Abramoff's Old Firm Gaming Wall Street For Fun And Profit

Greenberg Traurig, Jack Abramoff's old firm, leaked embargoed information about health insurance companies just before the bell. Who made the big bucks? If you guessed Wall Street, you win!


Chuck Grassley, trying to blame CMS for lobbyists' leaks

It's no secret that what Washington does affects the stock markets, given how gamed and absurdly not free they are. One look at the bogus tweet saying the White House was bombed, and BOOM! Down goes the market into the tank.

What goes down can also go up, especially if you've hired Jack Abramoff's old firm Greenberg Traurig to glean bits of 'political intelligence' to feed to high-rolling investors.

Washington Post:

The Securities and Exchange Commission has issued subpoenas to a firm and individuals in connection with the leak last month of a federal funding decision that appeared to cause a surge in stock trading of several major health companies.

[...]

The latest case emerged April 1 when Height Securities, a Washington-based stock brokerage firm, alerted its clients that the government would soon make a decision favoring private health insurers who participate in a Medicare program.

The alert went out 18 minutes before the end of the trading day, sparking a surge in trading in the shares of several major health-care firms, including Humana and Aetna. The official government announcement was made after trading closed for the day.

On Wednesday, several people familiar with the probe confirmed that the SEC has subpoenaed a Height Securities analyst and Mark Hayes, a health-care lobbyist who advised the firm on legislative issues. Hayes’s law firm, Greenberg Traurig, was also subpoenaed by the SEC, according to the sources, who spoke on the condition of anonymity because the matter was under federal investigation.

I'm not certain why the Washington Post reporter wanted to be so secretive about what the actual decision was about. After being lobbied hard by health insurers, CMS reversed the cut in funding to Medicare Advantage scheduled to take place and approved a 3.3 percent increase.

Yes, it appears Height Securities and their pal at Greenberg Traurig have some 'splaining to do, since their statement to the press is nothing more than blah-blah BS:

In a prepared statement to The Post, Andrew Parmentier, Height Securities’ managing director, said the firm’s alert “was based on careful and close analysis of the facts, and was solid, sound research in accordance with applicable laws and regulations.”

Oh please. What careful research? Discovering who the lead lobbyists were? This reversal from CMS was major and unexpected. The only possible "research" anyone could do is the research that involved picking up a telephone and asking a pal over at the political intelligence firm what scoop was out there that investors might care to know about.

Here's the timeline:

Height’s investor memo went out at 3:40 p.m. on April 1, about 45 minutes before Medicare’s official announcement. “Thirty minutes earlier, at 3:12, p.m. Eastern Time, on Monday, April 1, 2013, I understand a lobbyist at Greenberg Traurig sent an e-mail to Height Securities and others regarding the CMS announcement on the Medicare Advantage policy rate change,” Grassley wrote in the letter to Greenberg Traurig seeking information about the incident.

Hayes wrote Simon at 3:12 p.m., after Simon had written Hayes three minutes earlier with his speculation about the decision.

Hayes told Simon that he expected the payment cut to be reduced after Medicare officials changed their calculations, including an assumption that Congress would act to reverse a 25 percent cut in physician’s fees scheduled for next year. Congress has acted every year for a decade to reverse the annual cut, dictated by a formula called the Sustainable Growth Rate.

“We have heard from very credible sources that the final notice will adjust the phase-in on risk adjustment and take into account the likelihood/certainty of an SGR fix,” Hayes wrote in an e-mail reviewed by Bloomberg.
Health insurer stocks have gained since the announcement. The Standard & Poor’s 500 index of managed care stocks advanced 6.8 percent since March 28, the last day of trading before the Medicare announcement.

This stretches all credulity. Here's Mark Hayes' lobbying report (application/pdf - 481.72 KB), where you can see he has one client, and one client only: the for-profit healthcare industry.

If ever there was a situation that proves how wrong it is for health insurers to be for-profit concerns, this is it. Leak a little, talk a little, and boom! The market goes up, at least for those folks who have the information, money to pay for that information, and still more money to invest in the coming boom.

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