Judge rejected hedge fund manager Doug Whitman’s effort to throw out his insider trading conviction.
A federal judge rejected hedge fund manager Doug Whitman’s effort to throw out his insider trading conviction, and faulted the Whitman Capital LLC founder’s “chutzpah” in suggesting that his conduct was not a crime.
U.S. District Judge Jed Rakoff in Manhattan turned down Whitman’s argument that his August 2012 conviction and two-year prison term could not stand in light of a December 2014 ruling by the 2nd U.S. Circuit Court of Appeals.
That ruling said insider trading required knowledge that insiders who passed confidential tips did so in exchange for personal benefits of some consequence. It voided the convictions of hedge fund managers Todd Newman and Anthony Chiasson.
Prosecutors accused Whitman of trading illegally in Google Inc and video conferencer Polycom Inc based on tips from former Intel Corp employee Roomy Khan. They also said Whitman relied on consultant Karl Motey for tips from insiders at chipmaker Marvell Technology Group Ltd.
The 2nd Circuit upheld Whitman’s conviction in February 2014.
But Whitman, 57, said the Newman ruling undermined prosecutors’ theory that he traded on tips to maintain relationships with friends.
He said this called into question Rakoff’s pre-trial refusal to dismiss the indictment and the judge’s instructions to the jury after testimony ended.
In rejecting these arguments, Rakoff called Whitman’s view of the Newman ruling “overbroad,” a view the judge said others challenging their convictions share. Whitman had been “aware” that Khan and Motey expected personal benefits by giving him tips, Rakoff said.
Rakoff also rejected what he called Whitman’s contention that Carter Phillips, the prominent Supreme Court litigator, may have provided constitutionally ineffective assistance of counsel by not raising the personal benefit issue during the prior appeal.
“The sheer poverty of Whitman’s motion (not to mention chutzpah) is illustrated by the fact that his present counsel is reduced to arguing, without a shred of factual support,” that Phillips and his colleagues at Sidley Austin did their jobs poorly, Rakoff wrote.
Whitman Capital was based in Menlo Park, California. Whitman is housed at a federal prison complex in Lompoc, California and is eligible for release beginning May 29, 2016.
The case is U.S. v. Whitman, U.S. District Court, Southern District of New York, No. 12-cr-00125.