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SEC investigation into Burr's stock trading focused on conversations with brother-in-law

SEC investigation into Burr's stock trading focused on conversations with brother-in-law

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A Securities and Exchange Commission investigation into U.S. Sen. Richard Burr’s pre-pandemic stock trading has resurfaced with a sharp focus on Burr’s conversations with brother-in-law Gerald Fauth on Feb. 13, 2020.

That was the day the SEC says Burr and his wife, Brooke, “liquidated virtually all the stock” in their portfolio. The stock sold was valued at $1.65 million.

The publication Roll Call listed Richard Burr’s net worth at $1.7 million as of 2018.

A series of SEC civil filings were submitted Oct. 22 to the website. They were first reported on Thursday by ProPublica.

The SEC says that on Feb. 13, 2020, Burr “possessed material nonpublic information concerning COVID-19 and its potential impact on the U.S. and global economies.”

ProPublica previously reported that Fauth sold major stock holdings on the same day as Burr.

“But it was previously unknown that Burr and Fauth spoke that day, and that their contact came just before Fauth began the process of dumping stock himself,” ProPublica reported Thursday.

Shortly after a 50-second phone conversation between the men ended on Feb. 13, 2020, the SEC said Fauth called his stockbroker and sold off between $97,000 and $280,000 worth of shares in six companies. The amount is according to a federal Public Financial Disclosure Act filing made by Fauth.

The stock Fauth sold involved: Mondelez International Inc., a confectionery, food, holding and beverage company; Altria Group Inc., parent of tobacco manufacturer Philip Morris USA; Chevron Corp.; Royal Dutch Shell (B stock); BP (British Petroleum) PLC; and Williams-Sonoma Inc., between $1,001 and $15,000.

There was no overlap of the stocks sold Feb. 13 by the Burrs and Fauth. The Burrs bought stock in Mondelez in 2013 and sold it in 2015.

Burr’s office could not be immediately reached for comment on the SEC filings and ProPublica report.

In May 2020, attorney Alice Fisher of the Washington law firm Latham & Watkins LLP said in a statement that “Senator Burr participated in the stock market based on public information, and he did not coordinate his decision to trade on Feb. 13 with Mr. Fauth.”

ProPublica said Fisher did not respond when asked whether Burr discussed anything he learned as a senator with Fauth or any other relatives.

The Republican U.S. senator is from Winston-Salem. He has said he will not seek a fourth Senate term and will retire in January 2025.

Focus of SEC

The focus of the SEC filings is the agency’s pursuit of testimony from Fauth as it pertains to his knowledge of Burr’s stock selling.

Included is a subpoena request to a federal judge, citing a lack of cooperation from Fauth and his legal counsel since May 2020.

The SEC launched its investigation on March 25, 2020, to determine whether Burr has violated insider-trading laws.

However, the SEC probe has been overshadowed by a higher-profile U.S. Justice Department investigation.

Burr’s office and his attorney announced Jan. 19 that Justice officials declined to bring charges of insider stock trading. It is not unusual for the political subject of a Justice investigation to be the one announcing a decision.

Fauth and his wife, Mary, received their first documented subpoena on May 12, 2020, after a series of phone calls by the SEC were not returned.

The SEC narrative for Feb. 13, 2020, listed that at “8:54 a.m. Senator Burr placed a call from his cellphone to his broker’s landline at broker-dealer 1, and directed his broker to sell $1.65 million worth of stock — all but one of the equities in his and his wife’s joint individual retirement account (IRA) portfolio. The call lasted 12 minutes and 52 seconds.”

Following the 50-second phone conversation at 11:32 a.m., the SEC said Fauth tried to reach a stockbroker. After he was told that the stockbroker was out of the office, Fauth immediately called another broker to execute the trades.

The SEC said Burr, Fauth and their wives “communicated regularly by phone” during February, and that Burr had stayed with the Fauths during the week of Feb. 13, 2020.

Citing an anonymous law-enforcement source, the Los Angeles Times was the first to report in May 2020, that Federal Bureau of Investigation agents came to Burr’s home in the Washington area with a search warrant to seize Burr’s cellphone.

In May 2021, a federal judge denied two requests to unseal records related to the cellphone seizure filed by the L.A. Times.

Stock trading

U.S. senators are required to submit periodic financial disclosures.

Senate financial-disclosure documents show the Burrs sold between $628,000 and $1.72 million of their stock holdings in 33 separate transactions just on Feb. 13 alone.

The sales included shares of three corporations in the hotel and hospitality industry which was hammered economically during the early months of the pandemic.

A central question of the SEC investigation into Burr is whether he violated the STOCK Act.

The STOCK Act, passed by Congress in 2012, prohibits federal lawmakers from using nonpublic information derived from their positions for their personal benefit.

The SEC said Burr’s information was obtained from his leadership roles on Senate committees “and from certain former staffers that were then directing key aspects of the U.S. Government’s preparedness and response to the COVID-19 pandemic.”

Not cooperating

A hearing has been set for 1:30 p.m. Friday on the SEC’s show-cause request.

The SEC said Fauth’s testimony “is critical” to its investigation of Burr for “possible insider trading.”

The SEC said Fauth has declined to cooperate with the SEC since May 2020, listing that he and his legal counsel “have waged a relentless battle to avoid it.”

That includes ignoring SEC staff’s phone calls, “then by pleading respondent’s ill health and promising to offer dates for testimony at ever-shifting times in the future, and finally by refusing to explain how Fauth can maintain his current position at the helm of a federal agency, but cannot sit for a limited session of testimony.”

In 2017, President Donald Trump appointed Fauth to the three-person National Mediation board, a federal agency that facilitates labor-management relations within the nation’s railroad and airline industries. President Joe Biden reappointed him to the board in September 2021.

“Whether Fauth was himself tipped with inside information from Senator Burr, and whether Fauth knew that Senator Burr was violating his duties under the STOCK Act by conveying that information, are matters Fauth is uniquely positioned to speak to.”


Burr and former Sen. Kelly Loeffler, R-Ga., drew the most attention and scrutiny of several senators for their stock transactions, in part because on Jan. 24, 2020, they attended the Senate Health and Foreign Relations Committee’s closed-door briefing on the novel coronavirus.

The Senate committee meeting occurred shortly before the general public — and Wall Street — became aware of the seriousness of COVID-19 and the stock market plummeting in March.

Burr also gave a stark warning about COVID-19 at a Feb. 27 private event that he had not repeated publicly at that time.

Burr told members of the well-connected private Tar Heel Circle that the novel coronavirus would have dire effects on the U.S. economy and population, likening it to the 1918 Spanish flu pandemic that left millions dead, according to a secret recording obtained by NPR.

The Feb. 13 trading occurred six days after Burr co-wrote an op-ed piece saying America had tools in place to combat COVID-19 and seven days before the first major decline in the stock market.

Burr’s comments carry significant weight in part because he is author of the federal Pandemic All-Hazards Preparedness Act of 2006.

Burr initially took to social media for an eight-part Twitter response to denounce NPR’s report as “a tabloid-style hit piece.”

However, the next day, Burr released a statement saying “I relied solely on public news reports to guide my decision regarding the sale of stocks on Feb. 13. Specifically, I closely followed CNBC’s daily health and science reporting out of its Asia bureaus at the time.”

“Understanding the assumption many could make in hindsight however, I spoke this morning with the chairman of the Senate Ethics Committee and asked him to open a complete review of the matter with full transparency.”

The controversy surrounding Burr intensified on May 14, 2020, when he resigned as chairman of the Senate Intelligence Committee, a day after FBI agents seized his cellphone from his home.

Burr has said he has no plans to resign from his U.S. Senate seat as it relate to the investigations.

Burr has weathered resignation calls from critics as varied as Fox News host Tucker Carlson, embattled U.S. Rep. Matt Gaetz, R-Fla., the N.C. Democratic Party, and social media commentators.

Gaetz’ comments were viewed with suspicion by some Democrats and never-Trump supporters given that he also tweeted “Worth noting that Chairman Burr was swampily complicit in dragging an innocent @DonaldJTrumpJr before Senate Intel time & time again.”

Those groups believed Gaetz was trying to force Burr’s removal as Intelligence committee chairman as payback for Burr’s role in allowing the committee’s investigation into Russian interference in the 2016 presidential election.

John Locke Foundation senior analyst Mitch Kokai said Thursday that “this certainly isn’t good news for Sen. Burr, and it’s possible he could face legal repercussions.”

“The political impact is minimal. Burr plans to retire next year, and he has not played a particularly active role in the most recent hot-button debates on Capitol Hill.”

“Laying low might be his best strategy in the coming months.”

Meanwhile, the left-leaning advocacy group American Bridge 21st Century sought to insert the resurfaced Burr stock-trading investigation into the heated 2024 Republican primary race to succeed Burr, saying: “The Republican Senate candidates running to replace Burr — Ted Budd, Pat McCrory and Mark Walker — owe voters answers to questions” — would they sell stock based on material nonpublic information; what are appropriate consequences for Senator Burr, if these allegations are proven; and would they accept Burr’s political and financial-campaign support “if he’s proven to have engaged in illegal insider trading.”




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