Sen. Richard Burr and the coronavirus insider trading scandal, explained
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Sen. Richard Burr and the coronavirus insider trading scandal, explained

Sen. Richard Burr (R-NC) listens to testimony during a Senate Health, Education, Labor and Pensions Committee hearing on Capitol Hill on May 12 in Washington, DC. | Win McNamee/Getty Images

Sen. Burr has stepped down as chair of the Senate Intelligence Committee after the FBI executed a search warrant at his home Thursday morning.

North Carolina Sen. Richard Burr will step down from his role as chair of the Senate Intelligence Committee effective Friday, according to Senate Majority Leader Mitch McConnell.

His resignation came after the FBI served a search warrant at Burr’s Washington, DC, home Wednesday night in a probe of whether several stock trades he made after being briefed on the early outbreak of the coronavirus broke the law. Federal agents seized a cellphone belonging to Burr after serving the warrant, a law enforcement official told the LA Times.

It’s a significant escalation in the investigation of the Senate Intelligence Committee chairman, who has had a fraught relationship with the president and was one of several senators whose pre-pandemic stock trades came under scrutiny.

For Burr, the saga began February 13, less than a week after Fox News published an op-ed he co-wrote, reassuring the public that the US was well prepared for the pandemic. He and his wife then sold 33 stocks worth between $628,033 and $1.72 million. Those sell-offs included stocks in several industries that would later be hard hit by the pandemic, including hotel, restaurant, and shipping industries. The stock market tanked in late February and early March as states began issuing shelter-at-home orders and shuttering nonessential business operations in an attempt to prevent the spread of the virus.

As the chairman of the Senate Intelligence Committee, Burr reportedly received frequent briefings on the coronavirus outbreak in the days leading up to the stock sales. But after the news broke of his stock-selling, Burr tweeted on March 20 that he “relied solely on public news reports to guide my decision” to sell his stocks.

A spokesperson for Burr declined to comment to Vox. The FBI also declined to comment.

McConnell said Thursday that Burr would step down from the Senate Intelligence Committee “during the pendency of the investigation” on Friday. “We agreed that this decision would be in the best interests of the committee,” McConnell told the National Journal.

There has yet been no word on which of his Republican colleagues may replace Burr as chair.

While other senators have been questioned about their stock trades, Burr is reportedly so far the only lawmaker to be served a search warrant. It could be that the circumstances are most damning for the North Carolina Republican. But given his fraught relationship with the president (and an increasingly politicized Justice Department), the news raised questions of whether the DOJ investigation was politically motivated.

What we know about Burr’s stock trades and those of several other senators

Government officials and lawmakers are often privy to key information — which could potentially be used to profit in the stock market — that isn’t available to the public. But since the passage of the Stock Act in 2012, they’re barred from using it to trade personal stocks. (Burr was one of just three senators to vote against the law.)

They are permitted, however, to own and trade stocks as long as they don’t use that private information. They’re also required to report those trades in regular disclosures. Congressional financial disclosures don’t list specific transaction amounts, instead breaking reporting into dollar value bands like $1,001 to $15,000, $15,001 to $50,000, etc., up to transactions over $50 million.

On February 13, Burr, who Roll Call estimates is the 154th wealthiest federal lawmaker, sold up to $1.7 million in stock transactions. Among them, Burr sold up to $150,000 worth of shares of Wyndham Hotels and Resorts, a hotel chain. Wyndham’s stock dropped from $59.10 per share at the close on the day Burr sold it to a low of $21.59 on March 19, before rebounding. He also sold up to $100,000 in stock in Extended Stay America, an economy hospitality company.

Burr had been getting briefings on the virus for several weeks before making the trades, and according to an NPR report, he told a luncheon for a group called the Capitol Hill Club in late February that the virus was “more aggressive in its transmission than anything that we have seen in recent history,” likening it to the 1918 Spanish flu pandemic.

Sen. Kelly Loeffler has also drawn criticism for suspected insider trading related to the pandemic. When she was appointed in January, Loeffler instantly became the wealthiest senator currently in office. She is married to Jeffrey Sprecher, chair of the New York Stock Exchange and chair and CEO of its holding company, Intercontinental Exchange.

The Daily Beast first reported on March 19 that Loeffler had sold millions in stock within days of attending a February 24 Trump administration briefing on the novel coronavirus.

Loeffler reported a sale of stock owned jointly with Sprecher on the same day the Senate Health Committee, which she serves on, hosted a private, all-senators coronavirus briefing from Trump administration officials, including the CDC director and Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases.

In total, Loeffler and her husband conducted 29 stock transactions in late February. Perhaps the one that most drew attention was buying between $100,000 and $250,000 in technology company Citrix, which offers remote-working software. The software has become popular as white-collar workers have transitioned to working from home during the pandemic.

Loeffler pushed back against the allegations in a March 20 tweet, saying that neither she nor her husband makes decisions about her portfolio.

Eyebrows were raised again in early February when the Atlanta Journal-Constitution reported that Loeffler had sold off $18.7 million in stock in Intercontinental Exchange (ICE), where she was formerly a longtime executive. Those transactions — though large in value — don’t necessarily have an evident connection to the pandemic. But they drew scrutiny because, as the New York Times reported, they hinted at an unusual compensation scheme from her former employer.

But Burr and Loeffler aren’t alone in receiving scrutiny over suspect stock transactions. Sen. Jim Inhofe (R-OK), who chairs the Senate Armed Services Committee, sold up to $750,000 worth of stock, saying it was related to a “continuing divestiture plan.” Sen. Dianne Feinstein (D-CA) reported selling millions in stock just before the coronavirus-related market crash. The senator claimed she was not a party to the decision to sell and that the trades were made by her husband.

“Under Senate rules I report my husband’s financial transactions,” Feinstein said in a statement. “I have no input into his decisions. My husband in January and February sold shares of a cancer therapy company. This company is unrelated to any work on the coronavirus and the sale was unrelated to the situation.”

Burr is seemingly the focus of a larger probe into several lawmakers’ alleged pandemic-related trades — and that has some ethics experts concerned

The Department of Justice, in conjunction with the Securities and Exchange Commission, began an investigation in late March into lawmakers who may have tried to profit from inside information about the coronavirus.

Feinstein told NBC News Thursday that she had spoken to the FBI about her trading activity while Loeffler didn’t respond when asked by Politico whether she had been contacted by federal agents.

When asked by Vox if Loeffler had been contacted by the FBI about her trades, a spokesperson for the senator responded that the allegations “are completely false” and “based on a political attack.”

“No search warrant has been served on Sen Loeffler,” the spokesperson said in a statement to Vox but did not address whether there had been any other contact.

All four lawmakers have denied doing anything illegal. Burr himself asked for a Senate Ethics Committee investigation into his own trading activity. The warrant against Burr, however, is the first publicly reported action taken over the course of the investigation and is raising questions about whether his trades are most suspicious or whether something else is going on.

On one hand, agents and prosecutors would have needed to convince a judge that they had probable cause that a crime was committed in order to obtain said warrant. And as Preet Bharara, former US Attorney for the Southern District of New York, tweeted Wednesday night, seeking a search warrant against a high-level elected official like Burr “is not something the FBI or DOJ does lightly.”

“It requires layers of review, the blessing of a judge, and consideration of severe reputational harm to a sitting US Senator,” Bharara tweeted.

But some legal experts expressed concern on Twitter Wednesday night about a potential disparity in treatment between Burr, who has occasionally clashed with Trump, and treatment of a senator more loyal to Trump, like Loeffler.

Last May, Burr’s committee issued a subpoena for Donald Trump Jr. over the course of an investigation into links between the Trump campaign and Russian operatives. The subpoena became an issue for Trump-loyal Republicans who were trying to dismiss investigations into Trump campaign links to Russia as politically motivated. Trump has frequently lashed out at Burr in response, even retweeting criticism of the senator over the Russia investigation as recently as Monday.

Loeffler, meanwhile, was appointed to a White House task force on “reopening America,” which she touted in a campaign ad on Facebook in late April, according to a Daily Beast report. “President Trump tapped me to help re-open the American economy. While the fight against COVID-19 continues, we must provide relief to those in need and get Georgians back to work safely!” Loeffler’s campaign wrote in the ad.

One thing that possibly differentiates Burr’s case: His brother-in-law, Gerald Fauth, a Trump appointee to the National Mediation Board, which mediates labor-management relations in the railroad and airline industries, also sold significant shares on the same day, according to a ProPublica report last week.

Fauth’s trades could be innocuous or coincidental; however, tips to friends and family are considered insider trading under the SEC’s 2013 policy on insider trading, and convictions of insider trading by friends and family were upheld by the Supreme Court in a 2016 US Supreme Court ruling.

Thus far, Burr’s and Loeffler’s stock transactions have received the most public scrutiny. And now, Burr seems primed for possibly the most serious consequences.

Who replaces Burr if he resigns?

In the short term, if Burr leaves the Senate before his term expires, very little will change: He will be replaced by another Republican, and one of his Republican colleagues in the Senate will take over the Intelligence Committee. In the longer term, however, the timing of any possible resignation matters a great deal. It could change the balance of the Senate.

North Carolina law requires the state governor, currently Democrat Roy Cooper, to appoint someone to fill a US Senate vacancy. But the state vacancy law also provides that if the departing senator “was elected as the nominee of a political party, the Governor shall appoint from a list of three persons recommended by the State executive committee of the political party with which the vacating member was affiliated when elected if that party executive committee makes recommendations within 30 days of the occurrence of the vacancy.”

As a practical matter, that means that the state GOP will almost certainly send Cooper a list of three names, and Cooper will choose the new senator from among these three Republicans.

But the length of this appointed senator’s tenure in office depends on when Burr leaves the Senate. The same law provides for an election to fill the seat, which will “be held at the time of the first election for members of the General Assembly that is held more than 60 days after the vacancy occurs.” So, if Burr resigns more than 60 days from this year’s general election, which will be held on November 3, voters will pick a new senator on that date.

But, if Burr resigns later, the election will not be held until 2022, which would be the final year of Burr’s original term, giving the appointed Republican senator an additional two years in office.

If the election to replace Burr is held this year, it is likely to become one of the most hotly contested races in the nation, and Democrats have a decent shot of picking up Burr’s seat. Although North Carolina has historically favored Republicans, Democrats frequently win statewide elections. Both the incumbent governor and the sitting attorney general, Josh Stein, are Democrats. Democrat Kay Hagan served as a US senator from North Carolina as recently as 2015.

Though Trump won the state by nearly 4 percentage points in 2016, North Carolina appears to be trending blue. In 2017 and 2018, 63 percent of the state’s population growth occurred in the Charlotte, Raleigh, and Durham metropolitan areas, regions that favored Democrat Hillary Clinton over Republican Donald Trump by large margins in 2016.

In this sense, North Carolina resembles its neighbor Virginia, a former Republican stronghold that morphed into a blue state as its population grew more urban and more cosmopolitan — although, if North Carolina is destined to become a reliably Democratic state, its transition from red to blue is several years behind Virginia’s.

Burr’s fellow Republican senator, Thom Tillis, is already slated to run for reelection this November. And while polling of this election is fairly sparse, the data that does exist suggests that Democratic challenger Cal Cunningham is favored to win this race.

So Burr’s alleged insider trading could have significant implications for the nation as a whole. If Burr is forced out of his Senate seat, and if the timing is right, Democrats have a very real chance of picking up that seat in November. That could potentially impact who controls the Senate as a whole, and it could give Democrats more leeway to govern if they also capture the White House.


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