Under new, more stringent guidelines for prosecuting insider trading issued by a December appellate court ruling, the U.S. attorney for New York has stated charges will be dropped against five men alleged to have used advance knowledge of a forthcoming IBM acquisition to purchase stock in the target company. However, prosecutors have stated they may elect to reopen the charges at a later date.
The new guidelines for prosecuting white-collar crimes prompted one prosecutor to acknowledge there was not sufficient evidence to establish that one key facet of determining whether or not an actual crime had been committed existed. This element, whether or not the men being charged had obtained tangible and substantive benefit beyond that of mere friendship, proved to be a weak link in the prosecution’s case against the five co-defendants.
The prosecution based their charges against the five upon allegations that an IBM attorney told a friend about the planned acquisition in confidence in 2009. The friend purchased stock in the target company and informed three other people about the impending deal, prompting them to purchase stock as well. Prosecutors had previously argued the new rules did not apply to this case because the information was delivered with an expectation of privacy and not intended to be used for the enrichment of any party.
In preparation to defend against charges of white-collar crimes, an attorney might first examine what information the client possessed and how that information was intended. If the information was misused or misappropriated, the attorney may call into question the client’s culpability in any further activities based upon the information and possibly press for dismissal of charges or a plea bargain that could offer limited or total immunity from prosecution in exchange for cooperation with prosecutors.