In July 2013, Anthony Chiasson and Todd Newman were supposed to be reporting to federal prison to begin serving sentences of 78 and 54 months respectively. They had been convicted of insider trading and had asked U.S. District Judge Richard Sullivan to be allowed to remain free while their appeals were heard by the 2nd Circuit. Their reasoning was that they believed Judge Sullivan had erred in instructions he gave the jury and that an appeals court would see things their way, overturning the guilty verdict. Judge Sullivan denied their request. Days from reporting to prison, the 2nd Circuit granted them their freedom during the appeals process. On December 10 2014, the 2nd Circuit overturned the convictions of the men, and on Friday the government's quest to have that decision overturned, by asking for an en banc hearing, was denied.
The Newman decision will have an affect on numerous current cases, including that of former SAC Capital portfolio manager Michael Steinberg. Steinberg was sentenced to 36 months in prison on similar charges and his conviction is most likely going to be overturned as a result.
Even the guilty pleas have started to be reversed. Earlier this year the pleas of a four individuals involved in an IBM insider trading case were tossed and it is unlikely that a 5th will not go to trial. One of those guilty pleas was from Trent Martin who was extradited from Hong Kong after the U.S. put out an Interpol alert on him. Martin is an Australian citizen. A lot of resources have been thrown at these cases and now they are falling apart.
Michael Kimelman filed a motion in March to have his conviction overturned (better late than never since he has already served his prison term) based on the Newman decision. Doug Whitman, who is currently in prison did the same. Oh, and Rajat Gupta is trying to use the the case to help him win his freedom.
While there is hope for others, the lives of Chiasson/Newman have been on hold since their firms, Level Global and Diamondback, were raided by windbreaker-wearing FBI agents in November 2010. Business Insider covered the breaking news of the raid which had the appearance of a modern day witch hunt. They were followed by white-collar paparazzi as they looked for the photo shot that would deliver the image that would best fit the story that had been written ... smug, disappointed, arrogant, sad. Their firms were fined and closed as a result. Neither has worked since the raid four and half years ago. So now they are free ... thanks for playing.
Insider trading laws have been interpreted by the federal courts since there is no law against it. In the case of Newman/Chiasson, they went a long way in defining what insider trading was NOT. Sadly, they had to endure millions in legal fees, loss of their reputation, humiliation and denials that were met with skepticism by media that believed they were guilty of "something."
Even now, stories about their conviction being overturned continue to be about a record of wins and losses for U.S. Attorney Preet Bharara and not about the people cleared:
NY Times: "Court Rejects Bharara's Plea to Reconsider Insider Trading Ruling"
NY Post: "Preet Bharara Denied Chance To Re-Argue Rare Defeat"
Wall Street Journal: "Another Preet Defeat"
Reuters: "U.S. Prosecutors Lose Bid To Reverse Major Insider Trading Ruling"
How much power has the media given Bharara when they cannot even mention the names of those who have been exonerated in a headline? When Mark Cuban beat the Securities and Exchange Commission on insider trading charges, his name was in nearly every headline. Newman and Chiasson deserve to have their names cleared as well but that will be a slow process that they will have to do on their own.
Todd Newman and Anthony Chiasson were days from going to prison, days, for a crime that they never committed. They have now been cleared and that should be the headline of the day, and not that a prosecutor had a bad day in court.
In the end, justice should be about getting the decision right and in this case it did ... but it was not a pretty.
