How Richard Burr Made $185,000 During the Covid-19 Pandemic — GovTrades

Senator Richard Burr (R-NC) is the focus of an inquiry into major stock sales in advance of the February-March stock market crash by senators who received closed-door briefings on the spread of Covid-19. As head of the Senate Intelligence Committee, Burr received daily confidential reports throughout January and early February on the potential impacts of the coronavirus pandemic. ProPublica reported that on Feb. 13 – less than a week before the market peaked on Feb. 19 – Sen. Burr sold between $628K and $1.72M of his stock in major companies. According to our estimates, this sale amounted to about 25% of his financial holdings at the time. The FBI is currently investigating Burr for violating the 2012 STOCK Act, which prohibits members of Congress and other government employees from trading on non-public information. Sen. Burr has temporarily stepped down as chair of the Senate intelligence committee in response to the scandal, but maintains that his trades were exclusively informed by public media reports about the pandemic.*

It’s hard to know what information Burr used in making his trades. One approach — taken by most journalistic outlets — involves piecing together a timeline of Burr’s information flow and communications immediately before executing the suspicious trades. Another approach, sometimes taken by the Securities and Exchange Commission (SEC) when prosecuting insider trading on Wall Street, relies on evidence that traders with inside information enjoyed massive and unusual financial returns from their transactions. Evidence that Burr’s stock trades resulted in extraordinary returns would make his claim that he was trading based on purely public information less convincing.

Data aggregated by GovTrades gives unique insight into this second approach by directly quantifying the financial payoff that Burr enjoyed from his February stock sales and studying how unusual the returns actually were. To do so, we pulled Burr’s financial holdings and stock market transactions from January 1, 2014 to May 22, 2020, along with associated daily market returns.

We find that Burr earned a significant sum from his February sales — over $180,000 over less than 100 days, equivalent to a 25% return. This amount is about three-and-a-half times the annual income of the median North Carolina family he represents. Burr’s previous stock trades rarely earned anything close to that amount. To achieve such high returns, Burr selectively sold shares in companies most impacted by government-mandated closures and stay-at-home orders – even though such policies had yet to be announced to the public. Finally, neither Burr’s defense for his trading behavior, nor alternative innocent explanations, cannot explain his astronomical returns. While not definitive, our analysis adds crucial evidence in support of those who claim that Burr abused his office by trading on non-public information.

1. Burr’s February trades earned exceptionally high returns compared with past trades.

How much money did Burr earn from his February trades? To find out, we estimated the value of Burr’s actual financial holdings since Jan 1, 2020, and compared the result to an alternative scenario in which Burr did not sell any stock on February 13. Figure 1 plots the daily value of Burr’s actual holdings (red line) and the value of his holdings had he not sold his stock (blue line). As of May 22, 2020, Burr saved almost $187,000 by selling at the exact right time. That’s equivalent to a 25% return in less than 100 days, or over 65% in annualized terms.**  

This striking return should be enough to raise eyebrows. It also stands out in the context of returns from Burr’s previous financial transactions. Fig 2 shows the full distribution of 100-day returns*** for each of the 121 trades recorded in our database from Jan 1, 2014 to Feb 13, 2020. Over the past 6 years, the median return was a whopping 0%. The red line on the graph plots the return from the most profitable Feb 13 sale (in Park Hotels & Resorts, Inc, NYSE:PK), which exceeded the return from every previous stock transaction. The green line indicates the average return for all Feb 13 sales – higher than all but 8 previous individual stock transactions. Burr’s uncharacteristically high returns suggests he may have had an informational edge in his February trades.