Correction: A previous version of this article incorrectly said that Sen. Hatch was aware of the request by Capitol Street for a speaker from his staff. In fact, he is aware that such requests are commonplace. This version has been corrected.

An April 1 alert to stock traders that predicted the outcome of a key Medicare funding decision has gained intense legal and public scrutiny.

But a series of events in Washington and on Wall Street in the weeks before the alert raise the possibility that information related to the government’s decision may have previously circulated and moved the market, according to a trail of e-mails and market data.

A small Washington-based firm called Height Securities alerted its clients on April 1 that the government would soon make a decision favoring private health insurers that participate in a Medicare program. The alert went out just before the trading day ended, sparking a surge of trading in shares of Humana, Aetna and other major health-care firms.

The Obama administration made its decision public after the markets closed that day, and federal investigators along with Sen. Charles E. Grassley (R-Iowa) are looking into whether there was a leak.

Grassley is also examining the activities of another Washington firm, Capitol Street, that sent out a bulletin to its clients in late March about a government report that suggested that private insurers participating in Medicare could soon see good news.

Capitol Street, which describes itself as a health-care policy consulting firm, hosted a March 18 investor conference call with Stephanie Carlton, who was a point person on Medicare issues for Republicans on the Senate Finance Committee at the time.

In a recording obtained by The Washington Post, Carlton shared her views with an unknown number of participants in the conference call. She used technical terms to describe a range of possible responses by the administration. But her views on some topics that came up in the 30-minute call did not accurately predict the decision unveiled by the administration April 1.

Carlton said on the call she was “hopeful” that the administration would reach a decision favorable to the industry, “but I would put that as the lowest on my optimism score,” she said.

Later in the month, Carlton was involved in e-mail exchanges with Justin Simon, the analyst at Height Securities who sent out the April 1 alert.

In a March 27 e-mail, Simon congratulates Carlton for a “good job” on a key report requested by her boss at the time, Sen. Orrin G. Hatch (R-Utah). The report helped make the case for a Medicare rate increase for private insurers.

“Shorts getting squeezed,” Simon wrote, referring to traders who were betting against a rise in the rates.

In another e-mail later that day, Simon bets Carlton coffee on what the direction the rates will ultimately go and the magnitude. But she declines the bet.

“Ha, I can’t do that,” she responds two minutes later.

Carlton, who left for a private-sector job this week, could not be reached for comment.

Senate and ‘stakeholders’

Antonia Ferrier, a spokeswoman for Hatch, said the senator is aware that his staff participates in such events and that communicating with these types of groups is not unusual given the technical nature of the issues the committee handles.

“Staff members meet with stakeholders on every side of an issue as a means of better crafting policy solutions,” Ferrier said. “What information they share is the same information that Senator Hatch shares in an open and transparent way with his constituents. Senator Hatch has a zero-tolerance policy for anyone who would take advantage of privileged information, and he’s confident that no one on his staff has done that.”

At Capitol Street, managing director Ipsita Smolinski said in an interview this week that she had not been contacted by regulatory agencies. She said the activities of her firm and others like it were appropriate and commonplace, similar to the work done every day by reporters and others following political decision-making in Washington.

“We talk to lobbying firms, researchers, we read the press and a wide sample of public research” in making reports to clients, Smolinski said.

There are no legal barriers to Senate staffers speaking without compensation to individuals, investors or other audiences, said Stanley Brand, a Washington lawyer and expert in ethics regulations.

Pressure on Capitol Hill

But there is new pressure on Capitol Hill to avoid distributing privileged information to investors. Employees at publicly traded companies have long been subject to strict insider trading laws. The Stock Act, passed in April 2012, makes explicit that these laws also apply to members of Congress, their staffs and other federal officials.

The law adds that these public officials and employees have a “duty of confidentiality and trust” with regard to information that is not public and could affect the price of financial securities if revealed.

The Securities and Exchange Commission and the Justice Department have launched investigations into the April 1 trading that took place after early word of the government’s decision. The Height bulletin was based on an e-mail report from Mark Hayes, a lawyer at Greenberg Traurig who once worked on Grassley’s staff.

As part of his broad probe into the incident, Grassley asked the administration to outline the timing of the Medicare funding decision. In response, the Health and Human Services Department said it made its decision March 15. It sent a draft to the Office of Management and Budget on March 22.

That day, there was a spike in trading of Humana options, which traded at higher volume than any other day that month. The SEC declined to comment on whether it is looking into that day’s trading activity as part of its investigation.

But the agency routinely looks at options transactions when conducting insider trading probes. The options market can be lucrative for speculators. Even though it is riskier than the stock market, the payoff is greater if speculators are making the right bet.

“There’s no doubt the volume on the 22nd is unusually high,” said Dmitry Sarkisov, a managing director at Tradeworx, a New Jersey-based trading firm, which looked into the options activity that day. One big trade of 4,000 contracts dominated the day’s activity, he said.

Alice Crites contributed to this report.

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