There is no evidence that the trades were in response to the Capitol Hill phone call with a top aide for Sen. Orrin G. Hatch (R-Utah). But the conference call reveals the extent to which a direct pipeline of valuable political insight exists between Capitol Hill and Wall Street, one that ordinary Americans and investors do not enjoy.
“Political intelligence” firms — companies that sell their analysis of federal actions to investors — have drawn much of the scrutiny from lawmakers and investigators worried about potential insider trading. Last month, federal regulators issued subpoenas to the law firm Greenberg Traurig and an analyst at the brokerage firm Height Securities in connection with another spike in trading that occurred after information was shared about the government’s health-care decision.
But it is not just boutique firms and lobbyists offering political intelligence. Congress itself has become a source of sophisticated political analysis for investors, for whom every nugget of exclusive information can translate to millions of dollars in profit.
Ipsita Smolinski, managing director of Capitol Street, said she has asked other Senate staffers to participate in similar calls, though she declined to estimate how many had done so, or how often. She viewed the calls as innocuous.
“I wouldn’t expect anyone on a call — any staffer — to say anything they would not say to a researcher, a student, an investor or a reporter,” said Smolinski, adding that she routinely records such calls as part of an ongoing “commitment to transparency.”
She called it “highly unlikely” that her clients would have moved the market. Smolinski described the participants in the call with Hatch’s office as institutional investors, such as pension systems, mutual funds and hedge funds. Of interest was how the Obama administration would set rates paid to health insurers that participate in Medicare. She said the half-hour call took place in the morning but could not confirm the precise time.
Hatch spokeswoman Antonia Ferrier denied that the call had anything to do with the spike in trading or that the staff member revealed confidential information.
“No one working for Senator Hatch had any advance knowledge of this [Medicare] announcement — period,” said Ferrier, who argued that the staff member, Stephanie Carlton, actually made the wrong prediction on the call about the administration’s action.
According to an audio recording of the call obtained by The Washington Post, Carlton, a longtime health-care policy aide for Hatch, spoke cautiously, offering technical details and often attributing her facts to public information.