Business

NY Judge Rules Congress Must Comply With Height Securities Subpoena

Bob Corker has some competition…

In a blow to legislative privilege and a welcome move toward transparency in government, a New York judge ruled on Monday that the U.S. Congress must cooperate with federal investigators probing an apparent leak of government health-care policy in the House in April of 2013.

U.S. District Judge Paul Gardephe agreed with the Securities and Exchange Commission in nearly all of the case and ruled that a House committee and a top aide must comply with nearly all of a subpoena from the SEC.

There was no word yet on whether the legal staff for Congress in the case plans to appeal that decision.

Insider trading Height Securities
Chart via CapIQ

More on Height Securities leak in 2013

The issue at hand here is a probe by the SEC and the Justice Department into a potential leak of classified government information to Wall Street in April of 2013. The investigation has become a big deal because it foxes on the “political-intelligence” business, where policy-research firms assist Wall Street firms in making investment decisions based on insights into possible changes in government policy.

This case involves a well-known research firm named Height Securities, which sent an alert to its clients just before markets closed on April 1, 2013, suggesting that a major government agency would announce a policy change that would benefit large health insurance companies, such as Humana and UnitedHealth Group. Not surprisingly, just after the Height Securities alert was issued, health insurance firms began a notable move up (notice the spike in volume) and performed well over the next two years until the recent Shkreligate incident.

In the following weeks, as The Wall Street Journal detailed the timeline of the incident, the SEC and Justice Department began their probe and requested interviews with a number of government officials.

Around a year later, the SEC issued subpoenas that would have compelled the House Ways and Means Committee to turn over key records and other information relating to the case. The watchdog agency also wanted specific information from a top health-care aide on the panel, Brian Sutter, who has resigned his position in the meantime.

Attorneys for Congress decided to fight the subpoena in court.

Of note, Sutter has already given some information to federal investigators, such as his email address book and a list of contact phone numbers.

The Height Securities case has received wide attention over the past few years and is said to involve four hedge funds, including SAC Capital Advisors (now called Point72 Asset Management LP), Viking Global Investors LP, Visium Asset Management LLC and Citadel LLC.