Opinion ID: 3036135
Heading Depth: 3
Heading Rank: 1

Heading: Insider Trading Allegations Against Bhagat

Text: The government’s theory of prosecution was that Bhagat read the CEO’s Sunday night e-mail prior to purchasing Nvidia stock. To support this theory, the government introduced evidence that Bhagat arrived at work on Monday midmorning, and that all of the company-wide e-mails were on his computer. The government also introduced evidence that roughly twenty minutes after the final company-wide e-mail was sent, Bhagat purchased a large quantity of Nvidia stock — his largest purchase in nearly three years. There was no direct evidence that Bhagat read any of the e-mail prior to executing his purchase. Instead, the government asked the jury to infer Bhagat’s knowledge by virtue of the fact that he had probably read the original e-mail upon entering the office as a “normal, reasonable person” would. Evidence was also presented that rumors about Nvidia and the X-Box contract began leaking in the industry the day after Bhagat purchased his stock, and the price of the stock rose sharply. Three days later, the news was made public and the price of Nvidia stock skyrocketed. Another four days later, Bhagat sold his stock, reaping a substantial profit. Bhagat offered a different interpretation of the facts. He testified to conducting personal business for several hours upon reaching the office, and reading the company-wide e- mails at 1:00 p.m. — roughly forty minutes after he purchased the stock. Upon learning of the trading blackout, Bhagat attempted to cancel his trade by contacting his broker, who advised him that it was too late. However, Bhagat could not remember which branch of the trading company he contacted, nor the name, or even the gender, of the representative to whom he spoke. Bhagat made no further attempt to divest himself of the stock. He concluded that to do so would further UNITED STATES v. BHAGAT 1421 violate the trading blackout, although he sought no guidance from any Nvidia executive regarding his failure to cancel his pending trade. To rebut the government’s contention that his purchase of Nvidia stock was motivated by insider information, Bhagat testified that he purchased the stock after considering the general strength of the stock, and with the expectation that the company would win the X-Box contract. Bhagat introduced evidence that he was a consistent purchaser of technologybased stock. To counter the inference that he read the X-Box e-mail before executing his trades, Bhagat introduced evidence that, in a one-month period, he often did not send e- mails until after 1:00 p.m.