By Mark S. Nelson, J.D.
According to a lawsuit filed on behalf of Alan Jacobson, Sen. Richard Burr (R-NC) violated the antifraud provisions of the federal securities laws by selling large amounts of his assets after having been briefed by Trump Administration officials about the likely impact of COVID-19 on the U.S. economy while he also allegedly told a private group the pandemic would be significant but continued to publicly state that the U.S. was prepared for the pandemic. The complaint was filed in the U.S. District Court for the District of Columbia and claims that Sen. Burr’s stock sales in mid-February 2020 ran afoul of Exchange Act Sections 10(b) and 20A and Rule 10b-5 as well as the Stop Trading on Congressional Knowledge (STOCK) Act of 2012 (Jacobson v. Burr, March 23, 2020).
Conflicting public and private statements. The complaint alleged that Sen. Burr sold numerous stocks, including the stock of Wyndham Hotels & Resorts, Inc., within weeks of receiving a private briefing regarding COVID-19 on January 24, 2020 by Trump Administration officials for Senators on the Senate Committee on Health, Education, Labor, and Pensions, of which Sen. Burr is a member (Sen. Burr also is chairman of the Senate Select Committee on Intelligence). The complaint alleged on information and belief that Sen. Burr would have received material, nonpublic information about the spread of COVID-19 at that meeting. Senator Burr on February 7, 2020 allegedly made a media appearance during which he suggested the U.S. was prepared for a pandemic.
The complaint asserted that Sen. Burr’s public comments contrasted with those he made to a private meeting of the Tar Heel Circle on February 27, 2020 where the senator stated that “COVID-19 ‘is much more aggressive in its transmission than anything we have seen in recent history,’ comparing it to the 1918 flu pandemic.” The complaint again cited media reports of what Sen. Burr said and noted that the senator also told the meeting that “[e]very company should be cognizant of the fact that you may have to alter your travel. You may have to look at your employees and judge whether the trip they’re making to Europe is essential or whether it can be done on video conference. Why risk it?” The complaint also cited reports that Sen. Burr had made other remarks about the potential for school closures and the need for military tent hospitals.
Senator sold hospitality stock. Plaintiff Jacobson alleged that he owned shares of Wyndham at the same time that Sen. Burr owned and sold shares in the same company. Specifically, Jacobson’s complaint alleged that Sen. Burr and the senator’s wife engaged in a total of 33 stock sales transactions on February 13, 2020. The complaint cited a public transaction report filed by Sen. Burr on February 27, 2020 showing that the senator sold his stock in 18 companies, including Wyndham stock. Senator Burr’s wife also sold stocks in 15 transactions, including Wyndham stock.
The companies whose stocks the Burrs held appeared to be a diversified group of companies spanning multiple sectors of the economy, including banking and finance, pharmaceuticals, transportation, hospitality, and manufacturing. The complaint further noted that Wyndham’s stock price had fallen from $59.37 on February 13, 2020 to $20.61 as of March 19, 2020, a decline of 65 percent. In about that same time frame, said the complaint, the Dow Jones Industrial Average had peaked at a record level of over 29,551 but had lost one-third of its value as of the time the complaint was filed.
The complaint cited media reports suggesting that Sen. Burr’s net worth was roughly $1.7 million. According to transaction records detailed in the complaint, Sen. Burr’s Wyndham stock sales amounted to between $15,001 and $50,000 and the senator’s wife’s Wyndham stock sales amounted to between $50,001 and $100,000. The senator’s and his wife’s combined Wyndham stock sales totaled between $628,033 and $1.72 million.
Sen. Burr response. Senator Burr has responded publicly to the numerous media reports about his recent stock sales by tweeting a letter he wrote to the chairman and vice chairman of the Senate Select Committee on Ethics. In the letter, Sen. Burr wrote, in part: "While I relied solely on public reporting to guide my decision to sell the stock, it is my belief that an independent review is warranted to ensure full and complete transparency."
In addition to the letter, Sen. Burr also tweeted that he had followed CNBC's health and science reports from Asia and reiterated that he relied only on “public news reports” in making the decision to sell many of the stocks he owned. The senator added with respect to his letter to the Senate ethics committee: “Understanding the assumption many could make in hindsight however, I spoke this morning with the chairman of the Senate Ethics Committee and asked him to open a complete review of the matter with full transparency.”
Previously, Sen. Burr joined Senate Health Committee Chairman Lamar Alexander (R-Tenn) in a February 7, 2020 op-ed in which they cited U.S. preparedness. Upon the confirmation of North Carolina’s first COVID-19 case, Sen. Burr stated on March 3, 2020: “The U.S. is in a better position than any other nation to handle a public health emergency like coronavirus. But Congress must continue working to make sure first responders have the resources they need and the federal government is using all the tools at its disposal to stem the problem.”
Senator Burr, who authored the Pandemic and All-Hazards Preparedness Act (PAHPA), has supported federal legislation to respond to the COVID-19 pandemic, including the Families First Coronavirus Response Act. The PAHPA became law in 2006 under the sponsorship of Sen. Burr and Sen. Edward Kennedy (D-Mass) and was reauthorized in 2019.
The case is No. 20-cv-00799.