In court papers, the SEC said its probe relates to whether secrets were passed to certain members of the public surrounding an April 2013 announcement by the U.S. Centers for Medicare and Medicaid Services about a Medicare program.
Sutter, the committee's staff director, disclosed on May 9 to House Speaker John Boehner, a Republican, that he had received a subpoena from the SEC for documents and testimony along with a grand jury subpoena from federal prosecutors in Manhattan, according to the congressional record of that day.
The SEC said in its court papers that the committee and Sutter had refused to comply with the subpoenas. It said they had asserted "numerous objections, arguing, among other things, that the subpoenas are 'repugnant to public policy;' that they are vague and overbroad" and that the speech or debate clause of the Constitution entitled them to avoid producing the documents or testimony.
Messages left with lawyers for the House committee and for Sutter were not immediately returned Friday.
The SEC noted that a public rate announcement about the Medicare Advantage program that was far more favorable to certain health care insurers than anticipated was made 20 minutes after the market closed on April 1, 2013. But, it said, an analyst at dealer-broker Height Securities LLC issued a flash report about 20 minutes before the markets closed urging dozens of clients, including prominent investment funds, to buy stocks that would benefit from a rate increase close to what was announced.
The SEC said the prices and trading volumes of affected stocks, including Louisville, Kentucky-based health care company Humana Inc., increased dramatically within minutes. It said the Height analyst distributed the flash report about half an hour after receiving an email from a lobbyist firm and attorney forecasting the rate improvement.
An SEC probe began April 9, 2013, to determine the source of information sent from the lobbyist to Height and the circumstances of the transmittal and whether any conduct constituted insider trading, the SEC said.
A message seeking comment from Height, which has offices in New York and Washington, D.C., was not immediately returned Friday.
The SEC said information it had obtained indicates Sutter spoke several times in March 2013 to a colleague at the lobbyist firm that sent the email to the Height analyst and communicated with at least two people at the Centers for Medicare and Medicaid Services in the week before the rate announcement.
The SEC said an FBI agent and an investigator from the Office of the Inspector General at the U.S. Department of Health and Human Services interviewed Sutter several weeks after the rate announcement and discussed with him his communications with the lobbying firm.
The agency said Sutter did not recall speaking to the lobbying firm about the rate announcement, but a House attorney sent the FBI and the HHS investigator a letter saying some of the information provided during the voluntary interview was incomplete and, on at least one key issue, inaccurate.
The SEC said the commission had obtained other information that indicated Sutter may have been a source of the lobbying firm's non-public information.
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