The SEC lawsuit alleges that the House staffer, Brian Sutter, spoke with a lobbyist -- identified by the Journal as Mark Hayes, who happens to be a former aide to Grassley -- on the day of the leak. The suit alleges that Sutter was in touch with Hayes by both email and phone and that they discussed the upcoming Medicare policy change. Hayes then allegedly gave the information to a research firm, which distributed the flash that set off the trading, according to the SEC. A 2012 law, the Stop Trading on Congressional Knowledge Act, prohibits government officials from disclosing non-public information that could affect stock prices, the Wall Street Journal reported.
Grassley's office declined to comment to TPM about the latest development. He has also reportedly made inquiries into whether an aide to Sen. Orrin Hatch, his senior colleague on the Senate Finance Committee, had any role in the leak. Additionally, according to Politico, he has raised questions about Hayes’s role in the leaks. But the Obama administration appears to have been Grassley's initial and most public target when trying to identify the source of the leak.
Grassley has had suspicions about leaks from the Obama administration regarding health policy changes since at least 2011. For example, in a letter dated Dec. 12, 2011, the senator brought up his hunch with Marilyn Tavenner, who was then acting administrator of the Centers for Medicare and Medicaid Services.
Grassley’s letter said he was in contact with a “whistleblower within CMS” who had accused top administration officials of meeting with lobbyists and hedge fund brokers in non-public settings.
"My concern is that these allegations suggest a continuing pattern in which (administration) officials ... under the cover of reaching out and meeting with stakeholders, have disseminated information to well-connected lobbyists in non-public settings," he wrote.
Grassley’s suspicions were heightened in April 2013 when the Wall Street Journal broke the news about the stock trades that followed the leak of the Medicare policy change. The change reversed proposed funding cuts for private insurers and the leak became a market-moving event. Grassley sent a letter to Tavenner the day after the article was published, saying the incident "raises questions regarding political intelligence brokers’ ability to gather information from CMS in order to predict market moving events" and invoked his December 2011 inquiry.
Grassley took an even more forceful tone at a Senate hearing less than a week later. In the hearing, for Tavenner's confirmation to permanently take the administrator’s role, Grassley spent the entirety of his allotted time peppering her with questions about the leak.
"When information leaks from the administration that has the ability to cause significant market movement, it is wrong and quite possibly illegal," he said. He pointed to the litany of agencies where the leak could have come from -- including the White House itself -- and intimated that Tavenner might have trouble getting to the bottom of the issue given that the leak might lie deep within the administration.
"I obviously do not believe that you can get the folks at (Health and Human Services) or (the Office of Management and Budget) or the White House without some help, so I am going to pursue this," he said. "So you inform them that, if this is beyond CMS, I expect action to be taken, and I am going to get to the bottom of it one way or the other."
Meanwhile, the Justice Department has opened a criminal probe, and the Securities and Exchange Commission is pursuing a civil enforcement action, both in an attempt to get to the bottom of the leak.
On Thursday, the Wall Street Journal reported that Sutter, the top Republican health staffer on the House Ways and Means Committee, had been subpoenaed by both. The Justice Department wants Sutter to testify before a grand jury in Manhattan federal court. The SEC was seeking records from him as well as the House committee.
In a follow-up article on Saturday, the Journal reported the SEC had filed a lawsuit after Sutter and the committee refused to comply with its subpoenas. House lawyers, according to the SEC, had argued that the Constitution protected them from having to comply with the subpoenas. But as part of the suit, the SEC said that it had reason to believe Sutter “may have been" the source of the leak.
A spokesperson for the House Ways and Means Committee declined to comment. The counsel's office for the House, which is representing both Sutter and the committee in the lawsuit, told TPM that the subpoenas "run seriously afoul of the Constitution's Speech or Debate Clause, and we expect to respond in due course on that ground, among others." Hayes did not return a call or email seeking comment.