By Kevin Bogardus - 06/24/13 11:19 PM EDT
Sen. Chuck GrassleyChuck GrassleyThe Trail 2016: Fight night Clinton, Trump tied in Iowa, Grassley leads in Senate race Senate rivals gear up for debates MORE (R-Iowa) is demanding that the Obama administration explain a four-hour gap in emails that he requested as part of his investigation into the political intelligence industry. [WATCH VIDEO]
In a letter sent Monday and obtained exclusively by The Hill, Grassley questioned Centers for Medicare and Medicaid Services (CMS) Administrator Marilyn Tavenner about a period of inactivity in the agency’s email records from March 22.
Grassley is investigating suspicious trading in healthcare stocks in the days before the CMS announced a plan to reverse proposed cuts to Medicare Advantage, which are managed by private insurers.
CMS officials made the final decision on March 15, but didn’t make it public. In the two weeks before the announcement, there were a number of unusual trading spikes in health insurance stocks, including a rapid surge on April 1 that came just minutes before the administration broke the news.
Grassley is investigating whether operatives in the political intelligence industry might have tipped off investors about the CMS plan. Federal authorities are looking into the matter as well.
Investigators in Grassley’s office have zeroed in on the contact that CMS officials had with individuals outside the agency. After reviewing more than a thousand pages of emails from the CMS, Grassley’s office found that the agency provided zero emails from 9:57 a.m. until 2:45 p.m. on March 22 — one of the days of high activity in health insurance stock trading.
Grassley noted in his letter that “there was reportedly a significant spike in options trading activity in Humana, one of the companies that would benefit from the [Medicare] decision,” on the day of the four-hour email gap.
The emails from the agency so far show that at least 19 private firms — including insurance companies, political intelligence firms and financial traders — reached out to CMS sometime between March 19 and April 1 about the Medicare Advantage decision, according to an analysis by Grassley’s oversight staff.
The emails provided to Grassley do not show any evidence that someone at CMS tipped off the private sector to the decision, but the policy change was well-known within the agency. The Grassley oversight staff analysis found that 436 people in CMS and the Health and Human Services Department (HHS) received advance notice of the Medicare change.
In addition, Grassley said in his letter Monday that advance notice of the policy change was sent to “40 employees in 10 HHS sub-agencies and at least one outside contractor.”
“CMS takes the security and integrity of sensitive information very seriously,” said Brian Cook, a spokesman for the agency. “While large numbers of employees may need to be involved in developing complex policies, we carefully vet which CMS employees have access to sensitive information and are part of specific clearance chains.”
Officials there were aware of the unusual stock movements before the April 1 announcement. Emails cited by Grassley in his letter have CMS officials discussing whether to inform “the powers-that-be” of a 4 percent spike in Humana’s stock on March 27.
According to the emails described in Grassley’s letter, CMS officials would later credit the stock spike to the release of a Congressional Research Service report. But the senator notes that “there are indications in the emails that information about the decision was widely distributed on the evening of March 26, which could also help explain the spike on March 27” with 90 people receiving several documents describing the decision.
Grassley’s investigation into the political intelligence industry has become wide-ranging, touching several federal agencies and financial and lobby firms.
So far, the senator has asked for information from the Office of Management and Budget (OMB) and the State Department, as well as from the CMS. He has also contacted several individuals and firms, including Greenberg Traurig and Height Securities.
A Greenberg Traurig lobbyist and a former Grassley aide allegedly tipped off a Height Securities analyst about the Medicare decision. The analyst sent out a client alert minutes before the policy change was announced, and insurance stocks skyrocketed.
The tip might have come from someone within the government, and Grassley is casting a wide net to figure out if that’s the case.
Grassley has asked for the names of all OMB and White House officials who had advance word of the decision, as well as records of meetings and communications with financial firms and political intelligence groups.
The budget office learned of the CMS decision on Medicare Advantage on March 22, according to Grassley’s letter to the OMB.
Grassley also contacted State after reports emerged that Huma Abedin, a senior aide to then-Secretary of State Hillary ClintonHillary Rodham Clinton Trump reveals how he calmed his nerves before debate GOP lawmakers give Trump bad reviews on debate performance Trump on debate: I was 'holding back' MORE, was a “special government employee” that could work at State and represent outside clients. In his letter, Grassley suggested Abedin might be working in political intelligence.
A State Department official confirmed that the department is reviewing Grassley’s letter and would respond.
The Justice Department has also contacted Grassley regarding the Medicare trading. Grassley’s office received a letter from the Justice Department on May 9 requesting communications from his healthcare aide, Rodney Whitlock, on Medicare Advantage.
“Senator Grassley cooperated with the Justice Department’s voluntary request in the interest of assisting the Justice Department’s investigation into insider trading. A request for documents is not an indication of suspected wrongdoing,” said a June 13 statement on Grassley’s website.
Grassley and Rep. Louise Slaughter (D-N.Y.) have pushed more disclosure within the political intelligence industry. Last year, the Senate added a provision by Grassley to the STOCK Act that would have required political intelligence consultants to register as lobbyists, but that was later stripped from the bill in the House.
K Street has bristled at the push for more regulation of the political intelligence industry, which they say operates on public information available to anyone who wants it.
Grassley has said he is not seeking to shut down political intelligence but his investigation could lead to greater transparency.
“I am trying to learn how these political intelligence firms function by using this real-world example so that I can write better legislation on disclosure,” Grassley said in a floor speech last month.