U.S. Wants Time to Review Landmark Insider Trading Ruling

The government wants an extra month to decide whether to appeal a landmark ruling making it harder to bring insider trading charges, a decision that also threw out key convictions in Manhattan U.S. Attorney Preet Bharara’s seven-year probe of market manipulation.

U.S. Solicitor General Donald Verrilli Jr. and Bharara want the time to consider their options following the decision by the U.S. Court of Appeals in New York, which required juries find a defendant knew the original source of a tip got something in exchange for it before convicting.

A three-judge panel last week exonerated former Diamondback Capital Management LLC hedge fund manager Todd Newman and Level Global Investors LP co-founder Anthony Chiasson. They ruled unanimously that jury instructions omitted the element of benefit to the tipper, making conviction too easy. The government may seek a rehearing from the same panel, or from all judges on the appeals court. It could also ask the U.S. Supreme Court to hear an appeal, or drop the case entirely.

Bharara, whose office has won more than 80 convictions in his probe, alleged Newman and Chiasson illegally generated more than $70 million on tips about Dell Inc. and Nvidia Corp., based on information passed through a long chain of people.

The ruling has already triggered review in other cases. An insider trading case tied to International Business Machines Corp.’s $1.2 billion acquisition of SPSS Inc. may be first to unravel, as a judge ordered a hearing this week to decide how to proceed in the wake of the higher court’s opinion. Four of the five people charged in the IBM case pleaded guilty.

The U.S. has until Dec. 24 to notify the appeals court if it will appeal last week’s decision. The government said defense lawyers consented to the request to push that date back to Jan. 23. Greg Morvillo, a lawyer for Chiasson, confirmed that he agreed to the delay. Stephen Fishbein, a lawyer for Newman, didn’t immediately return a call seeking comment.

The appeals case is U.S. v. Newman and Chiasson, 13-01917, U.S. Court of Appeals for the Second Circuit (Manhattan).

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