Insider Trading

Rengan Rajaratnam and Dan Gitner

It’s bad luck to get a haircut during trial.

Daniel Gitner of Lankler Siffert & Wohl, commenting on one of the personal grooming superstitions he forces those staffing cases with him to adopt. Gitner recently broke U.S. Attorney Preet Bharara’s winning streak in the successful prosecution of insider trading cases when his client, Rengan Rajaratnam, was acquitted. Gitner cut his hair after the trial concluded.

Insider trading is one of those activities that you should avoid. If you’re a lawyer, it’s an activity you should definitely avoid. It’s not really all that hard to steer clear of insider trading either. Obviously there are some murky cases, but it’s wise to err on the side of caution.

On the other hand, there are also cases where the SEC says a close friend of a company’s executive is emailing you and telling you which days to buy because “[e]arnings are being released on the 30th along with some good news,” and “[l]ooking forward to getting paid back. Good luck…. SHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!” Those are the cases where you probably should walk away.

Put aside the insider trading: what lawyer is using email to have these conversations?

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I don’t want to minimize my guilt, as a lot of people here do. But [I] didn’t need a sentence that matches what people get for killing people or for raping people.

Matthew Kluger, formerly of Wilson Sonsini, commenting on the harshness of his 12-year sentence for insider trading, the longest sentence “ever meted out” in such a case. Kluger currently resides at “Club Fed.”

Time Magazine cover boy Preet Bharara

In the federal criminal world, there are certain cases where the government almost always wins.

Illegal reentry for a previously deported person, for example, is pretty close to a lock for a government win — all the government has to show is that the person isn’t a citizen, was previously deported, and is in the United States again. If the dude’s in the courtroom, the government is a third of the way there. For example, in the last fiscal year, there were 20,840 folks charged with illegal reentry.  Four of them were acquitted at trial.

Similarly, bank robbery is a high-percentage game for the government. These days, most banks have amazing technology that lets them record pretty much everyone inside. Last fiscal year, 896 people were charged with bank robbery. One lucky guy was acquitted.

These days, federal law enforcement is using wiretaps and, according to the Wall Street Journal, old-school sting operations, to go build white-collar cases (it’s a pretty cool article — very cloak and dagger). The strategies that got the federal government the conviction rate it has in drug and gun cases are being applied to investment fraud and insider trading cases.

This is one reason that insider trading cases have looked like as much of a layup as a bank robbery case. The U.S. Attorney’s Office in the Southern District of New York has secured a record of 85 convictions in either guilty pleas or trials without a single loss.

Until this week….

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* Alan Jacobs, Dewey’s bankruptcy trustee, says his clawback suit shouldn’t be stayed during the defendants’ criminal cases — after all, he doesn’t want their assets to dry up while they “scramble to defend themselves.” [New York Law Journal]

* Rengan Rajaratnam, Raj Rajaratnam’s little brother, was acquitted in his insider trading conspiracy case. It’s the first defeat in Preet Bharara’s financial crackdown against hedge funds. Tough break, dude. [DealBook / New York Times]

* Sore loser? Andrew J. Weinstock, the public defender who got into a fight with Judge John “I’ll Just Beat Your Ass” Murphy, resigned from his position in protest of the judge’s return to the bench. [WSJ Law Blog]

* There are many things nontraditional applicants should ask before going to law school, including, but not limited to, whether they’ll ever be able to find employment after graduation. [U.S. News & World Report]

* Oscar Pistorius’s attorney closed his defense of his client in the ongoing murder trial, and Judge Thokozile Masipa has adjourned all arguments in the controversial case until next month. [Bloomberg]

* While you weren’t looking, Phil Mickelson was cleared of insider trading of Clorox options. How does Lefty get his reputation back? Shooting better than 70 at Pinehurst would help. [mitchellepner]

* Lat reviews The Good Lawyer (affiliate link) by Douglas O. Linder and Nancy Levit. [Wall Street Journal]

* Canada grants asylum to Florida sex-offender. Maybe Canada can give a hand to Crystal Metheny. [National Post]

* Lawyer charged with stealing from clients defends himself: “[Wife] had become accustomed to a lavish lifestyle that generated living expenses of $40K per month.” Well then! [Seattle Post-Intelligencer]

* Can President Obama just raise taxes unilaterally? Apparently so. [DealBook / New York Times (gavel bang: TaxProf Blog)]

* So as I read this, someone who definitely bought prostitutes to influence people is accusing someone else of allegedly buying prostitutes to influence people. [Forbes]

* How to make the most of your summer associate experience and not screw up spectacularly (though if you choose to screw up spectacularly, please do it in a reportable way). Video below… [Mimesis Law]

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* Crim Law exam features Fifty Shades of Grey prequel as fact pattern. [Legal Cheek]

* You’d think being in jail would be a pretty good alibi. But that’s not the Chicago Way! [Overlawyered]

* How many law professors have wished they could say this before? “Don’t give me any of your s**tty papers and you get an A.” [Critical-Theory via TaxProf Blog]

* Lawyer powerlifting to raise money for mentoring programs. Because donating to charity is more fun when it comes with the risk of severe groin injuries. [Chicago Tribune]

* U.S. News has a list of ways being a paralegal first can help with law school. It’s dumb. There’s only one reason paralegal experience helps and that’s to meet practicing lawyers and figure out whether or not law school is even worth it. [U.S. News]

* In the past, Professor Nancy Leong was accused of narcissism. But she doesn’t seem to be attention-seeking at all based on this publicly posted shot. Maybe she can post that on Ashley Madison and see what happens… [Instagram]

* Regulating imports could drastically improve labor conditions around the world (and potentially bring more jobs back home). But that could curtail profits by a smidgeon so let’s table that discussion. [Lawyers, Guns & Money]

* A former AUSA on the Phil Mickelson/Carl Icahn insider trading case and wiretaps. [mitchellepner]

* John Oliver made a powerful appeal to the Internet to take action in defense of Net Neutrality. If you want to know what you can do (or don’t even understand the issue) and laugh at the same time, the video is embedded below… [Huffington Post]

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‘We’re not Case Western Law.’

* Justice Antonin Scalia isn’t quite ready to publicly weigh in on whether computer data is considered a protected “effect” under the Fourth Amendment. “[T]hat may well come up [before the Supreme Court],” he says. Thanks NSA. [Business Insider]

* “[I]t doesn’t take many bad apples in a barrel to cause a stink.” No matter how hard Biglaw firms try to keep their confidential information locked down, someone’s going trade on it. It looks like STB is learning that the hard way. [Wall Street Journal (sub. req.)]

* The day after Michigan’s ban on same-sex marriage was struck down by Judge Bernard Friedman, couples who rushed to marry were met with some serious Sixth Circuit sadness. Way to stay and spoil all of the celebrations, judges. [New York Times]

* “We’re not the Cleveland Browns,” says one of Case Western Law’s interim co-deans. With that kind of a glowing endorsement, we don’t see how this law school could possibly fail. [Crain's Cleveland Business]

* Rutgers Law-Newark has a new low-bono fellowship program “believed to be the first of its kind in the nation.” Some other law schools might have a bone to pick about that statement. [New Jersey Star-Ledger]

Over the years, we’ve covered many Biglaw employees who have been accused or convicted of insider trading. This should come as no surprise, given the confidential and market-moving information that regularly flows through the hallways and computers of leading law firms.

The latest accusations of insider trading involve a lawyer who worked at a white-shoe law firm. This individual stands accused of taking confidential information he was privy to by virtue of his work and passing it along through a middleman to a broker, who then allegedly traded on it. According to the Securities and Exchange Commission, the scheme generated over $5.6 million in illegal profits, with over $168,000 going to the Biglaw tipster.

At which elite law firm did this defendant work, and from which school did he receive his law degree?

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* Congrats to Weil Gotshal and Fenwick & West for getting in on Facebook’s $19 billion acquisition of WhatsApp, the biggest Internet deal in a decade. [The Recorder]

* In South Carolina, you can get arrested for crimes that aren’t even things any more. Like “failure to return a VHS tape.” [Lowering the Bar]

* Drunk lawyer at heart of alleged insider trading scheme. [Dealbreaker]

* Did LBJ colossally screw up the Supreme Court? [Concurring Opinions]

* Were you curious about who would be on the Mount Rushmore of Tax Law professors? No? Well, here they are anyway. [TaxProf Blog]

* The so-called “trial penalty” is really a myth and empirical data confirms that defendants who reject plea deals and go to trial actually garner a “trial discount.” Yep, prosecutors aren’t overreaching at all. [PrawfsBlawg]

* President Obama called for patent law reform in the State of the Union address. Now we have some insight into what he’s thinking about. [Patently-O]

* Congratulations to Matthew Skinner, the next executive director of the LGBT Bar Association of Greater New York! [LeGal]

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