Senator Richard Burr (R-NC) announced yesterday that he will temporarily step down as chairman of the Senate Intelligence Committee until the FBI wraps up its investigation into stock trades he made shortly before the pandemic torpedoed the market.
Sen. Burr said he stepped down because the probe into his finances is affecting the committee’s ability to work effectively. “This has become a distraction to the work on a committee that’s really, really important to the national security and a distraction to its members, and I thought this was the best thing to do,” he said in a statement to reporters. The committee’s top Democrat, Mark Warner (D-VA), said that he agreed that it was appropriate for Burr to temporarily step aside.
The FBI is conducting an investigation into politicians who sold their investments right before the government announced sweeping coronavirus-related lockdowns in March. The announcement sparked a major stock market sell-off. However, a handful of lawmakers sold theirs just in time to avoid major losses. Federal law prohibits lawmakers from trading stocks based on privileged congressional information. As a result, the FBI launched a probe into a number of prominent politicians. However, after weeks of investigation, the FBI is zeroing in on Mr. Burr.
Burr sits squarely at the center of the FBI probe because everyone else involved in the investigation had a solid defense. The other subjects told investigators that they don’t manage their own money, and they had no input into the sale of their assets. It’s not insider trading if you don’t sell your own stocks, so the defense is pretty solid assuming it’s true.
In addition, many of these senators in question only small portions of their portfolio. This is also inconsistent with insider trading. After all, if you knew a disaster was coming, you probably would sell more than 0.6% of your portfolio. However, that’s the exact amount that Kelly Loeffler (R-GA) unloaded before the pandemic. For the most part, Loeffler and the other senators under investigation avoided further scrutiny for these reasons.
Republican Senator Richard Burr will temporarily step aside as intelligence committee chair during a federal investigation into whether he sold shares ahead of a market plunge tied to the coronavirus pandemic, Senate Majority Leader Mitch McConnell said https://t.co/x1OApQvzH4 pic.twitter.com/MYgqgRBQoZ
— Reuters (@Reuters) May 14, 2020
However, Burr can’t make the same argument. He made the decisions to sell his stocks, and the assets he sold represented a large portion of his portfolio. Burr sold as much as $1.7 million worth of his and his wife’s stocks on February 13th. Based on those assets closing prices on March 19th, the sales helped the couple avoid at least $250,000 worth of losses.
As chairman of the Senate Intelligence Committee, Burr received briefings on the pandemic prior to the sale. There is an obvious cause to suspect that this privileged information motivated him to make the sale.
Burr released a statement in his defense that said he only based his decision on publicly available information. “I relied solely on public news reports to guide my decision,” he said. “Specifically, I closely followed CNBC’s daily health and science reporting out of its Asian bureaus at the time,” he added.
A Weak Defense
Unfortunately for Burr, this is a very weak defense. If you have highly-privileged secret information, the public information doesn’t matter. Saying you chose to ignore the privileged info in favor of publically-available information isn’t really a defense at all. A defense built around the claim that that they could've made the same trading decision with public info won’t fly very far with a judge.
On Wednesday night, the FBI escalated its investigation in Burr when it seized his cell phone. As of now, the case against Burr is almost entirely circumstantial. However, the phone could produce evidence that directly incriminates the senator.
Senate Majority Leader Mitch McConnell (R-KY) will decide who takes over as chairman of the intelligence committee. Generally, senators can’t chair more than one committee at the same time, so there’s a chance that McConnell’s decision could shuffle up some of the senate committee rosters. If Burr is cleared, he expects to return to his role as chairman. However, until the investigation is concluded, Burr’s future remains uncertain.
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