GOP senator cited COVID when he dumped shares ahead of stock market crash: FBI records

GOP senator cited COVID when he dumped shares ahead of stock market crash: FBI records
Senator Richard Burr appears on CBS (Youtube/screen grab)
Economy

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After Sen. Richard Burr, R-N.C., told his broker to sell off more than a million dollars in stock a week before the 2020 coronavirus market crash, he called his brother-in-law, Gerald Fauth. Immediately after, Fauth called his wealth manager to sell off almost $160,000 in stock.

Fauth sounded “hurried,” according to a witness cited by the FBI in newly released documents. In explaining why he wanted to dump the stock, Fauth suggested he had special knowledge.

I know a senator, he said.

That appears to contradict what Burr’s lawyer told ProPublica, when we broke the news that the senator and his brother-in-law sold stock on the same day. In that story, the lawmaker’s attorney denied Burr and Fauth had coordinated.

That detail and others were revealed this week, after a judge ordered the Justice Department to further unredact documents related to its insider trading investigation into Burr. Federal prosecutors closed that investigation without filing charges last year, but as of earlier this year, a civil investigation by the Securities and Exchange Commission remained ongoing.

Burr and Fauth could not immediately be reached for comment about the latest document release. In the past, Burr has denied trading on material nonpublic information, and Fauth has repeatedly hung up on ProPublica when asked about his trades.

Here’s a rundown of what’s new from the filing:

A Previous Transaction

Before Burr’s big stock dump on Feb. 13, 2020, the senator engaged in another transaction that suggested he anticipated investor concerns.

The day before his big stock sell-off, Burr purchased $1,189,000 in the Federated U.S. Treasury Cash Reserves Fund, about three-quarters of all the money he and his wife had in their joint account. That purchase had not been previously reported. “Investors often purchase U.S. Treasury funds to hedge against a potential market downturn,” an FBI agent noted.

Why Did Burr Trade?

When the scandal first broke, Burr denied his trades were motivated by inside information he learned as a member of the health and intelligence committees, but rather by news reports from CNBC.

Though this section remains lightly redacted, the FBI appears to have interviewed someone involved in executing Burr’s stock sell-off. That person did not recall Burr mentioning CNBC.

The person said Burr cited the coronavirus, saying it could affect the stock market and cause problems with the supply chain, since American companies rely on Chinese suppliers. (Burr also apparently mentioned that the surge in support for Sen. Bernie Sanders as the Democratic presidential nominee was a risk to the market.)

Did Burr Have a Source?

The FBI’s application for a warrant to search Burr’s phone remains heavily redacted in places, but it cites extensive texts and phone calls with someone about the impending coronavirus crisis.

“In total, between January 31, 2020, and April 7, 2020, (redacted) and Senator Burr exchanged approximately 32 text messages, nearly all of which concerned, in one way or another, the COVID-19 pandemic,” an FBI agent wrote.

That person’s identity remains unknown.

But the exchanges Burr had with this person are part of the reason the FBI was alleging there was probable cause to believe “Burr used material, non-public information regarding the impact that COVID-19 would have on the economy, and that he gained that information by virtue of his position as a Member of Congress.”

One More Call

The day the scandal first broke, Burr was facing demands that he resign from left and right, including from liberal Rep. Alexandria Ocasio-Cortez and conservative Fox News host Tucker Carlson.

One of his first calls that evening? His brother-in-law.

According to the FBI, at 7:31 p.m. a call was placed from Burr’s cellphone to Fauth’s cellphone.

It lasted four and a half minutes. What was discussed is unclear.

At that point, it wasn’t yet publicly known that Fauth had dumped stock the same day as Burr. ProPublica broke that story two months later.

A week later the FBI asked a judge for a warrant to search Burr’s phone, news of which prompted Burr to step down as chair of the intelligence committee.

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