Court Opinion

ID: 6942428
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:09:40.419712+00
Date Added: 2024-06-11T16:07:45.319528
License: Public Domain

MESKILL, Circuit Judge,
concurring in part and dissenting in part:
I concur in most of the majority’s opinion. However, I cannot agree that Cusimano’s trades on November 9 and 12 were criminal acts that should have been included in calculating his offense and fine level.
A person violates Rule 10b-5 when he or she “misappropriates material nonpublic information in breach of a fiduciary duty or similar relationship of trust and confidence and uses that information in a securities transaction.” United States v. Teicher, 987 F.2d 112, 119 (2d Cir.1993) (quoting United States v. Chestman, 947 F.2d 551, 556 (2d Cir.) (in banc), cert. denied, 503 U.S. 1004, 112 S.Ct. 1759, 118 L.Ed.2d 422 (1992)), cert. *669denied, 510 U.S. 976, 114 S.Ct. 467, 126 L.Ed.2d 419 (1993). Persons who trade while in knowing possession of such information similarly violate Rule 10b-5.
It follows that if none of the information that is allegedly “inside” information meets all of the elements (namely, material and nonpublie), there can be no violation. The flaw in the majority’s reasoning on the November 9 and 12 trades, is its attribution of materiality to Brumfield’s predictions that were based on false or thoroughly inconclusive information. Thus, I believe, that even though some of the information relayed by Brumfield to Cusimano was material, and some was non-public, none was both. ' Therefore, I respectfully dissent as to those trades.
The majority’s first theory is that Brum-field added to the information already available in the Wall Street Journal. However, the extra information — that the transaction definitely was going to happen and that it was going to be an acquisition — did not exist at the time Brumfield tipped Cusimano. In other words, Brumfield could not state correctly that the acquisition attempt was going to happen at all, because according to Blaine Davis, the head of AT & T’s Strategic Development group, the only government witness on this event, AT & T had not yet made that decision. The exploratory steps taken by AT & T prior to deciding whether to make a bid for NCR were just that, exploratory business inquiries before making an important business decision.
The majority says: “We do not today hold that any predictions made by an insider can constitute the basis for insider trading simply because a tippee relies upon them and their source, and they subsequently come true.” I fear that, by implication, they may have done just that.
I would vacate the judgment of conviction as to Cusimano’s sentence and remand for resentencing.