U.S. to seek reversal of landmark insider trading ruling
By Nate Raymond
NEW YORK (Reuters) - Federal prosecutors in New York plan on Friday to ask a U.S. appeals court to reconsider a landmark ruling that curtailed their ability to pursue insider trading cases and jeopardized several convictions.
Prosecutors will ask the 2nd U.S. Circuit Court of Appeals to grant a rehearing in the case of hedge fund managers Todd Newman and Anthony Chiasson, who in December won the reversal of their insider trading convictions, a spokeswoman for Manhattan U.S. Attorney Preet Bharara said.
Prosecutors will seek a rehearing by both the three-judge panel that ruled for Newman and Chiasson as well as the full appeals court, potentially 15 judges under its rules, said Jennifer Queliz, the spokeswoman.
Lawyers for Newman and Chiasson declined to comment.
The 2nd Circuit ruling held that prosecutors need to prove a trader knew that the original source of a tip received a benefit in exchange for the information. It also narrowed what constitutes a benefit, saying it must be of "some consequence" and cannot be only friendship.
The ruling marked a major setback for Bharara, whose office before the decision had secured 86 people's convictions for insider trading since October 2009.
Several defendants in the weeks since have sought to take advantage of the decision in their own cases.
On Thursday, U.S. District Judge Andrew Carter in Manhattan threw out the guilty pleas of four men accused of engaging in insider trading ahead of IBM Corp's <IBM.N> 2009 acquisition of SPSS Inc.
Carter on Friday asked prosecutors to provide more details about their evidence as he considers whether to dismiss the case altogether ahead of a Feb. 23 trial.
Newman, 50, and Chiasson, 41, were found guilty in 2012 for their roles in a scheme the government said reaped $72 million in illicit profits through trading on inside information about computer maker Dell Inc [DI.UL] and chipmaker Nvidia Corp <NVDA.O>.
Prosecutors said both men traded on tips they received from analysts working at their hedge funds who were members of a "corrupt circle" of investment firm analysts that traded non-public information obtained from employees at various companies.
Prior to winning the appeal, Newman, a former portfolio manager at Diamondback Capital Management, and Chiasson, co-founder of Level Global Investors, had been sentenced to 4-1/2 years and 6-1/2 years in prison, respectively.
The case is U.S. v. Newman, 2nd U.S. Circuit Court of Appeals, No. 13-1837.
(Reporting by Nate Raymond in New York; Editing by Chris Reese)
