Former U.S. Rep. Buyer arrested, charged with insider trading
SEC, federal prosecutors say Buyer schemed, cashed in big for himself, family, romantic acquaintance with info gleaned from consulting work
Special report from Dave Bangert of Based in Lafayette, Indiana on Substack. Reproduced with permission.
Former U.S. Rep. Steve Buyer was arrested and charged in federal court Monday, accused of using confidential information to buy more than $1.5 million in stock in two companies about to be sold, making six-figure profits in short order for accounts held by family members and someone he was romantically involved with, all while trying to cover his tracks.
Buyer, who as a Monticello Republican served parts of Indiana in Congress from 1993 to 2011, faces four criminal counts of securities fraud and demands from the SEC to “disgorge” himself and others of cash after racking up profits of $335,729 in stock purchases and sales in 2018 and 2019 he made with inside information pulled from his work as a consultant.
The criminal indictments, filed in U.S. District Court in the Southern District of New York, name Buyer for actions taken well after he’d left Congress as the representative for the 4th District, which includes Lafayette and West Lafayette. The SEC complaint, filed in the same court, names Buyer and his wife, Joni Buyer, though the court documents say the SEC doesn’t allege she “engaged in any legal wrongdoing.”
Attempts Monday to reach Buyer, 63 and now living in Noblesville, were not immediately successful.
The SEC complaint claims that when the federal agency issued a subpoena, “Buyer invoked his Fifth Amendment privilege against self-incrimination and refused to testify about, among other things, his trading in the securities.”
Damian Williams, U.S. attorney for the Southern District of New York, said Buyer had been arrested Monday morning. He said each of the four criminal charges carry a maximum term of 20 years in prison.
According to Politico, Andrew Goldstein, Buyer’s attorney, released this statement: “Congressman Buyer is innocent. His stock trades were lawful. He looks forward to being quickly vindicated.”
The SEC filing accused Buyer of doing consulting work, including in telecommunications and Department of Veterans Affairs issues, leveraged by his nine terms in Congress that put him in position to get the inside line on pending mergers and corporate sales.
“When insiders like Buyer — an attorney, a former prosecutor, and a retired congressman — monetize their access to material, nonpublic information, as alleged in this case, they not only violate the federal securities laws, but also undermine public trust and confidence in the fairness of our markets,” Gurbir Grewal, director of the SEC’s enforcement division, said in a prepared release Monday. “We are committed to doing all we can to maintain and enhance public trust by leveling the playing field and holding Buyer accountable for illegally profiting from his access.”
The charges accuse Buyer of cashing in when T-Mobile merged with Sprint in 2018 and when Guidehouse, a Virginia firm that provides consulting services to government clients, bought Navigant Consulting Inc.
Specifically on the $26.5 billion T-Mobile/Sprint merger, according to charges in the court documents:
Buyer was on a March 2018 golf trip to Miami when a T-Mobile vice president told him about the telecommunications company’s plans to renew negotiations to buy Sprint. Buyer, through the Steve Buyer Group LLC, had been a consultant for T-Mobile since 2016. The vice president was told to start outreach to the company’s core consultants, including the former congressman. T-Mobile explained that the consultants, including Buyer, were supposed to keep the acquisition confidential.
On March 29, 2018, a day after the golfing trip, Buyer began buying shares of Sprint. Over the course of a week, he bought 112,675 shares of Sprint, worth $568,063. He distributed it among five accounts, including: two IRAs in his name, a joint account with a cousin and an IRA owned by a woman the federal prosecutors say Buyer had been romantically involved with since 2006.
As he bought the shares, Buyer was accused of trying to cover things up by printing out a public report from Zacks Investment Research, a tip sheet for stock recommendations. According to the charges: “Buyer then made handwritten notes on the document to create the false impression that his purchases were based on information in the Zacks document, and not on material nonpublic information.”
News of the pending Sprint acquisition leaked on April 10, 2018, sending the stock up 16%. On April 11, Buyer sold shares in the four accounts, making a $107,986 in profits.
Buyer upped the ante a year later, according to the federal prosecutor and the SEC. Specifically on the $1.1 billion Guidehouse/Navigant deal a year later, according to the narrative with the charges:
Buyer had been working with Guidehouse since 2015, advising the company about making connections with the VA and in Congress. On June 12, 2019, a Guidehouse managing director called Buyer to get information about the VA and projects there. From that, Buyer figured out the Guidehouse was looking to buy one of two companies, including Navigant.
On June 13, Buyer “determined that his client planned to acquire Navigant,” and started loading up on stock. He also found a Zacks Investment Research report recommending Navigant shares and emailed it to himself and his son, telling his son that “he was ‘thinking of buying’” the stock, to cover himself. According to the criminal charges, Buyer didn’t wait for his son’s reply before picking up 28,300 shares of Navigant 12 minutes later.
Between June 13 and Aug. 1 that year, Buyer bought 46,654 shares, spending more than $1 million, of Navigant. This time, he spread those across six accounts, including: two IRAs in his name, a joint account owned with his son, an account owned by Joni Buyer, a joint account owned by Steve and Joni Buyer, and an IRA owned by the woman he was romantically involved with.
When Guidehouse publicly announced the acquisition on Aug. 2, 2019, Navigant shares increased nearly 17%. That day, Buyer sold all but the 954 shares owned by his friend; he sold those more than a month later. Buyer made $227,741 in profit.
According to the criminal charges, Buyer was interviewed in October 2019 by Guidehouse attorneys about potential insider trading. He told the company’s attorney that he’d bought Navigant stock based on two analyst reports and that “he was not privy to any conversations with Guidehouse about the potential transaction.” He didn’t tell about the calls from a Guidehouse official, and he didn’t mention that he’d purchased shares for his friend.
A few days later, according to the criminal case, Buyer sent an encrypted message to his contact at Guidehouse: “I need to see you. Please … I will catch next flight. I was interviewed and told them I bought and I figured it was either (another company) or Navigant on my own which is true and no one ever told me or uttered the word Navigant which is also true.”
The federal cases filed Monday ask the court to force Buyer to return the money and to block him from being a director or an officer with a public company.
Buyer was first elected to the U.S House in November 1992, in Indiana’s 5th District. In 2002, when Buyer and then-Rep. Brian Kerns were drawn into the same district, Buyer won the 4th District seat. He didn’t run in 2010, retiring, he said, because he wanted to spend more time with Joni as she dealt with health issues. In his final year in office, he fended off complaints that the Frontier Education Foundation, an entity he created, failed to channel scholarships to college students, as advertised, as it racked up administrative and travel costs.
FOR MORE: Read the SEC charges and federal criminal indictments here …