Are Federal Employees Now Involved in a Massive Insider Trading Scandal?

Federal employees were given advance notice of an April 1 Medicare decision worth billions of dollars to private insurers. And in the weeks before the decision was officially announced, shares in those firms spiked, the Washington Post reports.

Naturally, the Justice Department and the Securities and Exchange Commission suspect Wall Street investors and fed workers engaged in insider trading.

The April 1 decision was about increasing funding to Medicare Advantage by $8 billion

Sen. Chuck Grassley (R-Iowa) said last week that his office “reviewed the e-mail records of employees at the Department of Health and Human Services and found that 436 of them had early access to the Medicare decision as much as two weeks before it was made public,” the report notes.

“The number of federal employees with advance knowledge is surely higher; the figures Grassley’s staff compiled did not include people at the White House’s Office of Management and Budget who also saw the information,” the report adds.

“The e-mail records of those employees have not been made available to Grassley.”

The sensitive – and valuable -- information was so widely circulated among federal employees that it will no doubt make it difficult to pinpoint the source of the leak (if there was indeed a leak). Also, the fact that so many employees had access to this valuable information calls into question the government’s practice of handling of information coveted by Wall Street insiders.

“This should sound an alarm,” said the Iowa senator. “It should result in better controls to avoid unfair access to information that the average investor could never tap.”

Sen. Grassley said he he plans to introduce legislation that would require “political-intelligence consultants to disclose their activities, as lobbyists are required to do,” the report notes.

The Centers for Medicare and Medicaid Services officials do not question Grassley’s headcount of fed employees who were made privy to the April 1 announcement, but they stress that Medicare policy is complex and would require review.

“CMS takes the security and integrity of sensitive information very seriously,” spokesman Brian Cook said in a statement. “Our agency regularly handles sensitive information regarding payment rates, coverage decisions, and other technical policy decisions that need to be safeguarded until public release.”

Click here to read the full report.

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