A shareholder at one of the companies Sen. Richard Burr sold stock from in the weeks before the coronavirus pandemic rocked the U.S. is suing the senator, alleging the top Republican committed securities fraud by “exploiting material information unavailable to the public.”
The complaint, filed Monday evening in the U.S. District Court for the District of Columbia by attorneys with the litigation boutique Browne George Ross, alleges that Burr “has acted as a scofflaw in a time of national crisis.”
The attorneys represent Alan Jacobson, a shareholder for Wyndham Hotels & Resorts, one of the companies Burr and his wife sold stock from on Feb. 13. The suit claims Burr used the information he learned in private briefings on the COVID-19 virus to sell off the stocks.
“In so doing, he injured shareholders—including Plaintiff Alan D. Jacobson—who purchased and/or continued to hold securities in those same companies,” the complaint reads.
“Plaintiff’s ability to procure relief in the federal courts is unimpaired by the fact that Senator Burr is a Member of the U.S. Senate, where in his capacity as Chairman of the Senate Intelligence Committee he learned the nonpublic material information on which he based his stock trades,” it continues.
The suit was filed by Browne George Ross partners Eric George and Thomas O’Brien. O’Brien was previously the U.S. attorney for the Central District of California, and spent two years in the office as head of the criminal division.
George previously spent a year as a counsel to the Senate Judiciary Committee, from 1999 to 2000.
ProPublica reported last week that Burr sold about $1.7 million worth of stock on Feb. 13, as the chairman of the Senate Intelligence Committee reportedly received daily briefings about the coronavirus pandemic that had yet to fully impact the U.S.
Burr maintained that he relied “solely on public news reports” in deciding to sell off the stocks, and on Friday asked the Senate Ethics Committee to review his stock sales.
Monday’s lawsuit alleges that Burr’s stock sales violate the Securities and Exchange Act and the Stop Trading on Congressional Knowledge Act of 2012.
“While members of the public, including plaintiff, were being told by the United States government, including by Senator Burr, that the United States was prepared to face emerging public health threats like the coronavirus and that COVID-19 would not have a significant impact on the economy, Senator Burr was in possession of material nonpublic information to the contrary,” the lawsuit reads.
The complaint focuses on the Wyndham stocks, which have lost two-thirds of their market value since Feb. 13. The hospitality industry is experiencing steep losses during the pandemic, as fewer people travel and groups cancel conferences that typically use those facilities.
“On February 13, 2020, the day that Senator Burr and his wife dumped $150,000 of Wyndham stock, Wyndham’s stock traded at a high of $59.37,” the complaint reads.
“Over the next several weeks, Wyndham’s stock dropped precipitously as the market was belatedly informed of the severity of COVID-19, as well as its potential expected impact on the economy. In particular, Wyndham, as a hotel chain, obviously stood to lose substantial business as a result of quarantine measures, border closures, and substantial reductions in tourism,” it explains.
The lawsuit also highlights public and private remarks that Burr made about the incoming impact of the coronavirus pandemic, including comments he made to a small group on Feb. 27, revealed in reporting by NPR.
“There’s one thing that I can tell you about this: It is much more aggressive in its transmission than anything that we have seen in recent history,” Burr said at the time. “It is probably more akin to the 1918 pandemic.”
“Senator Burr’s knowledge of the devastating impact of COVID-19 on the United States, the mitigation measures that would be taken in efforts to curtail its spread, and the coming hit to the economy is evident not only by the fact that he received confidential briefings on COVID-19 and then sold all of the shares he held in the stock market but by comments he made to a small group of private investors,” Monday’s complaint reads.
Jacobson and his attorneys are seeking compensatory damages from Burr, as well as litigation costs and expenses and “such other and further relief as this court deems just and appropriate.”
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