Commission, according to Wall Street Journal. However, he added, “if they said, ‘We think the hotel industry is going to need a bailout,’ the more difficult it is to say it wasn’t material.”
According to former deputy general counsel of the SEC Andrew Vollmer, the case could be a legal gray area because insider trading is usually tied to a leak of valuable facts, such as measures of undisclosed earnings. Much of the debate about the coronavirus turned on estimates and predictions about the future, which are still just an opinion.
“All it’s doing is looking into a crystal ball, not a historical fact,” Vollmer explained. “Burr would have good arguments to defend himself.”
Self-quarantining, lockdowns, social distancing and many municipalities issuing stay at home orders to limit the spread of the coronavirus, also known as COVID-19, caused markets to plummet. The Dow Jones Industrial Average dropped more than 25 percent since the beginning of the year.
The world has been set back financially, as there are about 775,000 confirmed cases and more than 37,000 deaths, according to Johns Hopkins’ latest tracking data.