Supreme Court affirms broad reach of insider-trading laws
WASHINGTON _ The Supreme Court on Tuesday upheld the broad reach of insider-trading laws, affirming the conviction of a Chicago man who got secret stock tips from his brother-in-law in California.
In a unanimous opinion, the justices said that knowingly trading on confidential stock information is a crime, even if the tips came from a family member who received no direct payoff in return.
The decision is a major victory for federal prosecutors who have sought to bring insider-trading charges against a network of people who profit from confidential tips, even if they did not deal directly with the insider who first disclosed the secrets.
Those charges were threatened by an adverse ruling from the U.S. 2nd Circuit Court of Appeals in New York. But in Tuesday's opinion, the high court said it disagreed with the 2nd Circuit's approach and endorsed a broader reading of the laws against insider trading.
Bassam Salman, a grocery wholesaler in Chicago, made more than $1.5 million in quick stock profits by trading on information about upcoming mergers in the health care industry that came from his brother-in-law in California. The original source of the tip was Maher Kara, an investment banker with Citigroup. He passed the inside information to his older brother, who in turn informed Salman.
When federal investigators learned of their deals, the two brothers pleaded guilty and testified against Salman. He was convicted of securities fraud, sentenced to three years in prison and forced to repay $730,000.
He appealed on the grounds that he had not paid his brother-in-law for stock tips or engaged in any exchange of a "valuable nature." He characterized the tips as shared information within a family.
The 9th Circuit Court rejected his appeal, and the Supreme Court did the same Tuesday in Salman v. United States.
_Tribune Washington Bureau
