Senator Richard Burr (RN.C.) speaks during a hearing of the Senate Committee on Health, Education, Labor and Pensions to consider the federal response to Covid-19 and new emerging variants on January 11, 2022 on Capitol Hill in Washington, DC.
Greg Nash | AFP | Getty Images
WASHINGTON — Newly unsealed FBI documents paint a stark picture of government evidence in a 2020 insider trading investigation of Republican North Carolina senior senator Richard Burr.
Burr was ultimately not charged with breaking any laws. But the recently released sworn affidavit of an FBI special agent shows the Justice Department had probable cause to believe Burr had committed insider trading and securities fraud.
As chairman of the Senate Intelligence Committee, Burr abruptly liquidated more than half of his and his wife’s stock holdings in February 2020 at a time when U.S. markets and most Americans did not yet know how to how bad the coronavirus pandemic was going to be.
Given his position, Burr had information about the spread of the virus and America’s meager preparedness for a massive pandemic that was not publicly available.
The affidavit was submitted in support of a request for a search warrant to seize and search Burr’s phone, a request the judge in the case later granted.
It features a startling timeline of calls and texts between Burr, his wife Brooke Burr, his brother Gerald Fauth, and Fauth’s wife that took place on the same days that the Fauths and the Burrs sold hundreds of thousands of dollars of shares, right before the market plunges.
A spokesperson for Burr’s Senate office did not respond to a request for comment on the newly unsealed documents.
An unusual timeline
Early on, Burr insisted that the only information he relied on in deciding to sell his shares was publicly available, including reports from CNBC’s Asia correspondents.
Nonetheless, as chairman of the Senate Intelligence Committee, Burr had access to classified intelligence reports in January and early February that contained dire warnings about the coronavirus.
On January 31, Burr received nonpublic information from a source whose name is redacted in FBI documents. That same day, Burr placed orders to sell nearly $110,000 in stock from his and his wife’s brokerage accounts.
On February 12, Burr ordered the purchase of approximately $1.2 million in Treasury securities, using 76% of the total holdings in Burr and his wife’s joint account.
“Investors often buy US Treasury funds to hedge against a possible market downturn,” notes FBI Special Agent Brandon Merriman.
He also noted that the Dow Jones Industrial Average closed at a record high of 29,551.42 on Feb. 12.
A day after Burr’s large treasury purchase, Burr and his wife unloaded shares worth about $1.1 million.
The fact that the Burrs sold shares was reported at the time, but the value of the sale was only reported within a range. Monday’s filing was the first time exact amounts have been made public.
According to the FBI, “following Senator Burr’s sales on February 13, 2020, his portfolio shrunk from about 83% in stocks to about 3% in stocks.”
A week later, markets began a steep fall as investors panicked over the potential economic damage from the coronavirus.
The other person in Burr’s family who sold a lot of shares on February 13, 2020 was Burr’s brother-in-law, Gerald Fauth.
According to the affidavit, records show that a series of sell orders were placed in an account belonging to Fauth’s wife, Mary Fauth, just before noon on the 13th, for an amount of approximately $159,100.
Burr’s attorney, Alice Fisher, told ProPublica in May 2020 that Burr “did not coordinate her decision to trade on February 13 with Mr. Fauth.”
But FBI evidence released Monday shows Burr’s wife called her brother shortly after 11 a.m. ET on the 13th, and they spoke for two minutes.
Twenty minutes later, Burr also used his cell phone to call Fauth, according to records obtained by the Justice Department.
Just two minutes after Fauth’s conversation with his brother-in-law ended, Fauth called his investment manager and they talked for just under half an hour. In a later interview, the adviser appears to have told the FBI that Fauth seemed in a hurry and mentioned knowing a senator in Washington.
According to the FBI, the Burrs’ stock sell orders were placed between 11:38 a.m. and 11:49 a.m.
Fauth’s orders were placed between 11:55 a.m. and 11:58 a.m.
While the FBI affidavit sheds light on many questions about Burr’s stock sales, it tightly shields at least one relevant piece of information: what kind of nonpublic information Burr had about the coronavirus and where he got it.
But there may be a few clues: Specifically, the Justice Department mentions dozens of text messages that Burr exchanged with someone whose name is redacted, but who appears to be a potential source of nonpublic information.
According to the FBI, between January 31, 2020 and April 7, 2020, this person and Burr “exchanged approximately 32 text messages, almost all of which related in some way to the COVID-19 pandemic.”
Almost everything about the text messages is redacted, but later in the affidavit the government writes: “These text messages include those discussed above, and include those relating to other matters, such as efforts to provide face masks to the public, the ‘global outlook’ on COVID-19, and a proposed ‘national lockdown'”.
If Burr received this information when it was not publicly discussed, it could have strengthened the government’s case against him.
It’s still unclear why the Justice Department decided not to prosecute Burr or Fauth, and the department usually doesn’t explain why it isn’t prosecuting someone.
But on Jan. 19, 2021, nearly a year after the questionable transactions, Burr said in a statement, “Tonight, the Department of Justice advised me that it had concluded its review of my personal financial transactions conducted at beginning of last year.
“The case is now closed. Glad to hear it,” Burr said. “My goal has been and will continue to be to work for the people of North Carolina during this difficult time for our nation.”