The Washington-Wall Street "Corruption Corridor" By Shah Gilani

There's a new twist in an ongoing U.S. Securities and Exchange Commission (SEC) probe.

For months now, the SEC has been investigating whether anyone in the federal government leaked inside information to a Washington-based investment research firm.

While that was pretty juicy already, those investigators are now looking at up to 44 hedge funds that may have traded on that inside information.

If you already thought our public servants were greedy, dirty, and corrupt, well, this helps prove your case.

If, on the other hand, you think our folks in D.C. are pure, altruistic angels, today I'm going to convince you otherwise...

At 3:42 p.m. on April 1, 2013, more than 150 investor clients of Height Securities were sent an email predicting that the federal Centers for Medicare and Medicaid Services (CMS) would reverse course on planned funding cuts for private insurance plans.

Based on the "prediction," the hedge funds now under investigation bought shares of insurance companies that would benefit if CMS did in fact reverse its stance.

And wouldn't you know it, at 4:22 p.m. that same afternoon, the folks at CMS announced they were reversing themselves. In after-hours trading and over the next several days, insurance company stocks soared.

The SEC investigators believe the Height Securities analysts told the hedge-fund traders - immediately after the initial email was sent to Height's 150 clients - that Height's information was based on a "credible source" in the federal government.

If the credible source was leaking inside information, or the traders even thought that Height's tip was inside information, and they acted on it, those hedge funds could be charged.

It's all well and good that the SEC is looking into who made what on their trading. But what's far more interesting and important is who the credible source was.

Was he or she paid? Was he or she given the inside information by anyone in the government who was paid?

Whether we find all this out or not may be based on an upcoming judge's ruling.

That's because the credible source, Brian Sutter, a top House of Representatives healthcare aide, has refused to comply with an SEC subpoena in the matter. Sutter ignored the subpoena based on advice of congressional lawyers.

That prompted the SEC to file a federal lawsuit seeking to force Sutter to turn over his communications and records to investigators. The judge hearing the case is expected to rule any day now.

What is known to have happened, based on email and phone records, is that Sutter spoke to healthcare lobbyist Mark Hayes, who previously worked for Height Securities. And within 10 minutes, Hayes communicated CMS's change of course to someone at Height, citing a "credible source."

The SEC, to its immense credit, is actually investigating the Washington political-intelligence industry. That the investigators have been stymied by House lawyers is indicative of something.

The SEC, to its immense credit, is actually investigating the Washington political-intelligence industry. That the investigators have been stymied by House lawyers is indicative of something.

Some D.C. watchers say it's indicative of the separation-of-powers issues that come up when the executive branch investigates the legislative branch.

I say poppycock. It's indicative of a cover-up.

Here's what I want to know:

Are people in and around Congress making money directly (envelopes of cash) or indirectly (campaign donations) by channeling inside information to hedge funds?

Do you think we'll ever find out?

This story isn't over yet. Congress and their bankster paymasters wish Shah would just give up and go away. But he never will... Want to know what Shah knows, when he knows it? Just enter your e-mail address to get his free Insights & Indictments