1 00:00:00,200 --> 00:00:02,960 Speaker 1: A former trader at S A C Capital who wants 2 00:00:03,000 --> 00:00:07,120 Speaker 1: to withdraw his guilty plea for insider trading, saying that 3 00:00:07,240 --> 00:00:10,600 Speaker 1: two instant messages show that he didn't actually commit the crime. 4 00:00:11,160 --> 00:00:14,000 Speaker 1: Richard Lee said in court papers, at the instant messages 5 00:00:14,080 --> 00:00:18,560 Speaker 1: show that of his purchase of Yahoo shares was actually 6 00:00:18,640 --> 00:00:22,960 Speaker 1: based on public information, not inside information. My guest is 7 00:00:23,000 --> 00:00:26,040 Speaker 1: an expert at insider trading. Peter Henning, a professor at 8 00:00:26,040 --> 00:00:30,080 Speaker 1: Wayne State University Law School. Peter Lee's attorney, wrote that 9 00:00:30,480 --> 00:00:34,360 Speaker 1: Lee labored under a significant misapprehension of the facts of 10 00:00:34,440 --> 00:00:39,479 Speaker 1: his own case, explained his claims. Well, what Lee is 11 00:00:39,479 --> 00:00:42,800 Speaker 1: saying here is that when he was first approached by 12 00:00:42,840 --> 00:00:47,160 Speaker 1: the government um about his trading, they told him that 13 00:00:47,840 --> 00:00:52,159 Speaker 1: he received inside information about Yahoo that was one of 14 00:00:52,200 --> 00:00:55,400 Speaker 1: the two stocks on which he pleaded guilty, and that 15 00:00:55,480 --> 00:00:57,440 Speaker 1: then he traded on it. And in fact he bought 16 00:00:57,480 --> 00:01:03,400 Speaker 1: a large number of shares through SAC Capital, about thousand shares, 17 00:01:03,480 --> 00:01:07,480 Speaker 1: and so I suspect he remembered the phone call and 18 00:01:07,560 --> 00:01:10,640 Speaker 1: the government said you got inside information, and so he 19 00:01:10,720 --> 00:01:15,440 Speaker 1: pleaded guilty. It's now turned out that they have instant 20 00:01:15,440 --> 00:01:19,360 Speaker 1: messages that he sent to Steve Cohen, who ran s 21 00:01:19,400 --> 00:01:22,720 Speaker 1: a C. Capital and he had the information two hours 22 00:01:22,720 --> 00:01:26,160 Speaker 1: before he got the phone call. So you're saying, look, 23 00:01:26,280 --> 00:01:29,600 Speaker 1: I got the information, but by then it was public. 24 00:01:29,640 --> 00:01:35,080 Speaker 1: I wasn't getting tipped and therefore I didn't commit insider trading. 25 00:01:35,480 --> 00:01:39,400 Speaker 1: Please let me withdraw my guilty plea. The chipper has 26 00:01:39,480 --> 00:01:44,560 Speaker 1: pleaded guilty, and it is Does it seem likely that 27 00:01:45,000 --> 00:01:47,520 Speaker 1: Lee would have gone through the whole process, all the 28 00:01:47,600 --> 00:01:53,840 Speaker 1: discussions with the FEDS, flipping to cooperate without realizing that 29 00:01:53,960 --> 00:01:58,400 Speaker 1: he didn't get this information from someone else. I guess 30 00:01:58,400 --> 00:02:02,160 Speaker 1: it's certainly possible, because he was approached by the government 31 00:02:02,320 --> 00:02:08,160 Speaker 1: in two thousand Trading itself took place back in two 32 00:02:08,200 --> 00:02:11,760 Speaker 1: thousand nine, and this was someone who was trading in 33 00:02:12,160 --> 00:02:15,960 Speaker 1: a number of different stocks. SEC Capital was famous for 34 00:02:16,400 --> 00:02:18,520 Speaker 1: the volume of its trading, and they jumped in and 35 00:02:18,560 --> 00:02:23,400 Speaker 1: out of stocks. And so three to four years later, 36 00:02:24,080 --> 00:02:27,480 Speaker 1: when the government says here's the evidence we have on you, 37 00:02:27,800 --> 00:02:31,920 Speaker 1: I could certainly see remembering some of what happened and 38 00:02:31,960 --> 00:02:34,959 Speaker 1: then saying, I guess they got me. There is, for example, 39 00:02:35,000 --> 00:02:37,680 Speaker 1: at he's just talked about in the papers, a recording 40 00:02:37,880 --> 00:02:41,640 Speaker 1: of the tipper talking to Lee. And so you play 41 00:02:41,680 --> 00:02:44,840 Speaker 1: that recording and perhaps you just say you're right, I 42 00:02:44,919 --> 00:02:49,480 Speaker 1: must have gotten inside information. I can't remember specifically. This 43 00:02:49,520 --> 00:02:51,840 Speaker 1: is going to be a challenge for him because he 44 00:02:51,880 --> 00:02:54,680 Speaker 1: stood up in court and said I committed inside in 45 00:02:54,680 --> 00:02:58,960 Speaker 1: insider trading. Well, there's also another play that he's contesting 46 00:02:59,160 --> 00:03:02,720 Speaker 1: a planned act position of Czech company three Calm on 47 00:03:02,760 --> 00:03:07,880 Speaker 1: another ground right on that ground, this is related to 48 00:03:07,919 --> 00:03:10,680 Speaker 1: the Newman case that was decided by the Second Circuit, 49 00:03:10,720 --> 00:03:13,040 Speaker 1: and one of the parts of Newman that has survived 50 00:03:13,360 --> 00:03:17,520 Speaker 1: um is that the government must prove that the tippy 51 00:03:17,800 --> 00:03:20,800 Speaker 1: knew that the source of the information, the tipper breached 52 00:03:20,800 --> 00:03:24,920 Speaker 1: a fiduciary duty and received a benefit. And it looks 53 00:03:24,960 --> 00:03:27,960 Speaker 1: like at least here that Lee was maybe a third 54 00:03:28,040 --> 00:03:31,400 Speaker 1: or fourth level tippy. And indeed he's retained the lawyer 55 00:03:31,440 --> 00:03:35,000 Speaker 1: who represented Newman at his trial in his appeal. And 56 00:03:35,120 --> 00:03:37,680 Speaker 1: one of the grounds that the Second Circuit reversed that 57 00:03:37,800 --> 00:03:42,720 Speaker 1: conviction was the government didn't show that the tippy, the 58 00:03:42,800 --> 00:03:45,800 Speaker 1: third level tippy knew about the benefit. And that may 59 00:03:45,840 --> 00:03:48,880 Speaker 1: be what's going on here with regard to three Calm, 60 00:03:48,920 --> 00:03:52,200 Speaker 1: that the government had a gap in its evidence after 61 00:03:52,280 --> 00:03:56,680 Speaker 1: Newman that it didn't have back in when Lee pleaded guilty. 62 00:03:57,200 --> 00:04:01,600 Speaker 1: So Peter in about fifteen seconds. How likely is it 63 00:04:01,640 --> 00:04:04,960 Speaker 1: that he would have both of these thrown out on 64 00:04:05,040 --> 00:04:09,600 Speaker 1: two different grounds? Uh, this is tough withdrawing a guilty please, 65 00:04:09,840 --> 00:04:12,880 Speaker 1: very difficult. And the judges warned you do you understand 66 00:04:12,920 --> 00:04:16,640 Speaker 1: that this is going to be hard. That said, you 67 00:04:16,680 --> 00:04:19,000 Speaker 1: know he's got some evidence to try to back up 68 00:04:19,120 --> 00:04:22,480 Speaker 1: his position. Right, We'll have to leave it at that. 69 00:04:22,480 --> 00:04:26,000 Speaker 1: That's Peter Henning. He's a professor at Wayne State University 70 00:04:26,080 --> 00:04:26,839 Speaker 1: Law School.