Sometimes a couple of things strike you on the same day capturing in a nutshell, as it were, the very essence of the problem.
On the one hand you have District Court Judge Richard Kopf, undergoing a good deal of introspection these days at what presumably constitutes the tail end of his judicial career, blogging about a woman he sentenced to a long term of imprisonment in the early 1990’s. Quite a saga. He tried to set her free much earlier but the 8th Circuit Court of Appeals reversed him. The title of his blog post is “Merciless”. Ugh.
Contrast the mindless cruelty of the 8th circuit in that case with the tender solicitude demonstrated by Judge Barrington Parker (indeed apparently all three judges of a panel of the 2nd Circuit) yesterday for a different kind of criminal defendant. That is, the kind of criminal defendant that wheels and deals in complicated securities and instruments in New York City’s main “industry”:
“We sit in the financial capital of the world,” Parker said. The atmosphere that you have “gives precious little guidance to all the institutions, all the hedge funds, that are trying to come up with some bright line rule of what they can and can’t do.”
Notice the subtle bias there. Of course the
good guys “institutions” are “trying” so, so hard, in good faith, with all their might, using all the resources at their command and of course they have copious resources because they’re such great, great people to begin with, otherwise how would they have become so successful, like hedge funds are? (But then never mind about that Long Term Capital Management thing which was just an aberration.) But these great, great people are having such a tough, tough time figuring out just how to game the system to maximum advantage without getting caught what the “bright line rule” is. Oh, my.
Judge Parker and his panel are considering overturning the convictions of some hedge fund types for “insider trading”. The idea being expressed is that the nature of the crime needs to be more precisely defined so that traders will be certain just what it is they are prohibited from doing. The context is whether a jury needs to be instructed (and thus the law is) whether some benefit accrued to the source of the insider information, or whether the government just needs to prove that insider information was used to make trades.
By the way, as financial crimes go, insider information cases would be, I should think, fairly straightforward as compared with, say, fraud cases.
Note that the sentences the 2nd circuit panel is so concerned about are one for 4.5 years and one for 6.5 years for a couple of multi-millionaires, whereas the sentence Judge Kopf’s post chronicles is for 22 years. For an impoverished mother with a young child.
But never mind. In truth Judge Parker’s concerns appear to be entirely academic. The more restrictive interpretation of the law – that is, with an additional requirement in the jury instructions adding an element the government must prove – that he seems to favor has already resulted in convictions:
U.S. District Judge Jed Rakoff, in the case of Whitman Capital LLC hedge fund founder Doug Whitman; former U.S. District Judge Richard Holwell, in the case of Galleon Group LLC co-founder Raj Rajaratnam and U.S. District Judge Paul Gardephe, in the trial of SAC Capital portfolio manager Mathew Martoma, all required jurors to consider the three elements of insider trading, as opposed to the two Sullivan instructed the jury on.
However, although the other judges in the insider-trading cases have required jurors to find the extra element of personal benefit to convict, Rajaratnam, Whitman and Martoma, all were found guilty.
Judge Parker seems worried about it, but juries aren’t.
It’s disturbing that Judge Parker is so acutely aware of the fact that the 2nd circuit sits “in the financial capital of the world”. So what? Should the judges of the DC circuit give a lot of weight to the fact that they sit in the “governmental capital of the world” (or indeed the known universe at this point)? Should the 9th circuit be sensitive to the fact that they sit in the “.com start-up/fall down capital of the world”? Is Judge Parker worried about justice for the Defendants, or the impact on the local economy? Which might be an attenuated, but genuine, form of self-interest?
That’s disturbing on a deeper level, though. What’s disturbing enough on the surface is the comparative severity of the sentences, and that the difference is plainly related to the social status of the Defendants.
Things like this cannot go on forever.