To assess the criminal case against @SenatorBurr, we need to recognize a causation problem and a possible contradition between an initial moral wrong and the new alleged crime:
The problem of non-public information vs. obvious public information about the Coronavirus risk.
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The problem of non-public information vs. obvious public information about the Coronavirus risk.
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2/ Condemning Burr was appropriate yesterday for 2 seemingly contradictory reasons:
A) It was already outrageous that Burr secretly sold off assets while publicly dismissed the *obvious* risk.
B) The new outrage with a crim twist was b/c he also had *non-public* briefings.
A) It was already outrageous that Burr secretly sold off assets while publicly dismissed the *obvious* risk.
B) The new outrage with a crim twist was b/c he also had *non-public* briefings.
3/ The inconsistency - or at least a causation problem - as that the moral case against Burr is so strong because of how clear and public the risk already was.
That, in turn, makes the legal caustion case based on a non-public briefing more challenging.
That, in turn, makes the legal caustion case based on a non-public briefing more challenging.
4/
A prosecutor would allege Burr violated the STOCK Act by using non-public information (daily briefings).
One of Burr's defenses will be that he relied on the same obvious public information...
which was the original basis for our moral outrage.
Is there a causation standard?
A prosecutor would allege Burr violated the STOCK Act by using non-public information (daily briefings).
One of Burr's defenses will be that he relied on the same obvious public information...
which was the original basis for our moral outrage.
Is there a causation standard?
5/ This statute is the basis for the regulation specifying insider trading.
Unclear use of "use," but no causation reference:
"To use or employ, in connection with the purchase or sale [of securities] any manipulative or deceptive device or contrivance"
law.cornell.edu/uscode/text/15…
Unclear use of "use," but no causation reference:
"To use or employ, in connection with the purchase or sale [of securities] any manipulative or deceptive device or contrivance"
law.cornell.edu/uscode/text/15…
6/ The reg gives a broad interpretation based on awareness:
"a purchase or sale of a security is 'on the basis of' material nonpublic information...if the person making the purchase or sale was aware of the material nonpublic information when [he/she] made the purchase or sale.
"a purchase or sale of a security is 'on the basis of' material nonpublic information...if the person making the purchase or sale was aware of the material nonpublic information when [he/she] made the purchase or sale.
7/ Did the general news coverage *casuse* Burr to make the sale?
The reg says that doesn't matter. That's hard to prove. Mere awareness and possession of the inside info counts under the reg for a criminal conviction.
The reg says that doesn't matter. That's hard to prove. Mere awareness and possession of the inside info counts under the reg for a criminal conviction.
8/ But my concern is that judges might say that this regulation too broadly stretches the statute. The statute says "to use and employ," which is a higher threshold than the reg's low requirement of awareness.
9/ So even if the regulation is broad enough to cover awarenes and to set aside thorny causation problems, the statute's seemingly higher standard might mean the regulation is unreasonable.
Bottom line: prosecutors will need some causal timeline, even if it is a bit fuzzy.
Bottom line: prosecutors will need some causal timeline, even if it is a bit fuzzy.
10/ Gorsuch is looking for a case to scale back Chevron deference to agencies. (On that question, I agree with him).
If a prosecutor relied only on “awareness” from regs, and not “use,” he/she would risk getting overturned.
Make the case on “use.”
It’s a low threshold anyway.
If a prosecutor relied only on “awareness” from regs, and not “use,” he/she would risk getting overturned.
Make the case on “use.”
It’s a low threshold anyway.
