Sen. Charles E. Grassley, the Iowa Republican who has been leading an inquiry into “political intelligence” firms, said this week that he is not seeking to dismantle such firms or vilify the actions of Capitol Hill staffers who have communicated with them.
These firms hire armies of consultants to scour Washington for bits of information on federal actions that could influence the financial markets, and then sell the information to Wall Street investors. The industry was thrust into the spotlight in April, when a Washington brokerage called Height Securities revealed a key Medicare funding decision to its clients before the administration formally announced it, triggering a surge in health-care stocks.
The incident has come under federal investigation, prompted Grassley’s probe and ensnared other firms that were digging up information on the Medicare decision. Late Wednesday evening, Grassley spoke on the Senate floor to clear up what he described as “confusion” about the scope of his investigation.
“I am not seeking to ban the gathering of political intelligence,” Grassley said. “I am not suggesting that if someone was the source for some piece of political intelligence, that the source did anything illegal. But, the goal of these firms is to get an edge on other investors, and that should be understood by everyone who communicates with them.”
On April 1, Height Securities sent a bulletin to its clients 18 minutes before the market closed predicting that the administration was about to make a decision favorable to health insurers involving the rates insurers would get paid through the Medicare program. As first reported by the Wall Street Journal, stocks for Humana, Aetna and other health-insurance companies rose in value.
After the market closed, the administration made its formal announcement.
Grassley’s staff has asked for information about communications among lobbyists, financial analysts and federal officials before the administration’s plan was made public. One of those lobbyists formerly worked on Grassley’s staff and has since lobbied on health-care matters for the Greenberg Traurig law firm.
That lobbyist was one of the sources who contributed information used in the Height Securities bulletin, and Grassley said the lobbyist had billed only 1.75 hours of work to Height Securities. The Height Securities analyst who sent out the bulletin communicated with two other health-care policy experts before doing so, Grassley said.
The senator is also probing the role of a firm called Capitol Street, which provides Washington information to investors. Capitol Street held a private conference call with investors March 18 that featured Capitol Hill health staffers discussing the likely ruling on funding for Medicare insurance program.
“Just because I am asking questions about how certain information or expert opinions flowed to these political intelligence firms does not mean I am accusing anyone of any wrongdoing,” Grassley said. “. . . I am not focused on examining whether particular congressional staff acted properly with regard to their professional duties. . . . What I think we need is more transparency.”
Grassley and Rep. Louise M. Slaughter (D-N.Y.) have proposed requiring disclosure for political intelligence activities akin to those required of registered lobbyists.
The senator went on in his floor speech to suggest the leak could have come from other sources, including individuals in the Obama administration. He noted that reported spikes in options trading March 18 and 22 could implicate the administration.
“March 18th happens to be the first trading day after [the administration] made its decision internally,” Grassley said. “March 22nd happens to be the day that [the administration] transmitted its draft decision to the White House more than a week before the public announcement. On that date, the circle of people in the administration who would have known about the [Medicare] decision expanded significantly.”
On Thursday, a spokeswoman for Grassley said the senator’s inquiry remains on track, and his staff is continuing to interview individuals who could shed light on the information shared with the investment community before the administration’s decision.
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