U.S. to Seek Reversal of Ruling Weakening Insider CasesPatricia Hurtado
Federal prosecutors in New York intend to ask judges on the U.S. Court of Appeals to reverse a December ruling making it harder for the government to win insider-trading cases.
The Dec. 10 decision by a three-judge panel overturned the convictions of two former hedge fund managers and may lead to the dismissal of charges against others found guilty in a multiyear insider-trading probe.
It’s rare for appellate courts to agree to reconsider a ruling, especially when the original decision was decided unanimously. In last month’s 3-0 decision, the appeals court said recipients of inside tips are guilty only if they knew the data came from someone who had a duty to keep it secret and got a benefit for leaking it.
Prosecutors will ask the original three-judge panel or a full appeals court of as many as 13 judges to review the ruling, Jennifer Queliz, a spokeswoman for U.S. Attorney Preet Bharara, said in an interview. Queliz said prosecutors would file a formal motion later on Friday.
Earlier this month, in a separate insider-trading case, prosecutors said the appeals court decision “dramatically (and in our view, wrongly) departs from 30 years of controlling Supreme Court authority and, in so doing, legalizes manipulative and deceptive conduct.”
The Dec. 10 ruling overturned convictions of Level Global Investors LP co-founder Anthony Chiasson and ex-Diamondback Capital Management LLC portfolio manager Todd Newman, who were several steps removed from the leakers of Dell Inc. and Nvidia Corp. data. They argued on appeal that they didn’t know that the tipper, whom they never met, had received a benefit for his disclosures.
The decision, which barred retrial of the two men, may lead to a reversal of the convictions of six others who pleaded guilty in the case and cooperated with prosecutors. SAC Capital Advisors fund manager Michael Steinberg, who was found guilty in another case of trading on the same leaks, says he too is entitled to a reversal.
Greg Morvillo, a lawyer for Chiasson, and Stephen Fishbein, an attorney for Newman, declined to comment on the government’s decision to challenge the ruling.
The case is U.S. v. Newman, 13-1917, U.S. Court of Appeals for the Second Circuit (Manhattan).