A federal jury in the District of Massachusetts recently convicted Eric McPhail of securities fraud — one of the first criminal insider trading convictions since the US Court of Appeals for the Second Circuit’s decision in United States v. Newman.

The allegations arose out of information Mr. McPhail received from a close friend— an executive at American Superconductor Corporation (AMSC) — who was a member of the same country club and went on golf and other trips together. This information allegedly included nonpublic information about AMSC’s business activities. According to the government, Mr. McPhail then gave this information to other friends of his, who made trades based on the information and earned more than $500,000. Mr. McPhail is alleged to have tipped those friends in return for golf tournament fees and meals, and to have told one of them after a tip that he “like[s] Pinot Noir and love[s] steak…looking forward to getting paid back.”
Continue Reading Massachusetts Federal Jury Convicts Amateur Golfer for Insider Trading

Federal Bureau of Investigation (FBI) wiretapping played an important role in the wide-ranging insider trading investigation and subsequent trials of Galleon Group LLC principals and traders. During his criminal prosecution, former Galleon trader, Craig Drimal, unsuccessfully moved to suppress evidence obtained via an authorized wiretap of his cell phone because of a failure to minimize interception of calls with his wife. His wife, Arlene Villamia Drimal, is now pursuing civil claims against FBI agents for wiretapping her personal telephone conversations with her husband, but her claims have thus far been unsuccessful. On May, 15, the US Court of Appeals for the Second Circuit dismissed Ms. Drimal’s complaint without prejudice to repleading, finding that her conclusory pleading failed to state a claim under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, which requires the government to “minimize the interception of communications not otherwise subject to interception.” The Second Circuit also found fault with the lower court’s assessment of the agents’ qualified immunity defense.
Continue Reading Second Circuit Dismisses Suit Over FBI’s Wiretapping of Marital Conversations in Securities Fraud Investigation