United States v. Gansman, No. 10–0731-cr (2d Cir. September 9, 2011) (Cabranes, Chin, CJJ, Keenan, DJ)
From 2005 to 2007, James Gansman, an attorney at Ernst and Young, was having an affair with one Donna Murdoch. Perhaps as part of their “pillow talk,” Gansman – the “tipper” – would pass Murdoch material, non-public information, on which Murdoch – the “tippee” – traded profitably. Gansman was ultimately prosecuted for securities fraud under the “misappropriation” theory – as described by the Supreme Court, this occurs when a defendant misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.Liability can attach even if the defendant does not trade on it himself.
Gansman, whose defense was that he did not intend to commit securities fraud, sought a jury instruction under SEC Rule 10b5-2, asking the court to instruct that Gansman shared information with Murdoch as …