2nd Circuit refuses to reconsider its ruling limiting insider-trading convictions
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The United States Court of Appeals for the Second Circuit will not hear a challenge to a December ruling which sharply limited the ability of federal authorities to bring insider-trading cases.
The New York Times reported Friday that the court issued a brief order denying a request by U.S. Attorney Preet Bharara for a rehearing. Bharara, who has made a reputation for cracking down on insider trading on Wall Street, had requested that the full court reconsider the December decision by a three-judge panel narrowing the statutory definition of insider trading.
The panel had overturned the convictions of hedge fund managers Todd Newman and Anthony Chiasson for acting on material, non-public information that they had received from third-parties and not from the original source of the tip. The panel ruled that prosecutors had failed to prove that Newman and Chiasson knew that the people that had given the tip had actually received a benefit in exchange for the information. Bharara had warned in a statement following the December ruling that “the Court of Appeals interprets the securities laws in a way that will limit the ability to prosecute people who trade on leaked inside information.”
Friday’s order from the Court of Appeals means that Bharara will need to appeal to the U.S. Supreme Court if he wishes to undo the panel’s ruling. According to the Times, it is unlikely that the Supreme Court would hear the case. The ruling could also jeopardize the insider trading conviction of Michael Steinberg, longtime confidant and trader for billionaire Steven Cohen. Bharara declined to comment to the Times.
Defense attorneys were jubilant. “This victory is proof that the justice system worked how it is supposed to, with thoughtful judicial oversight when there are glaring errors at the trial court level,” said Gregory Morvillo, one of Chiasson’s lawyers, in a statement.
“Today’s decision, without dissent from any member of the Second Circuit, emphatically reaffirms that Todd Newman committed no crime,” said Stephen Fishbein and John Nathanson, Newman’s lawyers, in a statement. “It is now time for the government to move on and allow an innocent man to continue with his life.”
