By Sarah N. Lynch and Andy Sullivan
WASHINGTON, May 13 (Reuters) – The researcher whose report
prompted a spike in health stocks last month appears to have
relied on lobbyists rather than U.S. government insiders who had
direct knowledge of a pending healthcare decision, according to
emails reviewed by Reuters.
The messages could help bolster Height Securities LLC’s
claim that its analyst was essentially doing what reporters,
lobbyists and others in Washington do every day: trying to
figure out what the government is going to do next.
The small research shop is among the brokerages, law firms
and other “political intelligence” operations that have drawn
scrutiny over concerns that they may have facilitated insider
trading by passing along tips that moved markets.
Height Securities has drawn inquiries from the Securities
and Exchange Commission and Iowa Republican Senator Charles
Grassley since it correctly predicted on April 1 that President
Barack Obama’s administration would keep certain medical payment
rates in place, prompting a spike in healthcare stocks before
the official announcement came out.
The analyst who prepared the report, Justin Simon, reached
out to a healthcare lobbyist shortly before he issued his
market-moving research bulletin, the emails show.
“I’m tracking down a rumor … any chance you have heard
that POTUS/WH have stepped in” to keep the Medicare rates in
place, Simon asked, using shorthand for Obama and the White
House.
Other documents indicate the lobbyist, whose name was
redacted from the report, is Stacey Hughes, a founding partner
of the Nickles Group who used to work for several Republican
senators. She could not be reached for comment.
“That is the rumor,” Hughes responded, adding that it was “a
little more likely” that the Centers for Medicare & Medicaid
Services would not cut payment rates for healthcare providers
after the acting head of the agency that oversees the two
programs, Marilyn Tavenner, met with staffers of the Senate
Finance Committee.
Hughes wrote that the White House could decide to keep the
current payment rates for the popular health programs as a way
to convince lawmakers in the Senate to make her post permanent.
“Just my opinion,” Hughes wrote.
Simon released his report about an hour later, prompting a
spike in health stocks that stood to benefit from the decision.
“Did you see what I did to the stock in the final 30 min of
trading?” Simon wrote Hughes after his report came out. “We
heard the same story from like 30 people so we went with it.”
A Height spokesman said the emails reviewed by Reuters
confirm that Simon based his report on multiple sources of
information, rather than a single Obama administration insider
who would have had direct knowledge of the decision.
“We appreciate the fact that the released documents validate
our claim all along – Height did not receive or disseminate
material non-public information,” the spokesman said.
That appeared unlikely to satisfy Grassley, who wants
“political intelligence” firms to be subject to the same
disclosure laws as lobbyists.
Grassley’s office said Height was not cooperating as much as
they would like and appeared to be giving inconsistent
information.
“Senator Grassley continues to try to unwind the events
leading up to the stock spike on April 1 and previous trading
anomalies in the prior two weeks,” spokeswoman Jill Gerber said.
Michael Asaro, a lawyer who represents Simon, declined to
comment.
