Re: Is This Insider Trading?
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Martha Stewart is a good example of this -- they had IMO a perfectly winnable case of insider trading against her and Baconovic, but chose not to pursue it.
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I'm surprised you say this. I've been told that not only was her actions not insider trading in that she had no fiduciary obligations and didn't have any material non-public information, she just knew the CEO was selling (and that she was a former stockbroker who should have known this). So instead they went after her for blatantly lying to investigators. Why do you view it differently?
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Scenario #1 - Baconovic told Stewart only that Waksal was selling, and Waksal did not tell Bacanovic to tell Stewart. Bacanovic had a fiduciary duty to Waksal, violated it by telling Stewart, Stewart knew he violated it because she's a former broker. Misappropriation theory insider trading.
Scenario #2 - It's not a coincidence that Bacanovic told Stewart, a good friend of Waksal, immediately after speaking to Waksal, Waksal must have instructed Bacanovic to tell Stewart. If Stewart didn't have actual knowledge that Waksal was selling based on inside information, she was willfully blind to that fact (especially as a former stockbroker). Classic tipper/tippee insider trading through an intermediary.
In presenting either or both scenarios, and in the absence of a witness as to exactly which happened I'd present both (if Waksal didn't tell Bacanovic to pass the information along, she's guilty under #1, if he did, she's guilty under #2) use her after-the-fact lies as as consciousness of guilt evidence. Not a slam dunk, but a very winnable case.
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