Investor sues Sen. Richard Burr over stock sales ahead of coronavirus pandemic
The North Carolina senator has run into problems over stock sell-offs.
An investor in Wyndham Hotel stock has sued Sen. Richard Burr in federal court, alleging the North Carolina Republican used inside information he learned as chairman of the Senate’s intelligence committee -- and which other investors could not have known -- to sell off his shares before they plummeted in value amid the coronavirus pandemic.
"Senator Burr owed a duty to Congress, the United States government, and citizens of the United States, including Plaintiff, not to use material nonpublic information that he learned by virtue of his duties as a United States Senator in connection with the sale or purchase of any security," the lawsuit says. "Senator Burr breached that duty by selling stock, including Wyndham stock, based on that material nonpublic information."
The senior Republican faced intense backlash last week after news reports revealed he sold up to $1.7 million in stocks -- many of them in key industries later crippled by the fallout from novel coronavirus -- on Feb. 13, before the markets began to tumble.
Burr filed disclosure reports revealing he sold off scores of his and his wife’s holdings, including as much as $150,000 worth of Wyndham stock, all on Feb. 13.
The senator responded to the outcry Friday by defending his decision and volunteering to submit to a Senate Ethics Committee investigation to determine whether he breached any laws or congressional rules.
"I relied solely on public news reports to guide my decision regarding the sale of stocks on Feb. 13," Burr said of the controversial trades. "Understanding the assumption many could make in hindsight, however, I spoke this morning with the chairman of the Senate Ethics Committee, and asked him to open a complete review of the matter with full transparency."
Burr’s office did not respond to questions about the lawsuit filed this week.
Thomas P. O’Brien, a former federal prosecutor who filed the lawsuit on behalf of an investor named Alan D. Jacobson, said the civil case offers one potential remedy for investors who believe the senator gained an unfair advantage in knowing to sell the stock before it lost almost two-thirds of its market value.
"The senator made an unusual trade," O’Brien said. "Our client was one of many people who traded without benefit of information that the senator had."
O’Brien said he believes the U.S. Securities and Exchange Commission should investigate to determine whether Burr ran afoul of the STOCK Act, a law passed in 2012 that specifically precludes lawmakers from using their access to confidential or secret information to guide their investing. Burr was one of two senators who voted against the legislation. The lawsuit alleges Burr violated the STOCK Act.
Burr has disputed those allegations. He issued a statement on Twitter saying he did not use inside information to make his investment decisions, but elected to sell his holdings after he "closely followed CNBC’s daily health and science reporting out of its Asia bureaus at the time."
Washington ethics experts from both political parties told ABC News they believe authorities should look into the details of the classified intelligence briefings Burr received during that timeframe.
Matthew Sanderson, a Republican, is an ethics lawyer with the Washington, D.C., firm Caplin & Drysdale. His firm is not involved in the civil case. He told ABC News he harbors doubts about Burr’s statement, calling it a "last gasp type of defense."
He said Burr’s assertion that he sold off his stocks based on television coverage of the outbreak would not explain why he, and not many other investors, acted on that public reporting.
"To me that doesn’t hold any water," Sanderson said.
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