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The Street
The Street
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Rob Lenihan

Ex-U.S. Congressman Charged in Insider-Trading Case

A former Indiana congressman was arrested and charged with using inside information to buy $1.5 million in stock, federal officials said on July 25.

Stephen Buyer, a Republican who represented Indiana in the House from 1993 to 2011, was charged with insider trading by the Securities and Exchange Commission and by the U.S. Attorney for the Southern District of New York.

The cases were filed in U.S. District Court in Manhattan.

The SEC demands that Buyer give up the profit he made from the allegedly improper trades plus interest and penalties. The agency is seeking a permanent injunction and an officer-and-director bar against the former representative. And the agency said it demanded that Buyer's wife give up profit from the trades he made in her account.

In the U.S. Attorney's criminal case, Buyer, 63, of Noblesville, Ind., was charged with four counts of securities fraud, each of which carries a maximum prison term of 20 years.

Buyer's attorney, Andrew Goldstein, a partner at Cooley LLP, said, "Congressman Buyer is innocent. His stock trades were lawful. He looks forward to being quickly vindicated." 

Golf Outing

In a statement the SEC said that after Buyer left office, he formed a consultancy, Stephen Buyer Group, that provided services to the telecom-services company T-Mobile (TMUS) and other clients.

In March 2018, Buyer attended a golf outing with a T-Mobile executive, from whom he learned about the company’s plan to acquire Sprint, which was not yet publicly known, according to the SEC.

Buyer began purchasing Sprint securities the next day and, ahead of the merger announcement, he acquired a total of $568,000 of Sprint common stock in his own personal accounts, in a joint account with a cousin, and in an acquaintance’s account, the agency charged.

After news of the merger leaked in April 2018, Buyer saw an immediate profit of more than $107,000, the SEC said.

In 2019, Buyer bought more than $1 million of Navigant Consulting securities ahead of the public announcement that it would be acquired by another of Buyer’s consulting clients, Guidehouse LLP, according to the SEC’s complaint.

Buyer again spread the purchases across several accounts, including his own, joint accounts with his wife and son, his wife’s personal account, and the same acquaintance’s account involved in the Sprint trading, the agency charged. 

The complaint says Buyer began a romantic relationship with a woman identified as "Friend 1" in 2006. He later used her individual retirement account to purchase more than $12,000 of stock in Sprint. A year later, the complaint said, he used her account to buy $22,000 of stock in Navigant.

False Impression Alleged

In August 2019, on the day that the Navigant acquisition was publicly announced, Buyer sold almost all the shares he had acquired across the accounts and profited more than $227,000, the SEC alleged.

The SEC alleged that Buyer tried to hide that he was using material nonpublic information by printing out a document from Zacks Investment Research that showed Sprint stock purchases by insiders.

"Buyer then made handwritten notes on the document to create the false impression that his purchases were based on information in the Zacks document, and not on material nonpublic information," the complaint said.

Buyer served on the House Committee on Veterans' Affairs and the House Committee on Energy and Commerce.

"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," Gurbir S. Grewal, director of the SEC's Enforcement Division, said in a statement.

The U.S. Attorney's case against Buyer was one of four charging nine people in various insider-trading cases, officials said.

Other defendants included a one-time Goldman Sachs banker, who allegedly used confidential information from his company; and a former FBI trainee and his friend, who together made more than $1.4 million in illegal profits by trading stock based on inside information obtained from his then-girlfriend's confidential work documents.

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