NEW YORK (AP) — A powerful U.S. House of Representatives
committee was ordered on Friday to appear before a judge next month to
explain why it should not be required to turn over documents in an
insider-trading probe.
U.S. District Judge Paul Gardephe in
Manhattan set a July 1 hearing for the Ways and Means Committee to
appear. He also required a senior committee staffer, Brian Sutter, to
appear. He said the committee must show why it should not be ordered to
produce documents demanded by the Securities and Exchange Commission in
May.
In court papers, the SEC said its probe relates to whether
secrets were passed to certain members of the public surrounding an
April 2013 announcement by the U.S. Centers for Medicare and Medicaid
Services about a Medicare program.
Sutter, the committee’s staff
director, disclosed on May 9 to House Speaker John Boehner, a
Republican, that he had received a subpoena from the SEC for documents
and testimony along with a grand jury subpoena from federal prosecutors
in Manhattan, according to the congressional record of that day.
The
SEC said in its court papers that the committee and Sutter had refused
to comply with the subpoenas. It said they had asserted "numerous
objections, arguing, among other things, that the subpoenas are
‘repugnant to public policy;’ that they are vague and overbroad" and
that the speech or debate clause of the Constitution entitled them to
avoid producing the documents or testimony.
Messages left with lawyers for the House committee and for Sutter were not immediately returned Friday.

The
SEC noted that a public rate announcement about the Medicare Advantage
program that was far more favorable to certain health care insurers than
anticipated was made 20 minutes after the market closed on April 1,
2013. But, it said, an analyst at dealer-broker Height Securities LLC
issued a flash report about 20 minutes before the markets closed urging
dozens of clients, including prominent investment funds, to buy stocks
that would benefit from a rate increase close to what was announced.
The
SEC said the prices and trading volumes of affected stocks, including
Louisville, Kentucky-based health care company Humana Inc., increased
dramatically within minutes. It said the Height analyst distributed the
flash report about half an hour after receiving an email from a lobbyist
firm and attorney forecasting the rate improvement.
An SEC probe
began April 9, 2013, to determine the source of information sent from
the lobbyist to Height and the circumstances of the transmittal and
whether any conduct constituted insider trading, the SEC said.
A message seeking comment from Height, which has offices in New York and Washington, D.C., was not
immediately returned Friday.
The
SEC said information it had obtained indicates Sutter spoke several
times in March 2013 to a colleague at the lobbyist firm that sent the
email to the Height analyst and communicated with at least two people at
the Centers for Medicare and Medicaid Services in the week before the
rate announcement.
The SEC said an FBI agent and an investigator
from the Office of the Inspector General at the U.S. Department of
Health and Human Services interviewed Sutter several weeks after the
rate announcement and discussed with him his communications with the
lobbying firm.
The agency said Sutter did not recall speaking to
the lobbying firm about the rate announcement, but a House attorney sent
the FBI and the HHS investigator a letter saying some of the
information provided during the voluntary interview was incomplete and,
on at least one key issue, inaccurate.
The SEC said the commission
had obtained other information that indicated Sutter may have been a
source of the lobbying firm’s non-public information.