14‐3599
United States v. Martoma
14‐3599
United States v. Martoma
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
_______________
August Term, 2016
(Argued: October 28, 2015 and May 9, 2017 Decided: August 23, 2017)
Docket No. 14‐3599
_______________
UNITED STATES OF AMERICA,
Appellee,
– v. –
MATHEW MARTOMA
Defendant‐Appellant.
_______________
B e f o r e:
KATZMANN, Chief Judge, POOLER and CHIN, Circuit Judges.
______________
Defendant‐appellant Mathew Martoma appeals from a judgment of
conviction entered on September 9, 2014 in the United States District Court for
the Southern District of New York (Gardephe, J.). Martoma was found guilty,
after a jury trial, of one count of conspiracy to commit securities fraud in
violation of 18 U.S.C. § 371 and two counts of securities fraud in violation of 15
U.S.C. §§ 78j(b) & 78ff in connection with an insider trading scheme. After
Martoma was convicted, this Court issued a decision in United States v. Newman,
773 F.3d 438 (2d Cir. 2014), which elaborated on the Supreme Court’s ruling in
Dirks v. S.E.C., 463 U.S. 646 (1983), concerning liability for a “tippee” who trades
on confidential information obtained from an insider, or a “tipper.” Newman
concluded that the “personal benefit” that a tipper must derive from providing
inside information for a disclosure to trigger insider trading liability could not be
inferred under the “gift theory” articulated in Dirks “in the absence of proof of a
meaningfully close personal relationship [between the tipper and tippee] that
generates an exchange that is objective, consequential, and represents at least a
potential gain of a pecuniary or similarly valuable nature.” Newman, 773 F.3d at
452.
Martoma initially argued on appeal that the jury in his case had not been
properly instructed and that the evidence presented at his trial was insufficient
to convict him in light of Newman. While Martoma’s appeal was pending, the
Supreme Court issued a decision in Salman v. United States, 137 S. Ct. 420 (2016),
which rejected certain aspects of Newman’s holding. Id. at 428. In supplemental
briefing, Martoma argues that his conviction should still be reversed under
Newman because Salman did not overrule Newman’s requirement that a tipper
have a “meaningfully close personal relationship” with a tippee to justify the
inference that a tipper received a personal benefit from his gift of inside
information. Newman, 773 F.3d at 452.
We conclude that the logic of Salman abrogated Newman’s “meaningfully
close personal relationship” requirement and that the district court’s jury
instruction was not obviously erroneous. Further, any instructional error would
not have affected Martoma’s substantial rights because the government
presented overwhelming evidence that at least one tipper received a financial
benefit from providing confidential information to Martoma. Accordingly, the
judgment of the district court is AFFIRMED.
POOLER, Circuit Judge, dissents in a separate opinion.
2
_______________
ROBERT ALLEN and ARLO DEVLIN‐BROWN, Assistant United States
Attorneys, (Megan Gaffney, Michael A. Levy, and Margaret
Garnett, Assistant United States Attorneys, on the brief), for
Joon H. Kim, Acting United States Attorney for the Southern
District of New York, New York, NY, for Appellee.
PAUL D. CLEMENT (Erin E. Murphy, Harker Rhodes, and Edmund G.
LaCour, Jr., on the brief), Kirkland & Ellis LLP, Washington,
DC; Alexandra A.E. Shapiro, Eric S. Olney, and Jeremy Licht,
Shapiro Arato LLP, New York, NY; Charles J. Ogletree, Jr.,
Cambridge, MA, for Defendant‐Appellant.
_______________
KATZMANN, Chief Judge:
Defendant‐appellant Mathew Martoma was convicted, following a four‐
week jury trial, of one count of conspiracy to commit securities fraud in violation
of 18 U.S.C. § 371 and two counts of securities fraud in violation of 15 U.S.C.
§§ 78j(b) & 78ff in connection with an insider trading scheme. Martoma argues
primarily that the evidence presented at trial was insufficient to support his
conviction and that the district court did not properly instruct the jury in light of
the Second Circuit’s decision in United States v. Newman, 773 F.3d 438 (2d Cir.
2014), issued after Martoma was convicted. This appeal is our first occasion to
consider Newman in the aftermath of the Supreme Court’s recent decision in
Salman v. United States, 137 S. Ct. 420 (2016). We hold that the logic of Salman
3
abrogated Newman’s “meaningfully close personal relationship” requirement
and that the district court’s jury instruction was not obviously erroneous.
Further, any instructional error would not have affected Martoma’s substantial
rights because the government presented overwhelming evidence that at least
one tipper received a financial benefit from providing confidential information to
Martoma. As a result, we AFFIRM the judgment of the district court.
BACKGROUND
I.
Martoma’s convictions stem from an insider trading scheme involving
securities of two pharmaceutical companies, Elan Corporation, plc (“Elan”) and
Wyeth, that were jointly developing an experimental drug called bapineuzumab
to treat Alzheimer’s disease. Martoma worked as a portfolio manager at S.A.C.
Capital Advisors, LLC (“SAC”), a hedge fund owned and managed by Steven A.
Cohen. In that capacity, Martoma managed an investment portfolio with buying
power of between $400 and $500 million that was focused on pharmaceutical and
healthcare companies. He also recommended investments to Cohen, who
managed SAC’s largest portfolio. While at SAC, Martoma began to acquire
4
shares in Elan and Wyeth in his portfolio and recommended that Cohen acquire
shares in the companies as well.
In order to obtain information about bapineuzumab, Martoma contacted
expert networking firms and arranged paid consultations with doctors
knowledgeable about Alzheimer’s disease, including two who were working on
the bapineuzumab clinical trial. Dr. Sidney Gilman, chair of the safety
monitoring committee for the bapineuzumab clinical trial, participated in
approximately 43 consultations with Martoma at the rate of around $1,000 per
hour.1 As a member of the safety monitoring committee, Dr. Gilman had an
obligation to keep the results of the clinical trial confidential. His consulting
contract reiterated that he was not to disclose any confidential information in a
consultation. He nevertheless provided Martoma, whom he knew was an
investment manager, with confidential updates on the drug’s safety that he
received during meetings of the safety monitoring committee. Dr. Gilman also
shared with Martoma the dates of upcoming safety monitoring committee
1 Martoma did not pay Dr. Gilman or any other consultant directly. Instead, SAC
would pay the expert networking firm, and the expert networking firm would in turn
pay Dr. Gilman and the other consultants.
5
meetings, which allowed Martoma to schedule consultations with Dr. Gilman
shortly after each one. Another consultant, Dr. Joel Ross, one of the principal
investigators on the clinical trial, met with Martoma on many occasions between
2006 and July 2008 and charged approximately $1,500 per hour. Like Dr. Gilman,
Dr. Ross had an obligation to maintain the confidentiality of information about
the bapineuzumab clinical trial. Nevertheless, during their consultations, Dr.
Ross provided Martoma with information about the clinical trial, including
information about his patients’ responses to the drug and the total number of
participants in the study, that Dr. Ross recognized was not public.
On June 17, 2008, Elan and Wyeth issued a press release regarding the
results of “Phase II” of the bapineuzumab clinical trial. The press release
described the preliminary results as “encouraging,” with “clinically meaningful
benefits in important subgroups” of Alzheimer’s patients with certain genetic
characteristics, but indicated that the drug had not proven effective in the
general population of Alzheimer’s patients. J.A. 547. The press release further
stated that the results of the trials would be presented in greater detail at the
International Conference on Alzehimer’s Disease to be held on July 29, 2008.
Elan’s share price increased following the press release.
6
In mid‐July of 2008, the sponsors of the bapineuzumab trial selected Dr.
Gilman to present the results at the July 29 conference. It was only at this point
that Dr. Gilman was unblinded as to the final efficacy results of the trial. Dr.
Gilman was “initially euphoric” about the results, but identified “two major
weaknesses in the data” that called into question the efficacy of the drug as
compared to the placebo. Tr. 1419–20. On July 17, 2008, the day after being
unblinded to the results, Dr. Gilman spoke with Martoma for about 90 minutes
by telephone about what he had learned. That same day, Martoma purchased a
plane ticket to see Dr. Gilman in person at his office in Ann Arbor, Michigan.
That meeting occurred two days later, on July 19, 2008. At that meeting, Dr.
Gilman showed Martoma a PowerPoint presentation containing the efficacy
results and discussed the data with him in detail.
The next morning, Sunday, July 20, Martoma sent Cohen, the owner of
SAC, an email with “It’s important” in the subject line and asked to speak with
him by telephone. The two had a telephone conversation lasting about twenty
minutes, after which Martoma emailed Cohen a summary of SAC’s Elan and
Wyeth holdings. The day after Martoma spoke to Cohen, on July 21, 2008, SAC
7
began to reduce its position in Elan and Wyeth securities by entering into short‐
sale and options trades that would be profitable if Elan’s and Wyeth’s stock fell.
Dr. Gilman publicly presented the final results from the bapineuzumab
trial at the International Conference on Alzehimer’s Disease in the afternoon of
July 29, 2008. Elan’s share price began to decline during Dr. Gilman’s
presentation and at the close of trading the next day, the share prices of Elan’s
and Wyeth had declined by about 42% and 12%, respectively. The trades that
Martoma and Cohen made in advance of the announcement resulted in
approximately $80.3 million in gains and $194.6 million in averted losses for
SAC. Martoma personally received a $9 million bonus based in large part on his
trading activity in Elan and Wyeth.
II.
The procedural history of this case is inextricably intertwined with recent
developments in insider trading law. Insider trading is a violation of § 10(b) of
the Securities Exchange Act of 1934, codified at 15 U.S.C. § 78j(b), and Rule 10b‐5,
promulgated by the Securities and Exchange Commission (“SEC”) and codified
at 17 C.F.R. § 240.10b‐5. The Supreme Court has long held that there is no
“general duty between all participants in market transactions to forgo actions
8
based on material, nonpublic information.” Chiarella v. United States, 445 U.S. 222,
233 (1980). However, the “traditional” or “classical theory” of insider trading
provides that a corporate insider violates § 10(b) and Rule 10b‐5 when he “trades
in the securities of his corporation on the basis of material, non‐public
information” because “a relationship of trust and confidence [exists] between the
shareholders of a corporation and those insiders who have obtained confidential
information by reason of their position with that corporation.” United States v.
O’Hagan, 521 U.S. 642, 651‐52 (1997) (alteration in original) (quoting Chiarella, 445
U.S. at 228). Similarly, the “misappropriation theory” of insider trading provides
“that a person . . . violates § 10(b) and Rule 10b‐5[] when he misappropriates
confidential information for securities trading purposes, in breach of a duty
owed to the source of the information.” Id. at 652. It is thus the breach of a
fiduciary duty or other “duty of loyalty and confidentiality” that is a necessary
predicate to insider trading liability. See id.
In Dirks v. S.E.C., 463 U.S. 646 (1983), the Supreme Court held that a
“tippee”—someone who is not a corporate insider but who nevertheless receives
material nonpublic information from a corporate insider, or “tipper,” and then
trades on the information—can also be held liable under § 10(b) and Rule 10b‐5,
9
but “only when the insider has breached his fiduciary duty to the shareholders
by disclosing the information to the tippee and the tippee knows or should know
that there has been a breach.” Id. at 660.2 “[T]he test” for whether there has been a
breach of a fiduciary duty or other duty of loyalty and confidentiality “is
whether the [tipper] personally will benefit, directly or indirectly, from his
disclosure” to the tippee. Dirks, 463 U.S. at 662. As examples of “direct or indirect
personal benefit[s] from the disclosure,” the Supreme Court cited “pecuniary
gain or a reputational benefit that will translate into future earnings.” Id. at 663.
The Supreme Court went on to list “objective facts and circumstances that often
justify” an inference of personal benefit:
For example, there may be a relationship between the
insider and the recipient that suggests a quid pro quo
from the latter, or an intention to benefit the particular
recipient. The elements of fiduciary duty and
exploitation of nonpublic information also exist when
an insider makes a gift of confidential information to a
trading relative or friend. The tip and trade resemble
trading by the insider himself followed by a gift of the
profits to the recipient.
2 Although many of the cases refer to “insiders” and “fiduciary” duties because
those cases involve the “classical theory” of insider trading, the Dirks articulation of
tipper and tippee liability also applies under the misappropriation theory, where the
misappropriator violates some duty owed to the source of the information. See S.E.C. v.
Obus, 693 F.3d 276, 286–88 (2d Cir. 2012); see also Newman, 773 F.3d at 445–46.
10
Id. at 664. Building on this language, we have observed that “[p]ersonal benefit is
broadly defined to include not only pecuniary gain, but also, inter alia, any
reputational benefit that will translate into future earnings and the benefit one
would obtain from simply making a gift of confidential information to a trading
relative or friend.” United States v. Jiau, 734 F.3d 147, 153 (2d Cir. 2013)
(alterations, citations, and internal quotation marks omitted).
Accordingly, the district court instructed the jury in Martoma’s trial that:
If you find that Dr. Gilman or Dr. Ross disclosed
material, non‐public information to Mr. Martoma, you
must then determine whether the government proved
beyond a reasonable doubt that Dr. Gilman and Dr.
Ross received or anticipated receiving some personal
benefit, direct or indirect, from disclosing the material,
non‐public information at issue.
The benefit may, but need not be, financial or tangible
in nature; it could include obtaining some future
advantage, developing or maintaining a business
contact or a friendship, or enhancing the tipper’s
reputation.
A finding as to benefit should be based on all the
objective facts and inferences presented in the case. You
may find that Dr. Gilman or Dr. Ross received a direct
or indirect personal benefit from providing inside
information to Mr. Martoma if you find that Dr. Gilman
or Dr. Ross gave the information to Mr. Martoma with
the intention of benefit[t]ing themselves in some
11
manner, or with the intention of conferring a benefit on
Mr. Martoma, or as a gift with the goal of maintaining
or developing a personal friendship or a useful
networking contact.
Tr. 3191.
After Martoma was convicted and while his appeal was pending, we
considered one of the situations described in Dirks—giving a “gift” of inside
information to “a trading relative or friend”—in greater detail in United States v.
Newman, 773 F.3d 438 (2d Cir. 2015). The Court noted “that [p]ersonal benefit is
broadly defined.” Id. at 452 (quoting Jiau, 734 F.3d at 153) (internal quotation
marks omitted). The Court went on, however, to state:
This standard, although permissive, does not suggest
that the Government may prove the receipt of a
personal benefit by the mere fact of a friendship,
particularly of a casual or social nature. If that were
true, and the Government was allowed to meet its
burden by proving that two individuals were alumni of
the same school or attended the same church, the
personal benefit requirement would be a nullity. To the
extent Dirks suggests that a personal benefit may be
inferred from a personal relationship between the tipper
and tippee, where the tippee’s trades ‘resemble trading
by the insider himself followed by a gift of the profits to
the recipient,’ we hold that such an inference is
impermissible in the absence of proof of a meaningfully
close personal relationship that generates an exchange
that is objective, consequential, and represents at least a
12
potential gain of a pecuniary or similarly valuable
nature.
Id. at 452 (citation omitted).
Based on this language from Newman, Martoma challenged on appeal both
the sufficiency of the evidence presented at his trial and the adequacy of the
instructions given to the jury. Martoma argued that he and Dr. Gilman did not
have a “meaningfully close personal relationship” and that Dr. Gilman had not
received any “objective, consequential . . . gain of a pecuniary or similarly
valuable nature” in exchange for providing Martoma with confidential
information.3 Further, according to Martoma, even if the evidence was sufficient
to support his conviction, the district court’s jury instructions were inadequate in
light of Newman because they did not inform the jury about the limitations on
“personal benefit” developed in Newman. This inadequate instruction, Martoma
argued, warranted a retrial. The initial round of briefing and oral argument
focused in large part on whether Martoma’s conviction could stand in light of
Newman.
The parties focus primarily on Dr. Gilman because it was Dr. Gilman, not Dr.
3
Ross, who gave Martoma the final efficacy data that led Martoma to reduce SAC’s
position in Elan and Wyeth.
13
Shortly after we held oral argument, however, the Supreme Court granted
certiorari in Salman v. United States, see 136 S. Ct. 899 (2016), and issued a decision
in the case on December 6, 2016. See 137 S. Ct. 420 (2016). The defendant in
Salman argued that a “gift of confidential information to a trading relative or
friend,” id. at 426 (quoting Dirks, 463 U.S. at 664), was insufficient to establish
insider trading liability “unless the tipper’s goal in disclosing inside information
[wa]s to obtain money, property, or something of tangible value.” Id. In other
words, the defendant in Salman urged the Supreme Court to adopt a standard
similar to the ruling in Newman. The Supreme Court declined to do so and
instead “adhere[d] to Dirks,” which contained a “discussion of gift giving [that]
resolve[d] the case.” Id. at 427. According to the Salman Court:
Dirks specifies that when a tipper gives inside
information to “a trading relative or friend,” the jury
can infer that the tipper meant to provide the equivalent
of a cash gift. In such situations, the tipper benefits
personally because giving a gift of trading information
is the same thing as trading by the tipper followed by a
gift of the proceeds. Here, by disclosing confidential
information as a gift to his brother with the expectation
that he would trade on it, [the tipper] breached his duty
of trust and confidence to [his employer] and its
clients—a duty [the defendant] acquired, and breached
himself, by trading on the information with full
knowledge that it had been improperly disclosed.
14
Id. at 428. The Supreme Court also mentioned the Newman decision, observing
that “[t]o the extent the Second Circuit held that the tipper must also receive
something of a ‘pecuniary or similarly valuable nature’ in exchange for a gift to
family or friends, . . . this requirement is inconsistent with Dirks.” Id. (quoting
Newman, 773 F.3d at 452).
In light of Salman, we requested additional briefing from the parties and
scheduled a second round of oral argument to address how Salman affects this
case.
DISCUSSION
As noted above, Martoma challenges both the sufficiency of the evidence
presented at trial and the adequacy of the district court’s jury instruction. A
defendant challenging the sufficiency of the evidence “bears a heavy burden,”
and “the standard of review is exceedingly deferential.” United States v. Coplan,
703 F.3d 46, 62 (2d Cir. 2012) (citations and internal quotation marks omitted).
“In evaluating a sufficiency challenge, we ‘must view the evidence in the light
most favorable to the government, crediting every inference that could have been
drawn in the government’s favor, and deferring to the jury’s assessment of
witness credibility and its assessment of the weight of the evidence.’” Id.
15
(quoting United States v. Chavez, 549 F.3d 119, 124 (2d Cir. 2008)). “Although
sufficiency review is de novo, we will uphold the judgment[] of conviction if any
rational trier of fact could have found the essential elements of the crime beyond
a reasonable doubt.” Id. (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979))
(citation omitted). “A judgment of acquittal is warranted only if the evidence that
the defendant committed the crime alleged is nonexistent or so meager that no
reasonable jury could find guilt beyond a reasonable doubt.” United States v. Jiau,
734 F.3d 147, 152 (2d Cir. 2013) (alterations and internal quotation marks
omitted).
With respect to Martoma’s challenge to the district court’s jury instruction,
“[w]e review a jury charge in its entirety and not on the basis of excerpts taken
out of context.” United States v. Mitchell, 328 F.3d 77, 82 (2d Cir. 2003) (quoting
United States v. Zvi, 168 F.3d 49, 58 (2d Cir. 1998)). “A conviction based on a
general verdict is subject to challenge if the jury was instructed on alternative
theories of guilt and may have relied on an invalid one.” Hedgpeth v. Pulido, 555
U.S. 57, 58 (2008). Such a challenge, however, is subject to harmless error review.
See id. at 58, 61–62. And because Martoma raises his challenge to the jury
instruction for the first time on appeal, we review only for plain error. United
16
States v. Vilar, 729 F.3d 62, 70 (2d Cir. 2013). Under the plain error standard, an
appellant must demonstrate that “(1) there is an error; (2) the error is clear or
obvious, rather than subject to reasonable dispute; (3) the error affected the
appellant’s substantial rights . . . ; and (4) the error seriously affects the fairness,
integrity or public reputation of judicial proceedings.”4 United States v. Marcus,
560 U.S. 258, 262 (2010) (internal quotation marks and alteration omitted). “[W]e
look not to the law at the time of the trial court’s decision to assess whether the
error was plain, but rather, to the law as it exists at the time of review.” Vilar, 729
F.3d at 71. Even with respect to an instructional error that “incorrectly omitted an
element of the offense,” we will not overturn a conviction “if we find that the
jury would have returned the same verdict beyond a reasonable doubt,” and
thus that “the error did not affect [the defendant’s] substantial rights.” United
4 In the past, we have stated that “[w]here . . . the source of an alleged jury
instruction error is a supervening decision, we employ a ‘modified plain‐error rule,
under which the government, not the defendant, bears the burden to demonstrate that
the error . . . was harmless.’” United States v. Mahaffy, 693 F.3d 113, 136 (2d Cir. 2012).
We have “on at least twenty‐two occasions,” Vilar, 729 F.3d at 71 n.5, observed that the
Supreme Court’s decision in Johnson v. United States, 520 U.S. 461 (1997) “called into
question the modified plain error standard of review.” United States v. Botti, 711 F.3d
299, 308 (2d Cir. 2013). Here, as in the past, “[b]ecause we would reach the same
conclusion under either standard, we need not resolve that question.” United States v.
Nouri, 711 F.3d 129, 138 n.2 (2d Cir. 2013).
17
States v. Nouri, 711 F.3d 129, 139–140 (2d Cir. 2013) (internal quotation marks
omitted).
I.
We first evaluate Martoma’s sufficiency challenge. In Newman, the Court
noted that “the tipper’s gain need not be immediately pecuniary,” and, invoking
United States v. Jiau, 734 F.3d 147 (2d Cir. 2013), explained that “enter[ing] into a
relationship of quid quo pro with [a tippee], and therefore ha[ving] the
opportunity to . . . yield future pecuniary gain,” constituted a personal benefit
giving rise to insider trading liability. Newman, 773 F.3d at 452. That is exactly
what happened in this case. Martoma was a frequent and lucrative client for Dr.
Gilman, who was paid $1,000 per hour for approximately 43 consultation
sessions. At the same time, Dr. Gilman was regularly feeding Martoma
confidential information about the safety results of clinical trials involving
bapineuzumab. And when Dr. Gilman gained access to the final clinical study
efficacy data in July 2008, he immediately passed it along to Martoma. It is true
that Dr. Gilman did not bill Martoma specifically for the July 17 and 19, 2008
meetings at which Dr. Gilman provided Martoma with the efficacy data—
because, as he admitted at trial, doing so “would [have been] tantamount to
18
confessing that [he] was . . . giving [Martoma] inside information.” Tr. 1918. But
in the context of their ongoing “relationship of quid pro quo,” Newman, 773 F.3d at
452, where Dr. Gilman regularly disclosed confidential information in exchange
for fees, “a rational trier of fact could have found the essential elements of the
crime [of insider trading] beyond a reasonable doubt” under a pecuniary quid pro
quo theory. Coplan, 703 F.3d at 62 (quoting Jackson, 443 U.S. at 319).
II.
Because the evidence presented at trial was sufficient to sustain Martoma’s
conviction, we turn next to his challenge to the district court’s jury instruction.
His argument on this front focuses on the theory, originating in Dirks, that the
personal benefit necessary to establish insider trading liability in a tipping case
can be inferred from a gift of inside information “to a trading relative or friend.”
See Dirks, 463 U.S. at 663–64; Salman, 137 S. Ct. at 428. As noted above, Newman
held that this inference was “impermissible in the absence of proof of a
meaningfully close personal relationship.” 773 F.3d at 452. Martoma argues that
this requirement survives the Supreme Court’s decision in Salman and that the
jury was not properly instructed on it. Following the logic of the Supreme
Court’s reasoning in Salman, interpreting Dirks, we think that Newman’s
19
“meaningfully close personal relationship” requirement can no longer be
sustained.
A.
The Supreme Court explained in Dirks that a tippee who knowingly trades
on material nonpublic information obtained from an insider does not necessarily
violate insider trading law. See 463 U.S. at 658–59. But “[t]he conclusion that
recipients of inside information do not invariably acquire a duty to disclose or
abstain does not mean that such tippees always are free to trade on the
information.” Id. at 659. Instead, “the tippee’s duty to disclose or abstain is
derivative from that of the insider’s duty.” Id. at 659. “Thus, some tippees must
assume an insider’s duty to the shareholders not because they receive inside
information, but rather because it has been made available to them improperly.”
Id. at 660 (emphasis in original). As a result, “a tippee assumes a fiduciary duty
. . . not to trade on material nonpublic information only when the insider has
breached his fiduciary duty . . . by disclosing the information to the tippee and
the tippee knows or should know that there has been a breach.” Id. at 660.
Dirks further observed that “[w]hether disclosure is a breach of duty . . .
depends in large part on the purpose of the disclosure,” namely “whether the
20
insider personally will benefit, directly or indirectly, from his disclosure,”
because “[a]bsent some personal gain, there has been no breach of duty to
stockholders.” 463 U.S. at 662; see also id. at 659 (“[Tippers] may not give [inside]
information to an outsider for the . . . improper purpose of exploiting the
information for their personal gain.”). In the context of this discussion, Dirks gave
several examples of situations in which an insider would personally benefit from
disclosing inside information: disclosing inside information in a quid pro quo
relationship, disclosing inside information with “an intention to benefit the
particular recipient,” and disclosing inside information as “a gift . . . to a trading
relative or friend.” Id. at 664. Contrary to the dissent’s claim, see Dissent Slip Op.
at 23, this discussion did not purport to limit to these examples the situations in
which a personal benefit can be inferred; the broader inquiry underlying the
examples remained “whether the insider personally will benefit, directly or
indirectly, from his disclosure.” Id. at 662.5
The fact that Dirks held that the tipper’s intent to give a benefit to the tippee was
5
an example of a personal benefit to the tipper illustrates just how broadly the Court
defined the concept of personal benefit to the tipper.
21
Newman, however, did view these examples as limiting the situations in
which a personal benefit could be inferred. As relevant to this case, Newman held
that the jury was never permitted to infer that a tipper had personally benefitted
from disclosing inside information as a gift unless that gift was made to someone
with whom the tipper had “a meaningfully close personal relationship,” 773 F.3d
at 452, seeking to give definition to the “friend” language from Dirks.6 But in
evaluating this gloss on Dirks, it is critical to keep in mind that the ultimate
inquiry under Dirks is whether a tipper has personally benefitted from a
disclosure of inside information such that he has violated his fiduciary duty, and
it is not apparent that the examples in Dirks support a categorical rule that an
insider can never benefit personally from gifting inside information to people
other than “meaningfully close” friends or family members—especially because
the justification for construing gifts as involving a personal benefit is that “[t]he
tip and trade resemble trading by the insider himself followed by a gift of the
The “meaningfully close personal relationship” requirement was paired,
6
moreover, with the additional requirement that the relationship “generate[] an
exchange that is objective, consequential, and represents at least a potential gain of a
pecuniary or similarly valuable nature.” 773 F.3d at 452. The dissent concedes that
Salman expressly rejected the latter part of this pairing, See Dissent Slip Op. at 18.
22
profits to the recipient,” Dirks, 463 U.S. at 664, an observation that holds true
even if the tipper and tippee were, for example, business school classmates who
“had known each other for years” rather than “close friends.” See Newman, 773
F.3d at 452 (internal quotation marks omitted).
B.
Despite some tension between Newman and Dirks, “it would ordinarily be
neither appropriate nor possible for [a panel] to reverse an existing Circuit
precedent.” Shipping Corp. of India v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 67 (2d
Cir. 2009). However, “a three‐judge panel may issue an opinion that overrules
Circuit precedent . . . where an intervening Supreme Court decision casts doubt
on the prior ruling.” Doscher v. Sea Port Grp. Sec., LLC, 832 F.3d 372, 378 (2d Cir.
2016) (internal quotation marks omitted). The Supreme Court’s decision in
Salman explicitly rejected certain aspects of Newman. See 137 S. Ct. at 428. While
the Supreme Court did not have occasion to expressly overrule Newman’s
requirement that the tipper have a “meaningfully close personal relationship”
with a tippee to justify the inference that a tipper received a personal benefit
from his gift of inside information—because that aspect of Newman was not at
issue in Salman—“[e]ven if the effect of a Supreme Court decision is ‘subtle,’ it
23
may nonetheless alter the relevant analysis fundamentally enough to require
overruling prior, ‘inconsistent’ precedent.” Doscher, 832 F.3d at 378 (quoting
Wojchowski v. Daines, 498 F.3d 99, 108 (2d Cir. 2007)).
We respectfully conclude that Salman fundamentally altered the analysis
underlying Newman’s “meaningfully close personal relationship” requirement
such that the “meaningfully close personal relationship” requirement is no
longer good law. In a case involving a tipper and tippee who were brothers,
Salman found it “obvious” that an insider would personally benefit from
“trad[ing] on [inside] information . . . himself and then giv[ing] the proceeds as a
gift to his brother.” 137 S. Ct. at 427–28. And Salman observed that an insider
“effectively achieve[s] the same result by disclosing the information to [the
tippee], and allowing him to trade on it,” because “giving a gift of [inside]
information is the same thing as trading by the tipper followed by a gift of the
proceeds.” Id. at 428; see also id. (“Making a gift of inside information to a relative
. . . is little different from trading on the information, obtaining the profits, and
doling them out . . . .”). For this reason, Salman cited Dirks’s observation that
“‘insiders [are] forbidden’ both ‘from personally using undisclosed corporate
information to their advantage’ and from ‘giv[ing] such information to an
24
outsider for the same improper purpose of exploiting the information for their
personal gain.’” Id. (quoting Dirks, 463 U.S. at 659) (alterations in original).
It is true that Dirks and Salman largely confine their discussion of gifts to
“trading relative[s] and friend[s],” and, as indicated earlier, Salman did not
specifically hold that gifts to anyone, not just relatives and friends, give rise to
the personal benefit needed to establish insider trading liability (presumably
because Salman involved tips between brothers, comfortably within the “trading
relative” language of Dirks). However, the straightforward logic of the gift‐giving
analysis in Dirks, strongly reaffirmed in Salman, is that a corporate insider
personally benefits whenever he ”disclos[es] inside information as a gift . . . with
the expectation that [the recipient] would trade” on the basis of such information
or otherwise exploit it for his pecuniary gain. Salman, 137 S. Ct. at 428. That is
because such a disclosure is the functional equivalent of trading on the
information himself and giving a cash gift to the recipient. Nothing in Salman’s
reaffirmation of this logic supports a distinction between gifts to people with
whom a tipper shares a “meaningfully close personal relationship”—a term left
undefined in Newman, but which apparently did not reach two people who “had
known each other for years, having both attended business school and worked
25
. . . together,” 773 F.3d at 452—and gifts to those with whom a tipper does not
share such a relationship. If the insider discloses inside information “with the
expectation that [the recipient] would trade on it,” Salman, 137 S. Ct. at 428, and
the disclosure “resemble[s] trading by the insider followed by a gift of the profits
to the recipient,” id. at 427 (quoting Dirks, 463 U.S. at 664), he personally benefits
for the reasons described in Dirks and Salman.7 Indeed, Dirks seems to have at
least implicitly shared this understanding: Although the tippee in Dirks did not
have a personal relationship of any kind, let alone a friendship, with the tippers
who gave him inside information, the Supreme Court applied the gift theory to
his case. See Dirks, 463 U.S. at 648–49, 667 (“[N]or was [the tippers’] purpose to
make a gift of valuable information to Dirks.”); see also Salman, 137 S. Ct. at 427
7 The dissent posits that some benefits from gift‐giving might be unique to close
friendships and family relationships. See Dissent Slip Op. at 28–29. Notably, none of
these benefits bear any relation to the Supreme Court’s articulation of why giving a gift
to a “trading relative or friend” involves a personal benefit to the gift‐giver. The
Supreme Court did not, for example, say that an insider benefits personally from
making friends and family members happy, or from improving relationships, or from
the potential of using the gift in the future. Instead, the Supreme Court observed that
giving a gift of inside information personally benefits the insider because the gift is the
equivalent of trading on the tip oneself—an obvious pecuniary benefit—and giving a
gift of the proceeds. In light of this articulated logic, the dissent’s claim that “[i]t is not
entirely straightforward that giving a gift provides the gift‐giver with a benefit,” see
Dissent Slip Op. at 11, is not persuasive.
26
(“We then applied this gift‐giving principle to resolve Dirks itself . . . .”). This
approach makes sense in light of the Supreme Court’s observation that “’insiders
[are] forbidden’ both ‘from personally using undisclosed corporate information
to their advantage’ and from ‘giv[ing] such information to an outsider for the
same improper purpose of exploiting the information for their personal gain’”—
a statement not limited by the relationships of the parties. See Salman, 137 S. Ct. at
428 (quoting Dirks, 463 U.S. at 659) (alterations in original).
An example illustrates the point. Imagine that a corporate insider, instead
of giving a cash end‐of‐year gift to his doorman, gives a tip of inside information
with instructions to trade on the information and consider the proceeds of the
trade to be his end‐of‐year gift. In this example, there may not be a
“meaningfully close personal relationship” between the tipper and tippee, yet
this clearly is an illustration of prohibited insider trading, as the insider has given
a tip of valuable inside information in lieu of a cash gift and has thus personally
benefitted from the disclosure.
Thus, we hold that an insider or tipper personally benefits from a
disclosure of inside information whenever the information was disclosed “with
the expectation that [the recipient] would trade on it,” Salman, 137 S. Ct. at 428,
27
and the disclosure “resemble[s] trading by the insider followed by a gift of the
profits to the recipient,” id. at 427 (quoting Dirks, 463 U.S. at 664), whether or not
there was a “meaningfully close personal relationship” between the tipper and
tippee.8 The dissent criticizes us for “holding that someone who gives a gift
always receives a personal benefit from doing so” and that “an insider receives a
personal benefit when the insider gives inside information as a ‘gift’ to any
person.” Dissent Slip Op. at 2. But our holding reaches only the insider who
discloses inside information to someone he expects will trade on the information.
This holding is no broader than the logic underpinning the Supreme Court’s
conclusion in Salman. Indeed, as noted above, the Supreme Court has found it
8 Although we hold that Newman’s “meaningfully close personal relationship”
requirement is no longer good law, we do not hold that the relationship between the
tipper and tippee cannot be relevant to the jury in assessing competing narratives as to
whether information was disclosed “with the expectation that [the recipient] would
trade on it,” Salman, 137 S. Ct. at 428, and whether the disclosure “resemble[d] trading
by the insider followed by a gift of the profits to the recipient,” id. at 427 (quoting Dirks,
463 U.S. at 664). In the dissent’s example of a disclosure of inside information to a
reporter, for example, see Dissent Slip Op. at 5, a pre‐existing personal relationship
between the insider and the reporter might tend to show that the information was not
disclosed for altruistic reasons but was instead disclosed “with the expectation that [the
recipient] would trade on it.” Salman, 137 S. Ct. at 428. A pre‐existing personal
relationship might also tend to show, however, that the insider trusted the reporter to
scrupulously reveal a corporate fraud to the relevant authorities or the investing public.
It is for the jury to decide, based on all of the facts and circumstances in a particular
case, what to infer about the tipper’s purpose from his relationship with the tippee.
28
“obvious” that an insider would personally benefit from “trad[ing] on [inside]
information . . . himself and then giv[ing] the proceeds as a gift to his brother.”
Salman, 137 S. Ct. at 427–28. Our holding comports with Salman’s observation
that personal benefit to the insider is equally obvious when an insider
“effectively achieve[s] the same result by disclosing the information to [the
tippee]” for the purpose of “allowing [the tippee] to trade on it.” Id. at 428.
Contrary to the dissent’s suggestion, not all disclosures of inside
information will meet this test. For example, disclosures for whistleblowing
purposes to reveal a fraud, see Dirks, 463 U.S. at 649–50, 667, and inadvertent
disclosures, see id. at 663 & n.23, are not disclosures made “with the expectation
that [the recipient] would trade on” them and thus involve no personal benefit to
the insider. Salman, 137 S. Ct. at 428. There may also be other situations in which
the facts do not justify the inference that information was disclosed “with the
expectation that [the recipient] would trade on it,” Salman, 137 S. Ct. at 428, and
that the disclosure “resemble[s] trading by the insider followed by a gift of the
profits to the recipient,” id. at 427 (quoting Dirks, 463 U.S. at 664). As a result, our
holding does not eliminate or vitiate the personal benefit rule; it merely
acknowledges that it is possible to personally benefit from a disclosure of inside
29
information as a gift to someone with whom one does not share a “meaningfully
close personal relationship.” Phrased another way, we reject, in light of Salman,
the categorical rule that an insider can never personally benefit from disclosing
inside information as a gift without a “meaningfully close personal relationship.”
C.
It is, of course, the province of the jury to evaluate competing narratives
and decide what actually motivated a tipper to disclose confidential information,
and consequently, whether there was a personal benefit to the insider on the facts
of a particular case. How can jurors, or this Court on appeal, know that inside
information was disclosed “with the expectation that [the recipient] would trade
on it,” Salman, 137 S. Ct. at 428, and that the disclosure “resemble[d] trading by
the insider followed by a gift of the profits to the recipient”? Id. at 427 (quoting
Dirks, 463 U.S. at 664). Arguably, Newman’s “meaningfully close personal
relationship” requirement could be construed as limited to the question of the
sufficiency of circumstantial evidence in an insider trading case. See 773 F.3d at
451–53. But Newman’s sufficiency analysis appeared to assume that the personal
benefit involved in giving a gift was “the ephemeral benefit of the . . . friendship”
of the recipient of the gift. Newman, 773 F.3d at 452 (quoting Jiau, 734 F.3d at 153);
30
see also id. (explaining that the government cannot “prove the receipt of a
personal benefit by the mere fact of a friendship”). Because the Court in Newman
was of the opinion that friendship itself, “particularly of a casual or social
nature,” did not constitute a personal benefit, it required more. 773 F.3d at 452.9
But as the Supreme Court explained in Dirks and reaffirmed again in Salman, the
personal benefit one receives from giving a gift of inside information is not the
friendship or loyalty or gratitude of the recipient of the gift; it is the imputed
pecuniary benefit of having effectively profited from the trade oneself and given
the proceeds as a cash gift. See Salman, 137 S. Ct. at 427–28; Dirks, 463 U.S. at 664.
If under Dirks and Salman it is not correct to characterize the personal benefit at
issue in gift‐giving as the receipt of friendship, then Newman’s discussion of the
9 In particular, as described above, Newman held that a personal benefit could not
be inferred from gift‐giving “in the absence of proof of a meaningfully close personal
relationship that generates an exchange that is objective, consequential, and represents
at least a potential gain of a pecuniary or similarly valuable nature.” 773 F.3d at 452.
Under this standard, even a gift to one’s best friend or spouse was insufficient to convey
the requisite personal benefit without some kind of objective exchange involving
potential pecuniary value. While the latter requirement was explicitly rejected by the
Supreme Court, see Salman, 137 S. Ct. at 428, viewing the “meaningfully close personal
relationship” requirement in its original context further demonstrates that Newman
understood the personal benefit involved in gift‐giving to be the receipt of friendship
and concluded that this “ephemeral” benefit was simply not the kind of benefit that
should give rise to insider trading liability. See 773 F.3d at 452.
31
circumstances in which a jury can infer that a tipper personally benefitted from
disclosing inside information as a gift must now be considered inapposite.
The dissent argues that “[w]hat counts as a ‘gift’ is vague and subjective.”10
Dissent Slip Op. at 2. We reiterate the Supreme Court’s observation that
“[d]etermining whether an insider personally benefits from a particular
disclosure, a question of fact, will not always be easy for courts.” Salman, 137 S.
Ct. at 429 (quoting Dirks, 463 U.S. at 664) (alteration in original). As the dissent
points out, many cases may rely on circumstantial evidence of intent. See Dissent
Slip Op. at 20–21. Because we have concluded that the evidence presented at
Martoma’s trial was sufficient to convict under a straightforward pecuniary
benefit theory, we need not consider the outer boundaries of when a jury is
entitled to infer, relying on circumstantial evidence, that a particular disclosure
was made “with the expectation that [the recipient] would trade on it,” Salman,
137 S. Ct. at 428, and “resemble[d] trading by the insider followed by a gift of the
10 The same might be said of the “meaningfully close personal relationship” test.
When asked how “meaningfully close personal relationship” should be defined,
Martoma and the government both invoked the basics of Dirks and Salman, agreeing
that a “meaningfully close personal relationship” is the kind of relationship in which
gifts are exchanged.
32
profits to the recipient,” id. at 427 (quoting Dirks, 463 U.S. at 664). It is worth
noting, however, that not all insider trading cases rely on circumstantial
evidence. In some cases, the tipper may cooperate with the government and
testify against the tippee, providing information on the motivation for disclosing
inside information. In other cases, other witnesses might testify about
conversations with a tipper that shed light on the tipper’s intentions. Thus, while
concerns about the sufficiency of circumstantial evidence on the gift theory are
not wholly without basis, the response to those concerns lies in appellate review
of the sufficiency of the evidence of personal benefit, not in a definition of
personal benefit that categorically excludes situations where the requisite
personal benefit could be proven. In other words, the fact that some cases of
insider trading might be hard to prove beyond a reasonable doubt based on
circumstantial evidence (and might consequently be reversed on appeal as
supported by insufficient evidence) does not mean that other cases—the
doorman hypothetical discussed above, for example—should be outside the
bounds of insider trading liability even where the government has put forward
adequate proof of personal benefit.
33
As a final note on this point, the dissent is correct that the legality and
ethics of insider trading are not necessarily coextensive. See Dissent Slip Op. at
43. But the legality of insider trading is coextensive with a corporate insider’s
fiduciary duty of loyalty to the corporation. See Dirks, 463 U.S. at 654, 659–60.
The dissent would hold, in effect, that a corporate insider does not violate his or
her duty of loyalty by disclosing inside information to an outsider as a gift with
no legitimate corporate purpose so long as the gift is to someone with whom the
insider does not share a “meaningfully close personal relationship.” In our view,
for the reasons discussed above, Salman and Dirks compel a different result.
D.
Having concluded that the evidence was sufficient to support Martoma’s
conviction and that Newman’s “meaningfully close personal relationship”
requirement is no longer good law, the remaining question is whether the district
court’s jury instruction, which Martoma challenges for its failure to include
Newman’s “meaningfully close personal relationship” requirement, accurately
conveyed the elements of insider trading. The jury instruction given at
Martoma’s trial stated that a “gift [given] with the goal of maintaining or
developing a personal friendship or a useful networking contact” constitutes a
34
personal benefit. Tr. 3191. Martoma focuses on the language about developing
friendships, arguing that gifts given to develop future friendships do not give rise
to the personal benefit needed to trigger insider trading liability. Salman
reiterated that when confidential information is given as a gift, it is “the same
thing as trading by the tipper followed by a gift of the proceeds” and is thus the
functional equivalent of a cash gift. Salman, 137 S. Ct. at 428. Whether the
recipient of the gift is an existing friend or a potential future friend whom a gift is
intended to entice, the logic—that a tipper personally benefits by giving inside
information in lieu of a cash gift—operates in a similar manner. For this reason,
the aspect of the district court’s instruction on gifts with the goal of developing
friendships, which is at most “subject to reasonable dispute,” did not constitute
“obvious” error. Marcus, 560 U.S. at 262 (internal quotation marks omitted).
Even if the jury instruction was obviously erroneous—which we hold it
was not—that error did not impair Martoma’s substantial rights in light of the
compelling evidence that Dr. Gilman, the tipper, received substantial financial
benefit in exchange for providing confidential information to Martoma. As
discussed above, Dr. Gilman, over the course of approximately 18 months and 43
paid consultation sessions for which he billed $1,000 an hour, regularly and
35
intentionally provided Martoma with confidential information from the
bapineuzumab clinical trial. Martoma kept coming back, specifically scheduling
consultation sessions so that they would occur shortly after the safety monitoring
committee meetings, when Dr. Gilman would have new information to pass
along—and starting at least in August 2007, Dr. Gilman would reschedule his
conversations with Martoma if he had no new information to reveal at the time
they were scheduled to meet. Thus, the consulting relationship between Dr.
Gilman and Martoma at that point involved no “legitimate service,” see Dissent
Slip Op. at 43; as Dr. Gilman testified at trial, “the purpose of those consultations
was for [him] to disclose to [Martoma] confidential information about the results
. . . of the last Safety Monitoring Committee [meeting].” Tr. 1274:6–9. And
because Martoma continued to see Dr. Gilman to receive confidential
information, Dr. Gilman continued to receive consulting fees. The fact that Dr.
Gilman did not specifically bill for his July 17 and 19, 2008 conversations with
Martoma in which Dr. Gilman divulged the final drug efficacy data does not
alter the inescapable conclusion that in the context of this “relationship of quid
pro quo,” Newman, 773 F.3d at 452, Dr. Gilman’s disclosure of confidential
information was designed to “translate into future earnings.” United States v. Jiau,
36
734 F.3d 147, 153 (2d Cir. 2013) (quoting Dirks, 463 U.S. at 663). As a result, “it is
clear beyond a reasonable doubt that a rational jury would have found
[Martoma] guilty absent [any] error.” United States v. Mahaffy, 693 F.3d 113, 136
(2d Cir. 2012).
CONCLUSION
We have considered Martoma’s remaining arguments and find in them no
basis for reversal. Accordingly, we AFFIRM the judgment of the district court.
37
POOLER, Circuit Judge:
Because the majority rejects limitations the Supreme Court set forth in
Dirks v. S.E.C., 463 U.S. 646 (1983), and Salman v. United States, 137 S. Ct. 420
(2016), and overrules our holding in United States v. Newman, 773 F.3d 438 (2d
Cir. 2014), without convening this Court en banc, I cannot join the opinion. And,
because those precedents show that Martoma’s jury instructions were erroneous
in a way that affected his rights at trial, I respectfully dissent.
* * *
This appeal asks what the government must show to convict someone
criminally of trading on inside information, or to prevail on similar civil charges.
For years, the Supreme Court’s decisions have required the government to show
that the relevant information came from an insider who divulged it in return for
a personal benefit.1 The Supreme Court has described the “personal benefit” rule
1 The majority notes, and I agree, that it is irrelevant for our purposes whether
the source of the information is a true corporate “insider” or instead a corporate
outsider who has improperly shared information with which he was trusted
under the “misappropriation” theory of insider‐trading liability, see United States
v. O’Hagan, 521 U.S. 642, 651‐53 (1997). See United States v. Newman, 773 F.3d 438,
446 (2d Cir. 2014) (“The elements of tipping liability are the same, regardless of
whether the tipperʹs duty arises under the ‘classical’ or the ‘misappropriation’
theory.”); S.E.C. v. Obus, 693 F.3d 276, 285–86 (2d Cir. 2012). I use the term
“insider” interchangeably to refer either to an actual insider or someone who
misappropriates information.
1
as a limiting principle of liability. The rule allows many people—including
reporters and stock analysts—not to worry that they will become felons or face
civil liability for telling information to others who later happen to trade on it.
Without evidence that an insider let details slip in return for a personal benefit
for himself or herself, the government cannot convict.
Today, the majority holds that an insider receives a personal benefit when
the insider gives inside information as a “gift” to any person. In holding that
someone who gives a gift always receives a personal benefit from doing so, the
majority strips the long‐standing personal benefit rule of its limiting power.
What counts as a “gift” is vague and subjective. Juries, and, more dangerously,
prosecutors, can now seize on this vagueness and subjectivity. The result will be
liability in many cases where it could not previously lie.
In the past, we have held that an insider receives a personal benefit from
bestowing a “gift” of information in only one narrow situation. That is when the
insider gives information to family or friends—persons highly unlikely to use it
for commercially legitimate reasons. Today’s opinion goes far beyond that
limitation, which was set by the Supreme Court in Dirks, 463 U.S. 646, received
elaboration in this Court’s opinion in Newman, 773 F.3d 438, and was left
2
undisturbed by the Supreme Court in Salman, 137 S. Ct. 420. In rejecting those
precedents, the majority opinion significantly diminishes the limiting power of
the personal benefit rule, and radically alters insider‐trading law for the worse.
1. The Personal Benefit Rule
To prevail in an insider‐trading case based on a tip from an insider to a
trader, the government must prove several elements. See, e.g., United States v. Jiau,
734 F.3d 147, 153 (2d Cir. 2013). Among them, the government must show that
the insider had a fiduciary duty to protect the confidential information and
nonetheless disclosed it in return for a personal benefit. Dirks, 463 U.S. at 659‐64.
The requirement of a personal benefit exists because not “[a]ll disclosures
of confidential corporate information are . . . inconsistent with the duty insiders
owe to shareholders.” Id. at 661. The law targets only someone who “takes
advantage” of inside information to make “secret profits.” Id. at 654. For
example, the insider who reveals information inadvertently—perhaps letting it
slip accidentally during a legitimate business conversation—has not committed
insider trading. See S.E.C. v. Obus, 693 F.3d 276, 287 (2d Cir. 2012) (noting liability
likely would not lie for an inadvertent disclosure); see also Dirks, 463 U.S. at 662.
Similarly, insiders speaking for public‐spirited reasons, such as “a desire to
3
expose . . . fraud,” do not commit insider trading. Dirks, 463 U.S. at 667. To
ensure that these cases, and similar ones, do not result in criminal or civil
liability, the law requires the government to show that an insider benefitted
personally in return for a tip.2
a. Reasons for the Personal Benefit Rule
In introducing the personal benefit rule in Dirks, the Supreme Court
explained that it was “essential . . . to have a guiding principle for those whose
daily activities must be limited and instructed by the SEC’s inside‐trading rules,”
and that, without the personal benefit rule, there would be no such “limiting
principle” for insider‐trading liability. Id. at 664. The Supreme Court elaborated
that, “[w]ithout legal limitations, market participants are forced to rely on the
reasonableness of the SEC’s litigation strategy, but that can be hazardous.” Id. at
664 n.24. Before the personal benefit rule, the SEC believed that it had the power
2 Why must the insider who tips receive a personal benefit before the tippee may
be held liable? Tipping cases differ from situations where someone breaches a
duty owed directly to the company by trading. In tipping cases, the tippee
generally “has no . . . relationship[]” with the company or its shareholders, and
so “the tippee’s duty to . . . abstain [from trading] is derivative from . . . the
insider’s duty.” Dirks, 463 U.S. at 655, 659. Without the insider’s breach of duty,
the tippee who receives the information, and tells it to others or trades on it, also
breaches no duty and thus commits no crime. But if the insider does breach his or
her duty in return for a benefit, and the crime’s other requirements are satisfied,
then both insider and tippee are liable.
4
to enforce insider‐trading rules against “persons outside the company such as an
analyst or reporter who learns of inside information.” Id. (emphasis omitted).
The Supreme Court, troubled by that possibility, created a rule foreclosing such
prosecutions except when an insider has personally benefitted from a disclosure.
The Supreme Court also noted that the question of whether an insider
personally benefitted from disclosure would “require[] courts to focus on
objective criteria.” Id. at 663. Rather than courts attempting to “read the parties’
minds,” id., they would look to “objective facts and circumstances that [would]
justify . . . an inference” that an insider received a personal benefit, id. at 664.
Without the personal benefit rule, many insider‐trading cases would
require the government to show few objective facts. Consider, for example, a
situation where an insider conveys material, nonpublic information to a reporter,
and the reporter tells it to a third person who trades on it.3 Such a situation is
entirely plausible for a financial news reporter who speaks to many sources.
Suppose that the government, however, brings a civil suit against the reporter.
To prevail, the government first must show that the insider is at fault by
demonstrating that (1) the insider had a duty to keep the information secret, but
3 See Chiarella v. United States, 445 U.S. 222, 227 (1980) (stating that insider‐trading
charge requires that the information disclosed is material and nonpublic).
5
did not, that (2) the insider knew, or should have known, that the reporter would
benefit from the information, and that (3) the insider personally benefitted from
disclosing the information.4 After the government shows that the insider was at
fault, the government must show that (4) the reporter knew, or should have
known, of the insider’s breach of duty and personal benefit.5 Last, the
government must show that (5) the reporter either knew, or should have known,
4 See Obus, 693 F.3d at 288‐89 (“A tipper will be liable if he tips . . . to someone he
[knows or has reason to know] will likely (1) trade on the information or
(2) disseminate the information further for the first tippee’s own benefit.”).
5 See Dirks, 463 U.S. at 659‐64 (discussing necessity of insider’s duty and personal
benefit); Obus, 693 F.3d at 289 (“Tippee liability requires that (1) the tipper
breached a duty by tipping confidential information; (2) the tippee knew or had
reason to know that the tippee improperly obtained the information (i.e., that the
information was obtained through the tipperʹs breach); and (3) the tippee, while
in knowing possession of the material non‐public information, used the
information by trading or by tipping for his own benefit.”); United States v.
Mylett, 97 F.3d 663, 668 (2d Cir. 1996) (“Rule 10b‐5 requires that the defendant
subjectively believe that the information received was obtained in breach of a
fiduciary duty.”); Newman, 773 F.3d at 448 (rejecting argument that a tippee’s
“knowledge of [the tipper’s] breach of the duty of confidentiality without
knowledge of the [tipper’s] personal benefit [from doing so] is sufficient to
impose criminal liability.”). Salman suggested it is required, at least in a criminal
case, that “the tippee knew that the tipper disclosed the information for a
personal benefit and that the tipper expected trading to ensue.” 137 S. Ct. at 427
(emphasis added). It is not entirely clear whether this statement modified the
elements of the offense, given that the tipper’s level of knowledge of trading was
not at issue in Salman.
6
of the third person’s intention to trade, and that (6) the reporter received a
personal benefit from passing the information to the third person.6
These requirements at first appear weighty. Except for the “personal
benefits,” however, the requirements relate only to each individual’s state of
mind. In a civil suit, to prove these state‐of‐mind requirements, the government
need not show that the insider knew the reporter would benefit, or that the
reporter knew of the insider’s duty and breach or the third person’s intention to
trade. It is enough to show that the insider and the reporter should have known.7
Typically, circumstantial evidence meets this minimal requirement. The
government could argue that the insider and the reporter each heard and shared
6 See Obus, 693 F.3d at 288‐89 (“A tipper will be liable if he tips . . . to someone he
[knows or has reason to know] will likely (1) trade on the information or
(2) disseminate the information further for the first tippee’s own benefit.”). Note
that this same requirement must be met for the government to show that the
initial tipper improperly gave information to the reporter. Id. at 289.
7 Obus, 693 F.3d at 286 (“In every insider trading case, at the moment of tipping
or trading . . . the unlawful actor must know or be reckless in not knowing that
the conduct was deceptive.”); see Dirks, 463 U.S. at 660 (stating that liability may
result when “the tippee knows or should know that there has been a breach” of
the insider’s duty).
7
a certain type of information with certain people, and thus should have known of
the relevant duties, breaches, and benefits.8
In a criminal case, at least in this Circuit, it is not enough for the
government to show mere recklessness to fulfill the state‐of‐mind requirements.9
The reporter’s conduct must be willful—he must “subjectively believe” duties
were breached. United States v. Mylett, 97 F.3d 663, 668 (2d Cir. 1996).10 As in civil
8 See Newman, 773 F.3d at 454 (“The [g]overnment argues that given the detailed
nature and accuracy of [the information they received], [the defendants] must
have known, or deliberately avoided knowing, that the information originated
with corporate insiders, and that those insiders disclosed the information in
exchange for a personal benefit.”); Mylett, 97 F.3d at 668 (“[The tippee] knew that
he had obtained information from [the insider]. He argues that . . . nothing about
[the insider]’s position . . . would logically give rise to the inference that he was
disclosing inside information. Because [the tippee] knew that [the insider] was a
Vice President of AT & T, this contention is meritless.” (internal quotation marks
omitted)).
9 The Supreme Court in Salman suggested that all criminal cases now require a
showing of knowledge regarding the tipper’s duty and breach. See Salman, 137 S.
Ct. at 423 (“The tippee acquires the tipper’s duty if the tippee knows the
information was disclosed in breach of the tipper’s duty, and the tippee may
commit securities fraud by trading in disregard of that knowledge.” (emphasis
added)). It is not clear, however, whether this statement alters the standard for
civil cases.
10 See United States v. Gansman, 657 F.3d 85, 91 n.7 (2d Cir. 2011) (“To impose
criminal sanctions, the government must prove . . . that the defendant’s conduct
was willful. Civil liability, on the other hand, may attach if the government
proves . . . that the defendant’s conduct was merely reckless, rather than willful.”
(internal citations omitted)).
8
cases, however, “[s]uch belief may . . . be shown by circumstantial evidence,”
and the government often argues as much. Id.
The personal benefit requirement limits liability in situations like the one
described in the hypothetical above. It requires the government to show that the
insider received a benefit for disclosing the information, that the reporter
received a benefit for sharing it, and that the reporter had reason to know of
both. Assuming that the personal benefit must be demonstrated by objective
facts, it limits the government’s ability to hold persons liable where they
“mistakenly think . . . information already has been disclosed or that it is not
material enough to affect the market.” Dirks, 463 U.S. at 662; see also Obus, 693
F.3d at 287 (noting liability likely would not lie for an inadvertent disclosure).
The personal benefit rule makes it unlikely that persons with innocent intentions
will violate the law by sharing information with others: someone is unlikely to
receive a benefit from sharing information unless he or she knows the
information is material and nonpublic. It also provides greater notice to persons
hearing information that the information was shared improperly: the awareness
that someone benefitted from sharing the information suggests that revealing it
was not honorable.
9
b. Evolution of the Personal Benefit Rule
The development of the personal benefit rule from Dirks, to this Court’s
opinion in Newman, and then to the Supreme Court’s opinion in Salman, is crucial
to understanding why the majority’s rule in the opinion today goes far beyond
the law’s previous understanding of what constitutes a personal benefit.
i. Dirks
In Dirks, the Supreme Court first provided a list of items satisfying the
requirement that an insider receive a personal benefit from revealing inside
information:
[C]ourts [must] focus on objective criteria, i.e., whether the insider
receives a direct or indirect personal benefit from the disclosure,
such as a pecuniary gain or a reputational benefit that will translate
into future earnings. There are objective facts and circumstances that
often justify such an inference. For example, there may be a
relationship between the insider and the recipient that suggests a
quid pro quo from the latter, or an intention to benefit the particular
recipient. The elements of fiduciary duty and exploitation of
nonpublic information also exist when an insider makes a gift of
confidential information to a trading relative or friend. The tip and
trade resemble trading by the insider himself followed by a gift of
the profits to the recipient.
Dirks, 463 U.S. at 663–64 (internal citations omitted). Two of the possible personal
benefits, “a pecuniary gain” and “a reputational benefit that will translate into
future earnings,” correspond closely with the ordinary understanding of a
10
“benefit.” The third, “a gift of confidential information,” perhaps corresponds
less closely. It is not entirely straightforward why giving a gift provides the gift‐
giver with a benefit. But the Court restricted the applicability of that theory to
cases where the gift is given to the tipper’s “trading relative or friend.” Such a
limitation makes the theory defensible, because, as Justice Breyer noted at oral
argument in Salman, “to help a close family member [or friend] is like helping
yourself.” Transcript of Oral Argument at 8, Salman v. United States, 137 S. Ct. 420
(2016) (No. 15‐628).
ii. Newman
Our opinion in Newman built on the gift‐giving theory in Dirks in two
ways.11 Newman first held that, when the government wishes to show a personal
benefit based on a gift within a friendship, as permitted by Dirks, the friendship
must be “a meaningfully close personal relationship”:
To the extent Dirks suggests that a personal benefit may be inferred
from a personal relationship between the tipper and tippee, where
the tippee’s trades “resemble trading by the insider himself followed
by a gift of the profits to the recipient,” we hold that such an inference
Newman also rejected the argument that a tippee’s “knowledge of [the tipper’s]
11
breach of the duty of confidentiality without knowledge of the [tipper’s] personal
benefit [from doing so] is sufficient to impose criminal liability.” 773 F.3d at 448.
The majority does not suggest that this proposition of law is in doubt. In any
case, it is not at issue in this appeal.
11
is impermissible in the absence of proof of a meaningfully close personal
relationship that generates an exchange that is objective,
consequential, and represents at least a potential gain of a pecuniary
or similarly valuable nature.
Newman, 773 F.3d at 452 (emphasis added) (internal citations, quotation marks,
and brackets omitted). The opinion in Newman expressed concern that, without
such a limitation, the government would present superficial “friendships” not
worthy of the name:
We have observed that personal benefit is broadly defined to
include . . . the benefit one would obtain from simply making a gift
of confidential information to a trading relative or friend. This
standard, although permissive, does not suggest that the
Government may prove the receipt of a personal benefit by the mere
fact of a friendship, particularly of a casual or social nature. If that
were true, and the Government was allowed to meet its burden by
proving that two individuals were alumni of the same school or
attended the same church, the personal benefit requirement would
be a nullity.
Id. Newman thus expressed concern that inferring a benefit from a gift within a
“casual or social” relationship failed to honor the requirement that “the personal
benefit received in exchange for confidential information . . . be of some
consequence.” Id. Like Dirks, Newman’s first holding was clearly animated by the
idea that the personal benefit requirement could not become “a nullity” given its
role as a limiting principle of liability. Id. It attempted to specify what Dirks had
12
left unclear—how close persons must be for a gift between them to count as a
benefit to the gift‐giver.
Second, Newman held that an insider’s gift to a friend only amounted to a
personal benefit if the gift might yield money (or something similar) for the
insider. 773 F.3d at 452. Although Dirks said that “[t]he elements of fiduciary
duty and exploitation of nonpublic information . . . exist when an insider makes a
gift of confidential information to a trading relative or friend,” 463 U.S. at 663–64,
Newman interpreted Dirks to require not merely a gift to a friend, but also that it
be given in the context of a relationship that “generates an exchange that is
objective, consequential, and represents at least a potential gain of a pecuniary or
similarly valuable nature.” Newman, 773 F.3d at 452.
iii. Salman
After Newman, the Supreme Court decided Salman v. United States. Salman
involved three persons—Maher and Michael, who were brothers, and Salman,
the defendant, who was Maher’s brother‐in‐law and Michael’s “friend” and
“extended family member.” 137 S. Ct. at 423‐24. Maher, who had inside
information, would disclose it to his brother Michael, who then passed it to
Salman. Id. Salman traded on it. Id. at 424.
13
The defendant, Salman, “argue[d] that he [could not] be held liable as a
tippee because” Maher “did not personally . . . benefit from” giving tips. Id. at
424. The case, in other words, turned on whether “Maher, the tipper,” received a
personal benefit when he “provided inside information to a close relative, his
brother Michael.” Id. at 427. Salman contended that Maher “did not personally
receive money or property in exchange for the tips and thus did not personally
benefit from them.” Id. at 424. In short, Salman argued that even though Maher
had disclosed information to his (Maher’s) brother, Maher did not receive a
personal benefit from that disclosure unless he also stood to benefit financially
from it. Id.
The Supreme Court affirmed the Court of Appeals for the Ninth Circuit,
which had rejected Salman’s argument. Id. The Supreme Court explained that
“the Court of Appeals properly applied Dirks” in ruling that “Dirks allowed the
jury to infer that the tipper here breached a duty because he made a gift of
confidential information to a trading relative.” Id. (internal quotation marks
omitted). The Supreme Court held that a tipper did not need to receive money or
property to benefit personally when disclosing to a friend or relative. Id. at 428.
14
The Supreme Court’s opinion in Salman overturned Newman’s second
holding, which required a showing that a tipper would receive something of
“pecuniary or similarly valuable nature” even when making a gift to relatives or
friends. Regarding Newman’s second holding, the Supreme Court wrote the
following:
To the extent the Second Circuit held that the tipper must also
receive something of a “pecuniary or similarly valuable nature” in
exchange for a gift to family or friends, Newman, 773 F.3d at 452, . . .
this requirement is inconsistent with Dirks.
Salman, 137 S. Ct. at 428 (internal citation omitted). The Supreme Court stated
that, “when a tipper gives inside information to a trading relative or friend, the
jury can infer that the tipper meant to provide the equivalent of a cash gift.” Id.
(internal quotation marks omitted). Thus, after Salman, a gift of information to a
“trading relative or friend” is sufficient, without an accompanying monetary or
other gain, for a fact‐finder to conclude that a tipper received a personal benefit.
The Supreme Court, however, left Newman’s first holding untouched. The
Supreme Court quoted the first holding of Newman, that the inference of a
personal benefit from a gift “is impermissible in the absence of proof of a
meaningfully close personal relationship.” Salman, 137 S. Ct. at 425 (quoting
Newman, 773 F.3d at 452). But the Supreme Court explicitly stated that it
15
overruled Newman only “[t]o the extent” that it required an insider to “receive
something of a ‘pecuniary or similarly valuable nature’” as a result of giving a
gift to a friend. Salman, 137 S. Ct. at 428 (emphasis added). The Supreme Court’s
statement showed no disapproval of the “meaningfully close personal
relationship” language in Newman.
Had the Supreme Court discussed the “meaningfully close personal
relationship” requirement of Newman—which it did not—that discussion would
have been dicta. Salman considered whether a gift shared between brothers could
show a personal benefit. See 137 S. Ct. at 424. An opinion considering a
relationship between brothers does not need to rule on, or even address, how
close two persons’ friendship must be for them really to be “friends.”
To the extent Salman discussed the relationship between Maher and
Michael, it took pains to emphasize, repeatedly, that they were extremely close:
Maher enjoyed a close relationship with his older brother, Mounir
Kara (known as Michael). . . . At first he relied on Michael’s
chemistry background to help him grasp scientific concepts relevant
to his new job. Then, while their father was battling cancer, the
brothers discussed companies that dealt with innovative cancer
treatment and pain management techniques.
. . . .
The evidence at trial established that Maher and Michael enjoyed a
“very close relationship.” Maher “loved his brother very much,”
16
Michael was like “a second father to Maher,” and Michael was the
best man at Maher’s wedding to Salman’s sister. Maher testified that
he shared inside information with his brother to benefit him and
with the expectation that his brother would trade on it. While Maher
explained that he disclosed the information in large part to appease
Michael (who pestered him incessantly for it), he also testified that
he tipped his brother to “help him” and to “fulfill whatever needs he
had.”
. . . .
Maher, the tipper, provided inside information to a close relative,
his brother Michael.
Id. at 424, 427 (citations omitted). The fact that Michael and Maher were not only
brothers, but otherwise were “very close,” “enjoyed a close relationship,”
“loved” each other “very much,” that Michael served as “best man at Maher’s
wedding,” and that the two were “close relatives” demonstrates that any
discussion in Salman of the requirements for the closeness of a friendship was
unnecessary to resolve the appeal. The Supreme Court did not need to decide
how close a relationship must be for two persons to be “friends” or
“meaningfully close,” because the relationship between Michael and Maher
would have satisfied any conceivable test.
Beyond leaving Newman’s first holding untouched, the Supreme Court’s
decision in Salman also declined to adopt the government’s theory of the
personal benefit rule, which would have broadened the gift‐giving doctrine
17
substantially. In Salman, the government argued that “a gift of confidential
information to anyone, not just a ‘trading relative or friend,’ is enough to prove
securities fraud.” Id. at 426. Such a holding would have substantially broadened
the rule in Dirks, which stated that a personal benefit may be inferred when “an
insider makes a gift of confidential information to a trading relative or friend.”
463 U.S. at 664. The Supreme Court did not adopt the government’s view,
deciding instead to “adhere to Dirks.” Salman, 137 S. Ct. at 427.
To summarize, Dirks held that a gift of information to an insider’s relatives
or friends could permit an inference of a personal benefit. In Newman, we held
that such an inference could only be made when (1) the gift was exchanged
within a “meaningfully close personal relationship,” and (2) a gift created the
potential for an insider to receive a pecuniary or similar benefit. Salman reversed
the second holding of Newman, requiring the potential of pecuniary gain, but left
untouched the first holding that, in order to allow inference of a personal benefit,
gifts must be exchanged within a “meaningfully close personal relationship.”
c. The Majority’s Change to the Personal Benefit Rule
The majority today articulates a rule that permits inference of a personal
benefit whenever an insider makes a “gift” of information to anyone, not just to
18
relatives or meaningfully close friends. As the majority puts it, “a corporate
insider personally benefits whenever he discloses inside information as a gift
with the expectation that the recipient would trade on the basis of such
information or otherwise exploit it for his pecuniary gain.” Slip Op. at 25
(internal quotation marks, brackets, and ellipsis omitted). Or, put another way,
“[i]f the insider discloses inside information . . . and the disclosure resembles
trading by the insider followed by a gift of the profits to the recipient, he
personally benefits.” Id. at 26 (internal quotation marks, citations, and brackets
omitted).
The majority declines to provide further guidance on what counts as a
“gift.” Slip Op. at 33 (“[W]e need not consider the outer boundaries of when a
jury is entitled to infer . . . that a particular disclosure . . . resembled trading by
the insider followed by a gift of the profits to the recipient.” (internal quotation
marks and brackets omitted)). Any disclosure of material, non‐public
information clearly resembles a gift, in that it provides the recipient with
something of value. The rule limiting the gift theory to relatives and friends
made it largely unnecessary to ask what distinguished a “gift” from a non‐gift
disclosure, in that most insiders have few reasons beyond gift‐giving to share
19
valuable business secrets with close friends or family members. But in other
cases, simply telling a jury to distinguish between a disclosure that is a gift, as
opposed to one that is not, with no further guidance, invites decision‐making
that is entirely arbitrary and subjective. It puts the analysis largely on the
intentions of the parties, which is likely to be unclear and proven through
circumstantial evidence. In short, it undermines the objectivity and limitation
that the personal benefit rule is designed to provide. See Dirks, 463 U.S. at 662‐64.
The majority emphasizes that the vastly‐expanded “gift” rule “reaches
only the insider [or other tipper] who discloses information to someone he expects
will trade on the information.” Slip Op. at 29 (emphasis in original). This rule is a
separate requirement for insider‐trading liability in tipping cases, see Obus, 693
F.3d at 286‐87; United States v. Gansman, 657 F.3d 85, 92 (2d Cir. 2011),12 so the
majority’s reiteration of it does not add a new limitation to replace the personal
benefit rule. It is, moreover, no significant limitation at all. The majority
12 Gansman notes that “the SEC has recognized a number of situations . . . in
which a tippee, but not the tipper, may be liable for insider trading on the theory
that the tippee owed a duty of trust or confidence to the tipper and the tipper
conveyed confidential information without intending to have it used for
securities trading purposes.” 657 F.3d at 92. But these are not true “tipping”
cases, inasmuch as someone who legally entrusts information to another person is
not providing a “tip” in any meaningful sense.
20
acknowledges that “many cases may rely on circumstantial evidence of intent.”
Slip Op. at 32. That means, even in a criminal case, that the government needs to
show no objective facts to demonstrate a tipper’s expectation that a tippee would
benefit from the information. And, as noted above, civil cases do not even
require that the tipper actually thought the tippee would trade, but instead just
that the tipper should have known that the information would prompt a trade or a
further tip.13 In short, the independent requirement that the government show
circumstantial evidence that a defendant knew, or should have known, that a
recipient would trade on information, or otherwise benefit from it, does not
rescue the majority’s weakening of the personal benefit rule.
The majority also notes that defendants convicted under the greatly‐
expanded “gift” rule will have the right to “appellate review of the sufficiency of
the evidence of personal benefit.” Slip Op. at 33. In other words, persons dealing
with inside information should not worry that they may be ensnared by
See Obus, 693 F.3d at 287 (observing that “a tipper cannot avoid liability merely
13
by demonstrating that he did not know to a certainty that the person to whom he
gave the information would trade on it,” and noting that “recklessness” is
“actionable” in civil settings); 291 (concluding, in civil proceeding where a tip
was a gift to a friend, that the “evidence easily supports a finding of knowing or
reckless tipping to someone who likely would use the information to trade in
securities”).
21
ambiguous circumstances, because after they are convicted, they will enjoy a
review proceeding where they “carry a heavy burden” to show that, “drawing
all inferences in favor of the prosecution and viewing the evidence in the light
most favorable to the prosecution,” no rational trier of fact could have found that
a disclosure was a gift. See United States v. Santos, 449 F.3d 93, 102 (2d Cir. 2006)
(internal quotation marks omitted). It is unclear why the majority believes that
the cure for convictions that may rely entirely on circumstantial evidence is a
proceeding where that same circumstantial evidence is evaluated in the light
least favorable to the defendant.14
The majority’s rule is inconsistent with Newman’s “meaningfully close
personal relationship” requirement, which the majority explicitly overrules. The
majority claims that Salman “cast[] doubt” on the rule. Slip Op. at 23. The
majority takes this view even though Salman explicitly abrogated Newman only in
a single, narrower respect; even though Salman had no occasion to discuss
friendships since the case was about brothers; and even though Salman
The majority also notes that “not all insider trading cases rely on circumstantial
14
evidence.” Slip Op. at 33. That observation will be cold comfort for defendants
convicted based on circumstantial evidence alone. Rules of criminal liability
should not rely on our hope that, in some cases, the government will present far
more evidence than is required. We should instead be concerned with the
minimum that the government must show to convict a criminal defendant.
22
emphatically declared the Supreme Court’s intention to adhere to Dirks, which
was the basis of Newman. The source of the majority’s doubt is mysterious.
The majority also makes a bolder claim: that the limitation described in
Dirks—that a personal benefit may only be inferred from a gift when the gift is
between friends or relatives—is no longer good law. Slip Op. at 26‐27 (noting
that “[i]f the insider discloses inside information . . . and the disclosure resembles
trading by the insider followed by a gift of the profits to the recipient, he
personally benefits,” and suggesting that the rule is “not limited by the
relationships of the parties,” and that the rule may apply even without “a
personal relationship of any kind, let alone a friendship” between tipper and
tippee (internal quotation marks and brackets omitted)). The majority reaches
this conclusion even though, as noted, Salman spoke only of gifts raising the
inference of a personal benefit when “a tipper gives inside information to a
trading relative or friend,” 137 S. Ct. at 428 (emphasis added), and even though
Salman specifically noted the government’s view that all gifts (no matter to
whom) count as benefits, but did not adopt that view.
23
i. The Majority’s Reading of Salman and Dirks
The majority seizes on several features of Salman to contend that the
decision called into question the “meaningfully close personal relationship”
requirement of Newman and the “friends and relatives” limitation of Dirks. First,
the majority quotes Salman as saying that “‘insiders [are] forbidden’ both ‘from
personally using undisclosed corporate information to their advantage’ and from
‘giv[ing] such information to an outsider for the same improper purpose of
exploiting the information for their personal gain,’” and suggests that this
statement is not limited to gifts between relatives and friends. Slip Op. at 25, 27.
This quotation, however, comes from a parenthetical in Salman summarizing
Dirks, which, when read in context, does not suggest that liability can be
sustained by gifts other than those to relatives and friends:
Maher effectively achieved the same result by disclosing the information to
Michael, [his brother,] and allowing him to trade on it. Dirks
appropriately prohibits that approach, as well. Cf. 463 U.S., at 659
(holding that “insiders [are] forbidden” both “from personally using
undisclosed corporate information to their advantage” and from
“giv[ing] such information to an outsider for the same improper
purpose of exploiting the information for their personal gain”). Dirks
specifies that when a tipper gives inside information to “a trading relative
or friend,” the jury can infer that the tipper meant to provide the
equivalent of a cash gift.
24
137 S. Ct. at 428 (emphasis added) (brackets in original). The majority quotes the
Supreme Court’s parenthetical, leaving unstated its previous sentences applying
the theory to a family member, and its next sentence summarizing Dirks as
permitting an inference of benefit when the insider gives a gift to “a trading
relative or friend.” Given this language, the Supreme Court cannot have meant,
by writing the above‐quoted passage, to rule on whether gifts permit the
inference of a benefit when they are given to persons other than trading relatives
or friends.
Although the Supreme Court repeatedly stated in Dirks and Salman that a
personal benefit may be inferred from an insider’s “gift . . . to a trading relative
or friend,” the majority believes those statements were not meant “to limit” the
“gift” theory to gifts between relatives or friends. Slip Op. at 21. But the majority
does not explain why, if the Supreme Court meant that any gift could create the
inference of a benefit, it would have repeatedly referred only to gifts among
friends and relatives. Such an intention would be particularly puzzling given the
sheer number of times in Salman the Supreme Court listed this qualification,
including the following:
A tipper breaches such a fiduciary duty, we held [in Dirks], when the
tipper discloses the inside information for a personal benefit. And,
25
we went on to say, a jury can infer a personal benefit . . . where the
tipper receives something of value in exchange for the tip or “makes
a gift of confidential information to a trading relative or friend.”
. . .
In particular, we held [in Dirks] that “the elements of fiduciary duty
and exploitation of nonpublic information also exist when an insider
makes a gift of confidential information to a trading relative or friend.”
. . .
Dirks makes clear that a tipper breaches a fiduciary duty by making
a gift of confidential information to “a trading relative,” and that rule
is sufficient to resolve the case at hand.
. . .
Dirks specifies that when a tipper gives inside information to “a
trading relative or friend,” the jury can infer that the tipper meant to
provide the equivalent of a cash gift.
137 S. Ct. at 423, 427, 428 (emphasis added). In the majority’s view, the Supreme
Court’s references to “a trading relative or friend,” stated in Dirks and repeated
nearly a half‐dozen times in Salman, are just superfluous.
The majority additionally notes that the Supreme Court “applied” the gift
theory in Dirks, where there was no “personal relationship of any kind” between
Dirks and the insiders, and suggests that Dirks “implicitly” agreed with the
position that the gift theory is “not limited by the relationships of the parties.”
Slip Op. at 26‐27. It is true that, in Dirks, the Supreme Court stated that the
insiders’ “purpose [was not] to make a gift of valuable information to Dirks.”
26
Dirks, 463 U.S. at 667. But the Supreme Court did not say that, had the insiders
given a gift, it would have been sufficient to support liability. The intent to give a
gift is a necessary but not sufficient condition for liability under the gift theory;
having determined that it was absent, the Supreme Court did not need to discuss
the parties’ relationship.
ii. The Majority’s Argument Based on the Theory that Gifts
Resemble an Insider’s Trade Followed by a Gift of Profits
The majority also emphasizes the following passage in Salman:
In particular, [in Dirks,] we held that “the elements of fiduciary duty
and exploitation of nonpublic information . . . exist when an insider
makes a gift of confidential information to a trading relative or friend.” In
such cases, “the tip and trade resemble trading by the insider
followed by a gift of the profits to the recipient.”
137 S. Ct. at 427 (citations and brackets omitted; emphasis in original). Omitting
the Supreme Court’s italicized statement that the rule applies to gifts between
relatives and friends, the majority focuses only on the latter sentence: “In such
cases, the tip and trade resemble trading by the insider followed by a gift of the
profits to the recipient.” Salman, 137 S. Ct. at 427; see Slip Op. at 24, see also id. at
26. The majority states that this sentence means that “the personal benefit one
receives from giving a gift of inside information is not the friendship or loyalty or
gratitude of the recipient of the gift; it is the imputed pecuniary benefit of having
27
effectively profited from the trade oneself and given the proceeds as a cash gift.”
Slip Op. at 31‐32 (emphasis in original). Accordingly, the majority believes a
benefit may be imputed to a gift‐giver even when the recipient is not a friend or
relative. The only question should be whether “the tip and trade resemble trading
by the insider followed by a gift of the profits to the recipient.” Slip Op. at 24
(brackets omitted); see also id. at 26.
There are several problems with this line of argument. First, the majority
does not consider that there may be two limitations on whether a particular
disclosure confers a “personal benefit,” and that each limitation need not spring
from the same reasoning. It is perfectly reasonable to say that gifts can, in
principle, confer a personal benefit to the giver, but that most gifts actually confer
little or no such benefit. And a main area in which it is reasonable to see gifts as
creating a benefit for the gift‐giver is when the gifts go to family or close friends.
Gifts to family or friends are more likely to confer a benefit upon the gift‐
giver because, as noted above, “to help a close family member [or friend] is like
helping yourself.” Transcript of Oral Argument at 8, Salman v. United States, 137
S. Ct. 420 (2016) (No. 15‐628). This is true for several reasons. First, a person
often benefits directly when making significant gifts to friends and relatives. A
28
family member who receives a new car or apartment (or even a book) might
share it with the gift‐giver; similarly, providing a stock tip to a relative may
obviate the need to give the type of loan sometimes expected of close kin. A gift‐
giver may also benefit because of his or her genuine enjoyment of the recipient’s
happiness. And last, the gift‐giver may benefit from improved relations with
friends or relatives. When gifts pass to relatives or friends, there is thus far
greater reason than usual to believe that the gift‐giver has benefitted personally,
as the same benefits rarely accompany a gift to a casual acquaintance or a
stranger.15
Moreover, permitting a personal benefit to be inferred only from those
gifts between relatives and friends avoids much of the potential for liability
based on innocent conduct that might flow from a broader “gift” rule. As noted
above, insiders typically have no legitimate commercial reason to share business
secrets with friends and family. An inference that information passed by the
15 The majority counters that these benefits do not relate to the Supreme Court’s
statement that “the tip and trade resemble trading by the insider followed by a
gift of the profits to the recipient,” Salman, 137 S. Ct. at 427. See Slip Op. 26 n.7.
But the majority’s criticism ignores the Supreme Court’s “friends and relatives”
limitation on the “gift” theory, which must also be given significance. The
particular benefits explained above show why gifts to relatives and friends are
distinctive, and why such gifts occupy a limited area within the universe of gifts
where a benefit to the gift‐giver may typically be presumed.
29
insider to a friend or relative was intended as a gift, rather than for business
reasons, is thus far more defensible than a similar inference based on a gift
between strangers or colleagues.
In demanding that the “gift” rule be justified by a single line of reasoning,
the majority ignores the fact that logically independent limitations often cabin
legal rules that would otherwise be unworkable because they extend too far. For
example, in tort law, the doctrine that persons are liable for harms brought about
by their actions is limited by what consequences they might reasonably have
foreseen, and other rules of proximate causation. Palsgraf v. Long Island R. R. Co.,
248 N.Y. 339 (1928). In contract law, the principle that the parties’ agreement at
the time of the contract sets their duties is limited by a freestanding rule of
impracticability. See Restatement (Second) of Contracts § 261 (Am. Law Inst.
1981). In the law of insider trading, the Supreme Court appears to have made a
similar rule. It stated the principle that gifts may confer a benefit to the gift‐giver
because of their similarity to trading and gifting the profits, but limited that
rule’s reach to situations where the recipient is a relative or friend. And the
limitation to friends and relatives prevents the gift rule from extending much too
30
far: if interpreted broadly, the term “gift” could cover nearly any disclosure, and
thus eliminate the personal benefit rule entirely.
Finally, even if tension exists between the principles that (1) a gift of
information may provide an insider a benefit, and (2) that such a benefit may be
inferred only from gifts to family and friends, such tension has existed since
Dirks, where both of these statements appear. Dirks, 463 U.S. at 664. Our opinion
in Newman chose between the two (arguably) competing rationales, and
emphatically stated that we would infer a benefit only where gifts are exchanged
within meaningfully close personal relationships. 773 F.3d at 452. Nothing in
Salman breaks new ground on the point. Thus, there is nothing new that suggests
we should reverse Newman’s decision without a hearing en banc.
iii. The Majority’s Theory was Not Adopted in Salman
I note, also, that the majority’s opinion exactly mirrors the government’s
view pressed in Salman: that “a gift of confidential information to anyone, not
just a ‘trading relative or friend,’ is enough to prove securities fraud.” Salman,
137 S. Ct. at 426. The Supreme Court, however, did not adopt that view. Id. at
427. It is curious indeed that the majority would understand Salman to require us
to take a position that the Supreme Court explicitly considered but did not adopt.
31
Accordingly, I would hold (1) that Salman does not overrule Newman’s
“meaningfully close personal relationship” requirement, and (2) that Salman does
not overrule the limitation described in both Dirks and in Salman itself—that an
inference of personal benefit may be based on an insider’s gift to relatives or
friends, but not a gift to someone else.
2. Martoma’s Jury Charge Was Plainly Erroneous, and the Error was not
Harmless
Having determined that Newman is still applicable, I next consider, under
the standard articulated in Newman, whether Martoma’s jury instruction was
plainly erroneous, and, if so, whether the error was harmless. We review for
plain error because Martoma did not object to the jury instruction on grounds
related to the rule in Newman. See Fed. R. Crim. P. 52 (“A plain error that affects
substantial rights may be considered even though it was not brought to the
court’s attention.”). His slip‐up was, of course, eminently understandable, given
that the rule in Newman did not yet exist at the time of Martoma’s trial.
The plain‐error standard requires “that (1) there is an error; (2) the error is
clear or obvious, rather than subject to reasonable dispute; (3) the error affected
[Martoma’s] substantial rights . . . and (4) the error seriously affects the fairness,
32
integrity[,] or public reputation of judicial proceedings.” United States v. Prado,
815 F.3d 93, 100 (2d Cir. 2016).
a. The “Modified Plain Error Rule” Applies
I would apply our “modified plain error” rule in these circumstances. See
United States v. Viola, 35 F.3d 37, 41‐43 (2d Cir. 1994). In the past, we have held
that “[w]here . . . the source of an alleged jury instruction error is a supervening
decision, we employ a ‘modified plain‐error rule, under which the government,
not the defendant, bears the burden to demonstrate that the error was
harmless.’” United States v. Mahaffy, 693 F.3d 113, 136 (2d Cir. 2012) (quoting
United States v. Bahel, 662 F.3d 610, 634 (2d Cir. 2011)).
A number of panels of this Court have suggested, without deciding, that
our “modified plain error rule” may not have “survived the Supreme Court’s
decision in Johnson v. United States, 520 U.S. 461 (1997).” Bahel, 662 F.3d at 634; see
also United States v. Boyland, No. 15‐3118, 2017 WL 2918840, at *7 (2d Cir. July 10,
2017) (“[W]e have acknowledged doubt as to the continued viability of the
modified plain error test but have not had the need to address it.”); United States
v. Botti, 711 F.3d 299, 308‐09 (2d Cir. 2013) (discussing whether Johnson overruled
the modified plain error test).
33
We should adhere to the modified plain error rule when considering a
supervening legal change for two reasons. First, we are bound by post‐Johnson
precedents of our Court that apply the rule. The panel in Mahaffy recited the
modified plain error rule in 2012—over a decade after Johnson—and stated that
the rule applied when “the source of an alleged jury instruction error is a
supervening decision.” 693 F.3d at 135‐36. The panel then relied on the rule in
vacating a conviction. Id. The panel in United States v. Monteleone also relied on
the rule, and that case, too, was decided after Johnson. 257 F.3d 210, 223 (2d Cir.
2001).
Second, neither Johnson nor its reasoning challenges our modified plain
error rule. In Johnson, the Supreme Court considered an appeal of a perjury
conviction. Johnson, 520 U.S. at 463. During Johnson’s trial, the district court ruled
that the element of materiality, which was required to sustain a conviction under
the perjury statute, was a question for the judge and not the jury. Id. at 464. That
decision was “in accordance with then‐extant Circuit precedent.” Id. But after
Johnson’s conviction, the Supreme Court ruled in United States v. Gaudin, 515 U.S.
506 (1995), that materiality in perjury prosecutions was a question for the jury,
not the judge. Johnson, 520 U.S. at 464.
34
Johnson did not object at trial to the district judge’s ruling that materiality
was a question for the judge. She argued on appeal, however, that she should be
excused from showing that the district court’s decision was plainly erroneous
instead of merely erroneous, because the error was “‘structural,’ and so . . .
outside [Federal Rule of Criminal Procedure] 52(b) altogether.” Id. at 466. The
Supreme Court rejected this argument, explaining that “the seriousness of the
error claimed does not remove consideration of it from the ambit of the Federal
Rules of Criminal Procedure.” Id. The Supreme Court noted that Rule 52(b),
which sets out the standard for plain error, “by its terms governs direct appeals
from judgments of conviction in the federal system, and therefore governs this
case.” Id. The Supreme Court also “cautioned against any unwarranted
expansion of Rule 52(b),” discouraging especially “the creation out of whole
cloth of an exception to [Rule 52(b)], an exception which we have no authority to
make.” Id.
Even with its strong language, Johnson does not affect our modified plain
error rule. Johnson rejected an attempt to ignore the language of Rule 52(b), which
reads as follows:
(b) Plain Error. A plain error that affects substantial rights may be
considered even though it was not brought to the court’s attention.
35
Fed. R. Crim. P. 52. The defendant in Johnson asked the Supreme Court to go
beyond the language of Rule 52(b) by holding that she was not required to show
“plain” error, as the rule requires, to gain review of a right “not brought to the
court’s attention.” But the modified plain error rule in our Circuit does not lessen
the degree of error a defendant must show to gain review. Instead, the modified
plain error rule allocates the burden for considering whether a plain error
“affects substantial rights.” Rule 52(b) says nothing about that burden. Nor did
Johnson: the Supreme Court explicitly declined to decide whether the error
affected the defendant’s substantial rights, given that the government would
have prevailed for other reasons. 520 U.S. at 469.
Consequently, I would apply the modified plain error rule in this
context.16
b. Martoma’s Jury Instruction was Plainly Erroneous
The jury instructions given at Martoma’s trial permitted conviction if the
jury found that the tippers “gave the information to Mr. Martoma . . . as a gift
The panel in United States v. Botti wrote that Johnson raised questions for the
16
modified plain error rule because, in Johnson, “the Court applied plain error
review without mentioning modified plain error review,” and “[t]he Court never
placed the burden of proof on the Government.” 711 F.3d at 309. But there is no
reason to think that the defendant in Johnson argued for such a rule. It is thus
unsurprising that the Supreme Court did not apply it.
36
with the goal of . . . developing a personal friendship.” Tr. at 3191. As the
majority opinion appears to acknowledge, see Slip Op. at 35, to say that someone
gave a gift “with the goal of . . . developing a personal friendship” means that a
personal friendship does not yet exist. The instruction thus allows the
government to convict based on a gift between persons who are not friends, but
might become friends later.
Newman held that a personal benefit cannot be inferred from gift‐giving
“in the absence of proof of a meaningfully close personal relationship.” 773 F.3d
at 452. Salman did not abrogate that rule. And whatever counts as a
“meaningfully close” relationship, a non‐existent friendship clearly is not one.
The instruction is thus plainly erroneous under Newman.
c. The Error was Not Harmless
The government bears the burden to show that the error was harmless,
and “[a]n error is harmless in this context if it is clear beyond a reasonable doubt
that a rational jury would have found the defendant guilty absent the error.”
Mahaffy, 693 F.3d at 136 (internal quotation marks omitted).
The government argues that the error was harmless because evidence at
trial demonstrated a personal benefit to Gilman, the source of the information, in
37
two ways. The government argues, first, that the information was a gift within a
friendship between Gilman and Martoma, and second, that Gilman received a
pecuniary benefit in return for passing Martoma the information.17
Although a jury was entitled to find at Martoma’s trial that either the
government’s pecuniary or friendship argument satisfied this test, the
government has not carried its “burden to demonstrate that the error was
harmless.” Mahaffy, 693 F.3d at 136.
First, it is not clear that Martoma and Gilman had the kind of meaningfully
close personal relationship required by Newman. A jury could have seen their
relationship that way. Gilman said that it “was touching” that Martoma had
17 The government also argues that Ross received pecuniary benefits for speaking
with Martoma. But the government states in its briefs that Martoma received
from Ross the information he had already heard from Gilman. Gov’t’s Jan. 6,
2017 Br. at 8 n.5 (“Ross gave Martoma . . . . the same information that Gilman
provided to Martoma, and on which Martoma traded; the only difference was
that Gilman gave the information to Martoma first . . . .”). Although Martoma
received additional confidential information from Ross at earlier times, the
government does not argue that the earlier information was material, or that it
played a role in Martoma’s trading. If Martoma’s receipt of the material
information from Gilman was legal, and it served as the basis of his trades, then
it would not matter that he heard the same information from Ross later.
The government suggests that the information from Ross “caused more
illegal trades . . . when Ross’s information confirmed what Gilman had already
supplied.” Appellee’s Br. at 21. But the government provides no explanation of
why a jury could not have believed that Martoma traded because of what Gilman
had already told him instead of what he learned from Ross.
38
spent time trying to find him on one occasion, Tr. at 1240, and testified that
Martoma “wanted to be friends” and “seemed to want to be closer than I thought
a client should be to a consultant,” Tr. at 1236. Gilman also stated that he thought
he and Martoma “were friends” eventually. Tr. at 1488. But jurors could also see
an ordinary, if pleasant, transactional relationship between a hedge fund trader
and a medical expert. For example, the government asked at trial whether
Gilman “enjoy[ed] consulting with [Martoma] more than other hedge fund
clients,” and Gilman responded, “I enjoyed other consultations as well, but I
enjoyed speaking with him, yes.” Tr. at 1236. Gilman also stated that Martoma
told him many details from his (Martoma’s) life, but when the government asked
Gilman, “What did you talk to him about in your own life?” Gilman responded,
“Not much.” Tr. at 1238.
Moreover, at various stages in this case, the government has expressly
denied that Martoma and Gilman had any kind of meaningfully close personal
relationship. At the first oral argument in this case, the government stated the
following:
Judge Chin: Is it possible that the jury convicted because they
found that Dr. Gilman provided the information
to develop or maintain a friendship?
39
Government: I suggest that that is not possible, your honor. And the
reason is because any friendship . . . that Dr. Gilman
may have had with Mr. Martoma, and I think the
defense suggests that’s very small, was part of, and
inextricably intertwined with, their pecuniary
relationship.
Recording of Oral Argument at 26:27‐26:58, United States v. Martoma, No. 14‐3599
(2d Cir. October 28, 2015) (emphasis added). The government also described the
relationship as “clearly a commercial, pecuniary relationship,” given that Gilman
was a “doctor[] who never spoke to Martoma before he started paying . . . and
never spoke again once he stopped.” Recording of Oral Argument at 34:18‐34:27,
United States v. Martoma, No. 14‐3599 (2d Cir. October 28, 2015). In light of the
government’s own view of the issue, it would seem incorrect to hold that a
reasonable jury could not have thought the same: that Martoma and Gilman did
not share a meaningfully close personal relationship.
Although it is a much closer question, I would also hold that the
government has failed to show that a rational jury must find that Gilman
received a pecuniary benefit for disclosing the inside information on which
Martoma traded. I do not disagree with the majority that, in the context of a
“relationship of quid pro quo,” Newman, 773 F.3d at 452, a jury may infer that an
insider received a personal benefit from revealing information. But the jury is not
40
required to find as much, and it is not clear that, in this case, a reasonable fact‐
finder could not have thought otherwise.
At trial, Gilman testified that he did not bill for the sessions in July of 2008
during which he gave Martoma the information leading to Martoma’s trades. Tr.
at 1918. Whether Gilman was paid for his disclosures in July of 2008 thus relates
to whether one believes either that SAC paid Gilman earlier in anticipation of the
release of the July 2008 information or that Gilman released the information in
order that he might be paid by SAC in the future.
The government cites no clear evidence that SAC paid Gilman either
before or after July 2008 in return for revealing the information in question,
rather than simply paying Gilman for his other consultations with Martoma. And
the evidence at trial offered serious reason to doubt that Gilman took illegal
actions because he wanted, as a general matter, to keep payments flowing from
SAC. Testimony showed that Gilman was in high demand as an expert. From
2006 to 2010, Gilman earned at least $300,000 per year in consulting fees. Tr. at
1555‐56, 1560. This income resulted from services Gilman provided to more than
a dozen pharmaceutical and financial companies. Tr. at 1552‐54. Gilman testified
that, combining his consulting with his position as a professor at the University
41
of Michigan, he “work[ed] about 80 hours a week on average.” Tr. at 1560.
Gilman also testified that he did not recall intentionally revealing confidential
information to any of his other clients. Tr. at 1628‐29. This suggests that Gilman
had no shortage of well‐paid consulting work from companies other than SAC,
and did not need to disclose confidential information to receive significant
payment from those other companies. It is unclear, given this background, why
Gilman would have broken the law to keep SAC as a customer.
The government also conceded at oral argument in this appeal that no one
ever asked Gilman a direct question as to whether he told Martoma inside
information in exchange for a monetary benefit. In the absence of such testimony,
and particularly in light of Gilman’s abundant consulting opportunities, a
reasonable jury need not have concluded that Gilman released the information in
anticipation of payment. Instead, a jury could have believed SAC’s payments
were for information Gilman told Martoma during other sessions—information
that was either public, non‐material, or did not prompt a trade, and thus was not
a violation of insider‐trading laws. See, e.g., Tr. at 1231 (noting that Gilman began
speaking with Martoma in January 2006); 1242 (Gilman’s testimony that he did
not reveal confidential information until “the fall to winter of 2006‐7”). I would
42
not rule, particularly absent direct testimony on the point, that whenever inside
information is revealed within a paid consulting relationship where other,
legitimate service is rendered, a fact‐finder must infer that the insider was paid
to breach his duties.18
* * *
I note, in closing, that securities law is a field in which legal and ethical
obligations are not coterminous. Leading scholars emphasize that insider‐trading
rules are under‐inclusive in reaching conduct that disserves the public. See, e.g.,
Jesse M. Fried, Insider Trading via the Corporation, 162 U. Pa. L. Rev. 801, 808‐10,
813‐14, 816‐20, 826‐34 (2014) (emphasizing that the law does not bar trades based
on non‐material information, and describing potential and actual harm to the
public because of individual and corporate trades based on inside information).
This is not surprising, as the Supreme Court has noted, given that securities
18 The plain‐error rule also requires us to determine that “the error seriously
affects the fairness, integrity or public reputation of judicial proceedings.” Prado,
815 F.3d at 100. The evidence in this case is not so strong that the change in the
law was irrelevant to whether Martoma would have been convicted. And the
fairness of proceedings is undermined when a defendant is convicted based on
evidence that might not have persuaded a jury under rules that emerged soon
after the trial ended.
43
regulation is built on statutes and that its principles apply broadly to many
transactions in the marketplace:
We do not suggest that knowingly trading on inside information is
ever socially desirable or even that it is devoid of moral
considerations. . . . Depending on the circumstances, and even
where permitted by law, one’s trading on material nonpublic
information is behavior that may fall below ethical standards of
conduct. But in a statutory area of the law such as securities
regulation, where legal principles of general application must be
applied, there may be significant distinctions between actual legal
obligations and ethical ideals.
Dirks, 463 U.S. at 661 n.21 (internal quotation marks and citation omitted).
Adhering to the Supreme Court’s precedent may challenge us when it leaves
unethical conduct unpunished. But there is great wisdom in the Supreme Court’s
limitations on broad rules, particularly when those rules might otherwise allow
punishment of the absentminded in addition to persons with corrupt intentions.
Today, however, the majority severely damages the limitation provided by the
personal benefit rule, and casts aside Circuit precedent and Supreme Court
rulings to do so.
For the reasons stated, I respectfully dissent.
44