Tuesday, July 30, 2013
1. Barring a miracle, the government will win.
2. The law on corporate criminal liability may be unfair, but it has been around since 1909.
3. The government has to prove that: a) at least one SAC employee committed securities/wire fraud (several have already pled guilty); b) the employee was acting within the actual or apparent scope of his/her authority/employment at the time; and c) the employee intended, even in part, to benefit the corporation.
4. If the government can prove the above elements it will win, even if the employees who engaged in securities fraud/insider trading violated SAC's insider trading compliance policies or Steven Cohen's direct orders.
5. Give credit where credit is due. This is a well-crafted speaking indictment. Preet Bharara alleged more than he will technically need to prove at trial. He charged that SAC created an atmosphere in which insider trading was bound to flourish. Why did he do this? First, to make his case in the court of public opinion. Second, to help prevent jury nullification. Third, to rebut a defense that the guilty employees were acting against the interests of the company. Here is the SAC Indictment.
6. The attempt to obtain all of SAC's profits through criminal forfeiture allegations is, to put it mildly, a stretch. Significantly, the government did not try to seize funds through civil forfeiture in conjunction with the indictment. This was only partly to protect innocent third parties. The government also did not want to see its resources diverted, give up unnecessary discovery, or embarrass itself.
7. Like John Dowd in the Rajaratnam case, Ted Wells is in the catbird seat. No one in the criminal defense bar expects him to win. If he loses it will in no way dim his reputation. If he wins, he achieves true legendary status. Conversely, no AUSA worth his/her salt can afford to lose this case.
8. How to defend this case? By arguing that all the employees who pled guilty were greedy sorts who were in it 100% for themselves. They could not have intended to benefit the company, because the company made it so clear, time and again, that insider trading actually was bad for the company. Hence the key importance of the indictment's allegations that SAC's compliance policy was essentially a sham.
9. Insider trading law may be stupid, but, contrary to popular myth, is not for the most part vague or confusing to the professionals who have spent their careers in the securities industry.
10. When an employee vocalizes his reluctance to say more over the telephone, concomitantly referencing his "compliance" training, it's a pretty safe bet he knows insider trading is illegal.