It was only a matter of time. Senate Intelligence Committee Chairman Sen. Richard Burr (R-N.C.), who sparked bipartisan outrage with his stock sell-off before the market crashed, was sued on Monday by an angry shareholder. That shareholder, Alan D. Jacobson, filed a suit calling Burr a “scofflaw during a time a time of national crisis.”
Jacobson’s suit, filed in the U.S. District Court for the District of Columbia, got right to the point.
“This lawsuit is brought to redress acts of securities fraud committed by Defendant Richard M. Burr, a United States Senator, who has acted as a scofflaw in a time of national crisis,” the lawsuit began. “On February 13, 2020, exploiting material information unavailable to the public, Senator Burr and his wife engaged in 33 transactions by which he sold securities in a variety of publicly-traded companies for his personal gain.”
“In doing so, he injured shareholders–including Plaintiff Alan D. Jacobson–who purchased and/or continued to hold securities in those same companies,” the filing continued. “Plaintiff’s ability to procure relief in the federal courts is unimpaired by the fact that Senator Burr is a Member of the U.S. Senate, where in his capacity as Chairman of the Senate Intelligence Committee he learned the nonpublic material information on which he based his stock trades.”
Jacobson said that Burr abused his power during a time of crisis in America, but that it is really “elementary securities fraud” for which Burr ought to be held accountable in a court of law.
“The suit targets targets Senator Burr’s self-enrichment at the expense of members of the public; it neither infringes impeachment powers vested in the U.S. Congress, nor rights North Carolina voters hold to elect a senator of their choosing,” the filing said.
On Feb. 25, Burr was briefed by officials from the State Department, the Department of Health and Human Services, Centers for Disease Control and the National Institutes of Health. Two days later, Burr remarked during a luncheon–which included wealthy donors–that the COVID-19 pandemic was “probably more akin to the 1918 pandemic.”
There was no such dire warning to the general public. As Burr was responding at length to NPR’s report on this, calling it a “hit piece,” reporting about his stock dump emerged and only resulted in more outrage.
It was revealed that two weeks prior to the luncheon Burr and his wife unloaded stocks in industries that have since been particularly hit hard by the COVID-19 pandemic and concomitant market crash. Per Open Secrets:
Between the Burrs’ two accounts, they sold up to $150,000 worth of stock in Wyndham Hotels & Resorts, which lost almost two-thirds of its market value since Feb. 13. They sold up to $150,000 in Extended Stay America, another hotel company that lost half its value over the last month. Burr also sold up to $65,000 of stock in Park Hotels & Resorts, which saw its stock price drop from nearly $24 to under $5. The hotel industry is asking President Donald Trump for a bailout as Americans increasingly avoid travel.
This sell-off happened a week after Burr co-bylined an op-ed reassuring the American people about the Trump administration’s response; it happened not long after Burr was privy to a Jan. 24 senators-only briefing on the spread of the novel coronavirus.
In a statement released last Friday, Burr said he relied “solely on public news reports” in making his investment decisions. He also said he asked the chairman of the Senate Ethics Committee to “open a complete review.”
But Jacobson didn’t wait on the outcome of an “ethics review.” Jacobson is a shareholder in Wyndham Hotels & Resorts. The lawsuit claims that Burr profited off of “material nonpublic information” about the seriousness of COVID-19 and harmed Jacobson through a substantial stock sell-off. The plaintiff accused Burr of violating the STOCK Act:
While Wyndham’s securities traded at artificially inflated and distorted prices, Senator Burr personally profited by selling shares of Wyndham common stock at a price of approximately $59.37 on February 13, 2020, while in possession of adverse, material nonpublic information about the COVID-19. Had Plaintiff and the market known of the material nonpublic information in Senator Burr’s possession regarding COVID-19, and on which Senator Burr traded, Wyndham’s stock price on February 13, 2020 would have been substantially lower. Senator Burr and his wife sold up to $150,000 of Wyndham stock on that date, and therefore he and his wife pocketed up to $150,000 in illegal insider trading proceeds at Plaintiff’s expense.
Plaintiff suffered damages because, in reliance on the integrity of the market, he maintained his stock holdings in Wyndham at artificially inflated prices as a result of Defendant’s violations of Section 10(b) and 20A of the Exchange Act.
Plaintiff purchased and continues to hold Wyndham stock. As set forth above, Senator Burr and his wife sold Wyndham stock at artificially inflated prices based on material nonpublic information that Senator Burr learned by virtue of his duties as a United States Senator. Senator Burr had a duty to keep this information confidential and not to trade securities based on that information. Senator Burr breached his duty by trading Wyndham stock on February 13, 2020 based on that information, thereby causing Plaintiff damage.
Jacobson is seeking a jury trial.
You can read the complaint below.
[Image via YouTube screengrab]
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