The 2nd U.S. Circuit Court of Appeals in New York in a brief order
granted the Whitman Capital LLC founder bail, allowing him to be
released from the Sacramento, California, halfway house where he was
serving the remaining four months of his sentence.
The three-judge panel's decision gave no explanation. But it
followed a hearing earlier Tuesday in which some judges suggested
Whitman's conviction could no longer stand following a major
appellate ruling that limited the scope of insider trading laws.
Whitman lost a prior appeal in February 2014. But Circuit Judge
Barrington Parker said if that case had been heard after the
December 2014 ruling, "this court would have tossed the conviction."
Parker questioned why U.S. Attorney Preet Bharara's office opposed
allowing Whitman's release amid an appeal that would otherwise not
be heard until after his sentence finishes.
"It sounds sadistic to me," Parker said.
A spokesman for Bharara declined to comment. Whitman's lawyers did
not immediately respond to requests for comment.
The decision came amid continuing litigation over what constitutes
insider trading, an issue the U.S. Supreme Court last month agreed
Whitman brought his latest challenge after the 2nd Circuit ruled
that prosecutors must prove that a trader knew a tip's source
received a benefit in exchange.
The court, in reversing the convictions of hedge fund managers Todd
Newman and Anthony Chiasson, also narrowly defined what constituted
a benefit by saying it could not be just a friendship but had to be
of "some consequence."
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Of the 96 people charged under Bharara's watch for insider trading
since 2009, 14 have escaped charges thanks to that decision, which
held that prosecutors must prove that a trader knew a tip's source
received something in exchange.
Prosecutors accused Whitman of making nearly $1 million trading on
inside information about Google Inc, Polycom Inc and Marvell
Technology Group Ltd.
Those tips came from former Intel Corp employee Roomy Khan,
Whitman's neighbor and friend, and from a consultant, Karl Motey,
Whitman argued that under the December 2014 ruling, jurors were
improperly instructed that "just maintaining or furthering a
friendship" constitutes a benefit. But U.S. District Judge Jed
Rakoff in July called Whitman's interpretation "overbroad."
The case is Whitman v. United States, 2nd U.S. Circuit Court of
Appeals, No. 15-2686.
(Reporting by Nate Raymond in New York; Editing by Jonathan Oatis)
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