SEC is still investigating Sen. Richard Burr for insider trading, court filings say

By CNN Newsource

Published October 28, 2021 2:17 pm

By Tierney Sneed

A US Securities and Exchange Commission insider trading investigation into stock trades made by Sen. Richard Burr and his brother-in-law at the outset of the pandemic remains open, the SEC said in court filings made public this week.

Burr, a North Carolina Republican, sold $1.65 million in stock on February 13, 2020, the court filings revealed. The sales included tens of thousands of dollars in stock in the hospitality industry, which was particularly hard hit in coronavirus outbreak.

A Justice Department investigation into the trades was launched in March last year, soon after questionably timed trades by Burr and other lawmakers became publicly known. The Justice Department investigation — which was being done in coordination with the SEC — was closed in January, right before the inauguration. The new filings in the SEC dispute are the first public indication that an investigation into Burr is still active.

The new filings outline a series of calls, after Burr allegedly directed the sale, between the senator, his sister Brooke Burr and her husband, Gerald Fauth. Later that day, Fauth directed a broker to sell stocks in his wife’s account, the filing said.

The court filing, dated October 22 and initially filed under seal, was submitted in a dispute the SEC has brought in federal court, where the commission is seeking a court order compelling Fauth to testify in its investigation.

“Among other things, the Commission is investigating whether, on February 13, 2020, Senator Burr sold stocks on the basis of material nonpublic information in violation of the federal securities laws,” the SEC said in the filings. The commission pointed specifically to the STOCK Act, a 2012 law that bans federal lawmakers from making stock trades based on nonpublic information. (Burr was one of only three senators to vote against the legislation.)

ProPublica was the first to report the new filings.

The trades made by Burr and his brother-in-law first attracted scrutiny because of Burr’s position on Senate committees overseeing health policy and US intelligence. The Intelligence Committee, which Burr chaired at the time, had received periodic briefings on the coronavirus as the outbreak began to spread but it did not receive such a briefing the week of the trades.

The SEC says Burr possessed “material nonpublic information concerning Covid-19 and its potential impact on the U.S. and global economies.”

Neither Fauth’s attorney, nor an attorney for Burr or his Senate office responded to CNN’s inquiry about the filings.

The judge overseeing the subpoena dispute, which was filed in the Southern District of New York, has ordered a hearing for Friday.

According to a filing in the dispute from Fauth’s lawyer, after learning the Justice Department investigation had closed, Fauth’s lawyer did not hear from the SEC until March 12 of this year.

That Fauth also sold somewhere between $97,000 and $280,000 in stock the day that Burr sold his own stock has been public knowledge. But the new court filings shed light on the alleged phone conversations between Burr, Fauth and their brokers that day. At some point during the week of February 13, Burr had been staying at the Fauths’ residence, the SEC said.

The senator called his broker on February 13 a little before 9 a.m. and directed the sale, according to the filings. Fauth placed a two-and-half minute call to his wife a little after 11 that morning, the filings said. At 11:32 a.m., Sen. Burr placed a 50-second call with Fauth, and the next minute, Fauth called his broker’s landline, where he was told, according to the filings, that the broker had stepped out of the office. At 11:35 a.m., Fauth called another broker’s landline and had a 24-minute conversation, in which he directed the broker to sell stock in his wife’s account, the filings said.

The SEC first subpoenaed Fauth in May 2020. Fauth’s lawyers claim that he has a medical condition that prevents him from sitting for video testimony. According to the Fauth team’s filings, his lawyers have offered to submit written answers to the SEC’s questions instead. In their filings in the subpoena dispute, Fauth’s lawyers pointed to a 90-minute proffer they made to the DOJ and SEC in June 2020, which Fauth’s lawyers say was “sufficient” for the DOJ to close its investigation.

The SEC told the court that Fauth’s testimony is needed because he is “uniquely positioned to provide information concerning Senator Burr, the information the Senator possessed that he may have shared with Fauth, and Fauth’s own securities trading.”

Jeremy Herb contributed to this report.