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SEC Ends Insider Trading Probe of Ex-Sen. Richard Burr and Brother-In-Law Without Taking Action, Lawyers Say

Leigh Vogel | Pool | Reuters
  • The Securities and Exchange Commission ended its insider trading investigation of former U.S. Sen. Richard Burr and his brother-in-law without taking action against either man, lawyers said.
  • The SEC was eyeing the Republican Burr and his brother-in-law Gerald Fauth, who sits on a federal board, for their stock sales on the same day in February 2020.
  • The sales came a week before equities markets in the U.S. and elsewhere plunged as a result of the Covid-19 pandemic.
  • The Department of Justice earlier closed a criminal investigation of Burr and Fauth without taking action against either man.

The Securities and Exchange Commission has ended its insider trading investigation of former U.S. Sen. Richard Burr of North Carolina and his brother-in-law without taking action against either man, their lawyers said Friday.

The SEC, which did not deny the attorneys' statements, was eying Burr, a Republican, and his brother-in-law Gerald Fauth, who sits on a federal board, in a civil probe for their stock sales on the same day in February 2020.

The stock sales occurred, a week before equities markets in the U.S. and elsewhere plunged as a result of the Covid-19 pandemic, and after Burr had received briefings about the threat of the pandemic. Burr and Fauth had a very short phone call on the same day as the stock sales, the SEC has said in court filings.

Burr retired from the Senate on Tuesday after three terms. He had said before his 2016 reelection that he would not seek a fourth term if he won that year.

The SEC previously said in court filings that the agency was "investigating whether [Burr] sold stocks on the basis of nonpublic information."

Members of Congress are barred by law from using nonpublic information that they obtain through their official positions to profit from stock trades.

Gerald Fauth
Source: Wikipedia
Gerald Fauth

The Department of Justice earlier had closed a criminal investigation of Burr and Fauth without taking action against either man.

As part of that criminal probe, Burr had his cellphone seized by the FBI in May 2020, which led to him stepping aside as chairman of the Senate Select Committee on Intelligence.

Burr, in a statement provided to CNBC on Friday, said, "This week, the SEC informed me that they have concluded their investigation with no action."

"I am glad to have this matter in the rearview mirror as I begin my retirement from the Senate following nearly three decades of public service," Burr said.

In her own statement, his attorney Alice Fisher said, "We have believed all along that this is the right result."

Burr "is glad to put this matter behind him as he embarks on his retirement from his dedicated service in the Senate," Fisher said.

In a statement, Fauth's lawyer, F. Joseph Warin, said, "The SEC has closed its investigation into our client. "

"We are thrilled that the SEC and the DOJ appropriately closed their investigations without any findings of insider trading," Warin said. "Mr. Fauth looks forward to continuing his public service and leadership in the transportation industry." 

A spokesperson for the SEC, in an email to CNBC, said, "As a matter of policy, the SEC does not comment on the opening or closing of a possible investigation."

Burr, like other senators, had been briefed by federal health officials in early 2020 about the coronavirus before it began spreading widely in the U.S., leading to nationwide lockdowns and decreases in business activities.

At the time, Burr, due to his membership on the intelligence committee, had access to classified intelligence reports that contained dire warnings about the pandemic.

Fauth, who is the brother of Burr's wife, is a member and former chairman of the National Mediation Board, an agency that facilitates labor-management relations in the U.S. railroad and airline industries.

The SEC in court filings has said that on Feb. 13, 2020, Burr called his stockbroker and directed him to sell more than $1.65 million worth of stock. The holdings accounted for "all but one of the equities in his and his wife's joint individual retirement account ... portfolio."

Almost three hours later, Burr called Fauth's cellphone for a call that lasted 50 seconds, the SEC has said.

A minute or less after that, Fauth called his primary stockbroker, who did not answer, the SEC has said in a filing. Fauth then called a second broker within two minutes and "directed her to sell several stocks in his wife's account," the filing reveals.

That broker sold between $97,000 and $280,000 worth of Fauth's shares in six companies, several of which ended up having their stocks plummet in the following weeks, the filing indicates.

After Burr's stock sales came to light in March 2020, he said, "I relied solely on public news reports to guide my decision regarding the sale of stocks."

"Specifically, I closely followed CNBC's daily health and science reporting out of its Asia bureaus at the time," Burr said at that time.

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