(Updates with further details on case)
By Nate Raymond, Jonathan Stempel and Sarah N. Lynch
NEW YORK/WASHINGTON, June 20 A U.S. judge on
Friday directed the House Ways and Means Committee and a staffer
to appear at a July 1 hearing to address their alleged refusal
to respond to U.S. Securities and Exchange Commission subpoenas
as part of an insider trading probe.
The order by U.S. District Judge Paul Gardephe in New York
covers both the committee and Brian Sutter, staff director for
its healthcare subcommittee and came at the SEC's request.
The SEC said it is examining whether material nonpublic
information concerning an April 1, 2013 announcement by the
Centers for Medicare and Medicaid Services of 2014 reimbursement
rates for a Medicare program was leaked improperly, and whether
anyone traded on that information.
"This cannot be good for inter-governmental relations
between the SEC and Congress," said Bradley Bondi, a partner at
Cadwalader, Wickersham & Taft and former counsel to two SEC
commissioners. He called the matter a "rare dispute."
According to the SEC, the House committee has resisted the
subpoenas, in part by arguing that the U.S. Constitution shields
lawmakers from having to testify or turn over documents.
A lawyer for the committee was not immediately available for
comment. Sutter's lawyer declined to comment.
The motion followed earlier reports of an insider trading
investigation into whether congressional staff helped tip
traders about the CMS announcement.
"Immunity will be the focal point of the legal controversy,"
said Karl Manheim, a professor at Loyola Law School in Los
The initial SEC subpoena to the House committee was
previously disclosed by the committee's chairman, Rep. David
Camp (R-Michigan), according to the May 9 Congressional Record.
That same day, Sutter disclosed receiving subpoenas from the
SEC and a grand jury in Manhattan.
In court papers on Friday, the SEC said it was looking into
an email that a lobbyist at the law firm Greenberg Traurig sent
to broker-dealer Height Securities regarding a deal struck in
Congress about the Medicare rates.
It said that email was 70 minutes before CMS announced the
rates after U.S. markets closed, and about 30 minutes before
Height issued a report suggesting that the change could help
companies such as Humana Inc and Health Net Inc.
The SEC said the share prices of both companies jumped after
the report, with Humana's rising 7 percent in the last 15
minutes of trading.
Sutter, meanwhile, had on the day of the announcement been
emailing the Greenberg Traurig lobbyist about the termination of
a client from the Medicare program, the SEC said. Both then
spoke on the phone for three minutes, which was 10 minutes
before the lobbyist emailed Height, the SEC said.
Greenberg Traurig spokeswoman Jill Perry said; "We are
cooperating with the inquiry and will continue to do so." A
Height spokesman did not respond to a request for comment.
The case is SEC v. Committee on Ways and Means of the U.S.
House of Representatives et al, U.S. District Court, Southern
District of New York, No. 14-mc-00193.
(Reporting by Nate Raymond and Jonathan Stempel in New York,
and Sarah N. Lynch and Emily Stephenson in Washington, D.C.;
Editing by Chris Reese, Bernard Orr)