Buyer indicted on charges of insider trading




Buyer

Buyer

Former U.S. Congressman Stephen Buyer has been indicted on federal charges of insider trading in Manhattan.

Buyer, formerly of Rensselaer and a graduate of North White High School, is a Republican who represented Indiana’s Fifth Congressional District from 1993–2003 and its Fourth Congressional District from 2003-2011.

In a case that alleges encrypted emails, cover-ups, and profits of more than $349,846.61, prosecutors say Buyer obtained Material Non-Public Information (MNPI) in connection with two corporate mergers relating to his consulting work, T-Mobile/Sprint and Guidehouse/Navigant. They also allege that Buyer tried to cover up his insider trading by, among other things, providing false and misleading information to representatives of one of the companies for which he consulted in connection with its inquiry into his trading.

The Securities and Exchange Commission filed the complaint which charges Buyer with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks disgorgement of ill-gotten gains plus interest, penalties, a permanent injunction, and an officer and director bar against Buyer. The complaint also seeks disgorgement from Buyer’s wife, Joni Lynn Buyer, who profited when Buyer executed unlawful trades in her brokerage account. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced related criminal charges.

“When insiders like Buyer – an attorney, a former prosecutor, and a retired Congressman – monetize their access to material, nonpublic information, as alleged in this case, they not only violate the federal securities laws but also undermine public trust and confidence in the fairness of our markets,” said Gurbir S. Grewal, Director of the SEC Enforcement Division. “We are committed to doing all we can to maintain and enhance public trust by leveling the playing field and holding Buyer accountable for illegally profiting from his access.”

Monticello resident and County Council member Jan Faker who worked in Buyer’s office for 17 years said she was “shocked and disappointed” at learning of the indictment.

“The 17 years I spent on staff with Congressman Buyer were some of the best professional years of my life. I’m proud of the service his staff provided and the number of constituents we were able to assist with difficulties with federal agencies was remarkable. That record will always remain. Steve and Joni are in our prayers,” Faker said.

Over the course of seven years, 1993-2011, during Buyer’s time in Congress, court documents state he served on the committee on Energy and Commerce and its subcommittee on Communications and Technology, which had oversight over the telecommunications industry. Buyer also served on the committee on Veterans’ Affairs and the House Armed Services Committee. After leaving Congress, Buyer and a partner started a consulting firm. Buyer’s consulting work largely focused on areas in which he had gained expertise in Congress – the telecommunications industry and issues involving the United States Departments of Veterans Affairs and the United States Department of Defense.

T-Moble/Sprint

It is alleged that from 2016-2022, Buyer provided consulting services to T-Mobile. Around April 29, 2018, Sprint and T-Mobile publicly announced that they would enter into a business combination agreement, commonly known as a merger. Prosecutors allege that from at least March 29, 2018, through April 5, 2018, Buyer, misappropriated MNPI that he learned through his consulting work for T-Mobile and, in violation of duties he owed to T-Mobile, used that MNPI to make timely, profitable trades in Sprint stock in advance of the April 29, 2018 announcement of the mergers of Sprint and T-Mobile.

“From on or about March 29, 2018, through on or about April 5, 2018, Buyer purchased a total of 112,675 shares of Sprint stock across four different brokerage accounts. Before those trades, Buyer had never purchased Sprint stock in those accounts. In or about August 2018, Buyer sold the Sprint stock he had purchased in all four brokerage accounts for a profit of approximately $126,404,” court documents state. “In or about March 2018, members of T-Mobile’s legal department informed certain executives in T-Mobile’s Government Affairs group that discussion about a merger of Sprint and TMobile, which had previously been abandoned, had been renewed.

“The possibility of a merger was highly confidential, but TMobile’s Government Affairs executives were authorized to mobilize a small, trusted group of lobbyists to develop a strategy for securing regulatory approvals and other forms of support for the merger. Buyer had a business and social relationship with one of those Government Affairs executives.”

Court documents further state that around late March of 2018, the executive was made aware of the renewed merger discussions between the two companies and allegedly spoke on the telephone with Buyer each of the preceding two days, as well as on March 28, 2018.

“Also on March 28, 2018, Buyer and the executive played golf together during a golf trip they took to Miami, Florida. On the morning of March 29, 2018, Buyer purchased approximately 42,675 shares of Sprint in three different trading accounts at a price of approximately $4.84 per share. One of those trading accounts was shared jointly between Buyer and a relative whom (he) had caused to make an investment that lost the relative hundreds of thousands of dollars, which Buyer had promised to pay back by generating trading profits.

“Another one of those accounts was held in the name of a woman with whom Buyer previously had a romantic relationship and with whom he remained close friends,” according to court documents.

Before the March 29, 2018 purchases of Sprint stock, prosecutors allege the woman’s account had not been used to purchase or sell any individual securities. They also allege that “In an effort to furnish a seemingly innocuous cover story for his purchases of Sprint, on or about April 2, 2018, Buyer printed records regarding Sprint from a stock research website and made notes to himself purporting to speculate regarding the likelihood of an acquisition. On about April 3, 2018, Buyer purchased an additional 10,000 shares of Sprint in his own account at a price of approximately

$4.94 per share.”

Prosecutors say that on April 4, 2019, Buyer received an email inviting him to an April 16, 2018 meeting regarding the merger of Sprint and T-Mobile entitled “Meeting re: Business Update.” And around April 5, 2018, it is alleged that Buyer purchased an additional 60,000 shares of Sprint in his own account, at a price of approximately $5.20 per share.

News of the potential T-Mobile/Sprint merger was reported by news outlets around April 10, 2018. On that day, Sprint stock closed at $6.02 per share, up from the previous day’s closing price of $5.14 per share.

“On or about April 29, 2018, Sprint and T-Mobile announced that they had executed a business combination agreement in a deal that would value Sprint stock at $6.62 per share. On or about August 2018, Buyer, sold shares of Sprint in all four accounts for a total gain of over $126,000,” court documents allege.

Navigant

Prosecutors allege that from at least June 13, 2019, through Aug. 1, 2019, Buyer misappropriated MNPI he learned through his consulting work for Guidehouse and, in violation of duties he owed to Guidehouse, used that MNPI to make timely trades in Navigant stock in advance of the Aug. 2, 2019 announcement that the company would acquire Navigant in a deal valued at approximately $1.1 billion.

Guidehouse was a private company based in Washington D.C. that provided management and technology consulting services to government clients, including federal agencies. Guidehouse was previously a part of the international professional service firm Pricewaterhouse Coopers (PwC), handling its United States public sector business. Guidehouse separated from PwC in July 2018 after the private equity firm Veritas Capital (Veritas) acquired Guidehouse from PwC. Buyer provided consulting services to Guidehouse and its predecessor from around January 2016 through November 2019, including connection with matters involving the Department of Defense and Veterans Affairs, according to court documents.

It is alleged that from June 12, 2019, through Aug. 1, 2019, Buyer purchased a total of 46,654 shares of Navigant stock across six different brokerage accounts. Before those trades, Buyer had never purchased Navigant stock in those accounts, according to court documents. Around Aug. 2, 2019, Buyer allegedly sold substantially all of the Navigant stock for a profit of over $233,000.

“On or about March 2019, the Board of Directors of Navigant authorized an investment bank to launch a bid process for its sale. The Investment Bank contacted multiple potential acquirers in March and April of 2019. The possibility of an acquisition was highly confidential, and each of the potential acquirers was required to sign a non-disclosure agreement with Navigant. One of the potential acquirers was Veritas, the private equity firm that owned Guidehouse.”

According to court documents, one of the primary contacts of Buyer at Guidehouse was a partner in Guidehouse’s healthcare group. The partner was aware of the potential acquisition around April 2019.

“On or about June 6, 2019, the Investment Bank directed three potential acquirers, including Veritas, to submit final, binding proposals regarding the acquisition of Navigant by no later than July 9, 2019. During the evening of June 12, 2019, the partner sent an email to a sales leader at Guidehouse, who was a contact of Buyer’s, seeking information on revenue synergies that the acquisition could create. The email referenced a potential ‘combination.’ Shortly after that, the salesperson called Buyer and they spoke for approximately five minutes. The salesperson then called the partner with a partial response to their question. The salesperson and Buyer spoke three additional times that evening,” court documents allege.

“Within several hours of the June 12, 2019 communication, Buyer had used the information he learned during his confidential conversation with the salesperson to determine Guidehouse intended to purchase Navigant. Shortly after 1 a.m. on the morning of June 13, 2019, Buyer searched for Navigant’s ticker on a brokerage website. Several hours later, at 8:44 am. On June 13, 2019, Buyer emailed himself an analyst report from a website listing Navigant as a strong stock pick. At 9:54 a.m. that day, Buyer emailed the analyst report to his son, with whom he shared a trading account and wrote that he was “thinking of buying” Naviant stock.”

Prosecutors allege that this behavior is consistent with Buyer’s earlier use of the website, and records in connection with his alleged insider trading of Sprint stock.

“Buyer sent these emails in an effort to conceal his intent to trade on MNPI by creating the appearance of an innocent basis for his trading,” court documents state.

“Buyer did not wait for his son to respond to his 9:54 am. email, rather at 10:06 a.m., Buyer purchased a total of 28,300 shares of Navigant across three brokerage accounts, including the account he shared with his son, at prices ranging from $22.40 to $22.51 per share. Buyer continued trading in Navigant through on or about Aug. 1, 2019. The trades were placed in six accounts, including an account in his wife’s name, the account he shared with his son, and the account for (his relative).”

According to prosecutors, between the time the individual account was opened around 2017 and the time of the 2019 Navigant trades in their account, the only other securities purchased or sold in the account were Sprint shares.

Around Aug. 2, 2019, Guidehouse announced it had agreed to acquire Navigant for $28 per share, Navigant’s stock price closed at $28.06 per share, an approximate increase of 17% over the Aug. 1, 2019 closing price of $24.02 per share.

Buyer allegedly sold all of the shares held in accounts in his or his wife’s name that day for a profit of approximately $223,442.61.

Alleged cover-up

Prosecutors say that around Oct. 31, 2019, Buyer was informed by counsel for Guidehouse that the Financial Industry Regulatory Authority (FINRA) had contacted the company to inquire about potential insider trading in Navigant stock. Counsel for Guidehouse then interviewed Buyer to collect information to respond to FINRA’s inquiry.

During the interview, Buyer allegedly told the lawyers that, among other things, he had purchased Navigant stock in his account and his son’s account; he had made four purchases of Navigant stock; he bought more Navigant stock because the price went down; he was not privy to any conversations with Guidehouse about potential transactions, and he bought the Navigant stock based on two analyst reports. Buyer allegedly did not disclose his communication with the salesperson on June 12, 2019, nor did he tell attorneys about trading in (his relative’s) account.

It is alleged in court documents that about Nov. 2, 2019, “in further effort to cover up his schemes, Buyer sent (the salesperson) a message over an encrypted messaging application stating, ‘I need to see you. Please … I will catch the next flight. I was interviewed and told them I bought and I figured it was either (another company) or Navigant on my own which is true and no one ever told me or uttered the word Navigant which is also true . . . I had seen research that recommend it around June 8 as a buy and had sent an email to my son about it . . . he never replied.‘”

Buyer is being charged with four counts of securities fraud, two in connection with T-Mobile/Spring stock purchases and sales, and two connected to Guidehouse/Navigant.

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