WASHINGTON (AP) — The Obama administration asked the Supreme Court Thursday to reinstate securities fraud convictions against two hedge fund portfolio managers, saying a federal appeals court ruling in the financiers' favor makes it harder to prosecute insider trading.
The justices should reverse the December ruling by the 2nd U.S. Circuit Court of Appeals in New York and reinstate the convictions of Anthony Chiasson, of New York, and Todd Newman, of Massachusetts, Solicitor General Donald Verrilli Jr. said in his Supreme Court filing.
In the closely watched case, the appeals court ruled that the defendants were too far removed from inside information to be prosecuted and more generally criticized criminal cases undertaken by federal prosecutors in Manhattan that resulted in over 80 insider trading convictions since 2008. The judges noted that the prosecutions were novel because they "are increasingly targeted at remote tippees many levels removed from corporate insiders." Earlier cases involved people accused of directly passing on corporate secrets.
But the government said that the appellate ruling conflicted with a 1983 Supreme Court decision and the rulings of other federal courts of appeals. If allowed to stand, the ruling would "hurt market participants, disadvantage scrupulous market analysts, and impair the government's ability to protect the fairness and integrity of the securities markets," Verrilli said.
Chiasson co-founded Greenwich, Connecticut-based Level Global Investors. He had been sentenced to 6 1/2 years in prison and ordered to pay a $5 million fine and forfeit $1.38 million.
Newman worked for Stamford, Connecticut-based Diamondback Capital Management. He had received 4 1/2 years, was fined $1 million and ordered to forfeit $737,724. The former portfolio managers were both convicted in December 2012.
The Supreme Court won't decide whether to hear the case before the fall.