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Humana Insurance Insider Trading Investigation Includes 44 Funds

The Securities and Exchange Commission ("SEC") is looking into insider trading allegations involving Height Securities, LLC ("Height") and 44 of its clients. On April 1, 2013, the Centers for medicare and Medicaid Services ("CMS") made an announcement regarding reimbursement rates for the medicare advantage program, which resulted in private insurance comapnies like Humana Insurance ("Humana") saving millions of dollars.

The SEC is investigating allegations that, before the CMS annoucement was made, a senior aide in the House of Representatives allegedly leaked information about the reimbursement rates to Height -- a privately held broker-dealer that provides research, advisory, and investment banking services to institutional investors, financial sponsors and corporation -- and that Height then relayed that information to its clients. According to the SEC, Heights' clients were then able to buy a great deal of shares in health care insurance companies, substantially increasing trading for health care stocks right before the announcement. These investors then allegedly profited when the share price increased due to the positive announcement from CMS for Humana and other private insurance companies.

The alleged link between the House and Height was a former Senate health policy aide and current lobbyist/lawyer for Greenburg Traurig LLP, Mark Hayes. Mr. Hayes allegedly received notification about the contents of the announcement from a senior aide and alerted a Height analyst, who provided that information to the company's clients.

The SEC is continuing its investigation, looking to obtain documents from the House of Representatives that would provide details about the exchange between House staffers and the lobbyist. The House has resisted and refused to hand over documents related to the investigation. The SEC is pressing United States District Judge Paul G. Gardephe of the United States District Court for the Southern District of New York to require compliance from the House.

Humana has since fired Greenburg, Traurig LLC as its lobbying firm and launched an internal review looking for possible misconduct "to determine if [their] interests were harmed." The SEC will continue to pursue this matter, as it is very likely "a violation of insider-trading laws if someone received advance word of the policy change from the government and passed the tip to traders."

This action by the SEC is in line with its increased focus on preventing funds and other entities from receiving non-public government information and using that information to affect markets. The Stop Trading on Congressional Knowledge Act ("STOCK"), which was passed in 2012, helps to clarify the fact that government employees cannot profit from information they encounter while working. The House Committee of Ethics elaborated after the law was enacted, "[a] good rule of thumb to determine whether information may be material nonpublic information is whether or not the release of that information to the public would have an effect on the price of the security of property" ( The STOCK act shows that the government has been trying to make sure public servants do not use their access to information to alter market prices for any asset, and it is likely that the SEC will continue to pursue cases similar to this one as political information that can affect markets become more valuable.

Insider trading continues to be a substantial focus of SEC enforcement activities. Under the Dodd-Frank Wall Street Reform and Financial Protection Act, a whistleblower who knows of potential securities law violations can assist the SEC and receive a monetary award for reporting such information. The range for potential awards is between 10% and 30% of the money collected by the SEC if more than $1 million is recovered. SFMS attorneys have substantial experience representing clients in connection with Dodd-Frank whistleblower proceedings.

If you have any questions regarding this subject or this posting, please contact James E. Miller ([email protected]), Rose F. Luzon ([email protected]) or Michael Ols ([email protected]). We can also be reached toll-free at (866) 540-5505.

Shepherd Finkelman Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains an affiliate office in London, England, and is an active member of Integrated Advisory Group (, which provides the firm with the ability to provide our clients with access to excellent legal and accounting resources throught the globe. For more information about our firm, please visit us at


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