United States v. Contorinis, No. 11-3-cr (2d Cir. August 17, 2012) (Winter, Hall, Chin, CJJ)
In this appeal from an insider trading conviction, the defendant unsuccessfully challenged the jury instructions in which the district court defined “material, nonpublic information.”
Contorinis was a portfolio manager at a hedge fund, who befriended an investment banker at UBS. From late 2005 to January of 2006, the banker was providing information to several of his friends, Contorinis included, about the potential sale of the Alberstons grocery chain. Contorinis bought and sold large blocks of Albertsons stock for his fund based on this information. The Albertsons deal had lots of false starts, but when it was finally publicly announced as a go, Contorinis sold all of the fund’s Albertsons stock making a net profit of $3 million.
Contorinis’ defense at trial was that, although he and the banker spoke often, the banker never gave him any information about the deals he was working on. The banker, a government witness, had testified otherwise. Contorinis also objected to the court’s jury charge on “material, nonpublic information.” He claimed that it was incomplete because it did not contain language instructing, in substance, that “general confirmation of an event that is ‘fairly obvious’ to knowledgeable investors is not material, nonpublic information,” and that it erroneously instructed that the “confirmation by an insider of unconfirmed facts or rumors – even if reported in a newspaper – may itself be inside information.”
The circuit found no error. The charge “conveyed to the jury that material, nonpublic information is information that either is not publicly available or is sufficiently more detailed and/or reliable than publicly available information to be deemed significant, in and of itself, by reasoanble investors.”
The circuit did find error, however, in the forfeiture order, because it included profits that Contorinis “never received or possessed.” The proceeds included in the forfeiture order here were acquired by the hedge fund itself, not by Contorinis. Even though a forfeiture order may include proceeds received by actors in concert, it it may not include proceeds that “go directly to an innocent third party and are never possessed by the defendant.”