Friday, April 9, 2010

Third Circuit Says No to DOJ Stretching & "Musical Chairs"

In the Third Circuit Court of Appeals decision, U.S. v. Schiff, the court stated:

"Frederick Schiff and Richard Lane were high-ranking corporate executives at the pharmaceutical giant Bristol-Myers Squibb ("Bristol"). They were criminally indicted for allegedly orchestrating a massive securities fraud scheme related to Bristol’s wholesale pharmaceutical distribution channels in the early 2000s, in violation of, inter alia, 15 U.S.C. § 78j(b) and Securities and Exchange Commission ("SEC") Rule 10b-5. The Government filed this interlocutory appeal in response to the District Court’s March 19, 2008 opinion that addressed several contested theories of liability as well as expert witness issues under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993).1 On appeal are two issues: (1) whether the DistrictCourt properly dismissed the Government’s theories of omission liability under Rule 10b-5 that attempted to hold Schiff accountable for omissions in quarterly SEC 10-Q filings based on his and Lane’s alleged misstatements in Bristol’s quarterly conference calls; and (2) whether the District Court abused its discretion in excluding the Government’s expert, following a Daubert hearing, who would have testified to Bristol’s stock price drop as evidence of Rule 10b-5’s materiality element. Because we agree that the Government’s omission liability theories are not viable, we affirm the District Court’s dismissal of these theories. As to the expert testimony, we conclude that the District Court’s ruling excluding the Government’s materiality expert was not an abuse of discretion." (footnote omitted)

A telling line from the decision -

"Throughout the pretrial proceedings, and even in this appeal, the Government has engaged in a game of musical chairs with their pursuit of changing legal theories under Rule 10b-5."

See also Jonathan Stempel, Reuters, Bristol-Myers ex-CFO wins ruling in criminal case


Judicial Opinions, Securities | Permalink

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