House Brief Points Finger Back At Admin In Insider Trading Probe

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House lawyers filed a brief Friday rebuffing the Securities and Exchange Commission’s subpoenas for a GOP staffer and a congressional committee in its investigation into the leak of market-moving information to Wall Street.

And in it, after SEC lawyers had alleged the House aide “may have been” the source of the leaks, congressional counsel pointed the finger back at the Obama administration.

“The SEC purports to be investigating an alleged leak of a particular health care reimbursement rate which, if it occurred at all, must have originated at (the federal Centers for Medicare and Medicaid Services),” the House counsel wrote in the brief, which asks a Manhattan federal court to dismiss the SEC’s lawsuit to force compliance with the subpoenas.

As TPM has reported, the investigation centers on the leak of a pending policy change by CMS that reversed proposed Medicare funding cuts for private insurers. A flash report was distributed to stock traders before the change was publicly announced, and shares in major insurance companies spiked.

Sen. Chuck Grassley (R-IA) had implicated administration officials shortly after the leak became public in April 2013. But the tables seemed to have turned last month when SEC and Justice Department subpoenas of the House aide, Brian Sutter, and the Ways and Committee were made public. The SEC alleged that Sutter may have been the source of the leak and that he allegedly spoke on the day of the leak with a lobbyist who reportedly helped distribute the information to Wall Street.

But in their Friday brief arguing that Sutter and the committee should not be required to comply with the SEC subpoenas, House lawyers countered that only administration officials could have had “definitive knowledge” about the policy change that was leaked.

“CMS, of course, is part of the Executive Branch of the federal government (more particularly, part of the Department of Health and Human Services (“DHHS”)),” House counsel wrote in the brief, “and only Executive Branch employees could have had definitive knowledge of the 2014 reimbursement rate for the MA program prior to the April 1, 2013 CMS announcement.”

They also argued as expected that Sutter and the committee were exempt from the subpoenas under the Constitution’s Speech or Debate Clause. The House’s lawyers also noted that the SEC had not formally accused Sutter of wrongdoing and that the Justice Department had withdrawn its own subpoena for Sutter after the House counsel offered information on behalf of Sutter, as TPM had reported.

The SEC received the same information, the House attorneys said, but has continued pressing forward with the subpoenas, suggesting that the inquiry is “more about making headlines and less about obtaining information pertinent to any viable investigation,” they wrote.

“This sort of unsubstantiated effort to tarnish Mr. Sutter is reprehensible and wholly unbecoming an agency of the United States government,” they wrote. “Mr. Sutter was not a source for anyone’s material non-public information.”

House Brief SEC Subpoena

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