Supreme Court Upholds Hedge Fund Manager’s Conviction

Nov 11 2014 | 2:52pm ET

The U.S. Supreme Court has refused to free a former hedge-fund manager convicted of insider-trading, but offered hope to others found guilty of the crime.

The high court yesterday declined to hear Douglas Whitman’s appeal of his 2012 conviction. The decision means that Whitman, who is serving his two-year sentence at a federal prison in California, will have to complete his term.

The Whitman Capital Management founder was convicted of earning almost $1 million trading technology stocks after receiving confidential corporate information from several sources. Prosecutors presented evidence that Whitman illegally traded shares of Google Inc., Marvell Technology Group and Polycom Inc. Whitman's former neighbor and former Intel Corp. and Galleon Group employee Roomy Khan testified against him, as did former consultant Karl Motey and former SAC Capital Advisors trader Wesley Wang.

The court, as is customary, did not explain its reasoning. But two of its members appended a statement making clear that they would like to take a closer look at how insider-trading is being prosecuted, even if Whitman’s was not the right case for it.

Justice Antonin Scalia, joined by Justice Clarence Thomas, wrote that “a court owes no deference to the prosecution’s interpretation of a criminal law.” He was referring to the U.S. Second Circuit Court of Appeals’ ruling upholding Whitman’s conviction, which said such deference was required.

“The rules of lenity requires interpreters to resolve ambiguity in criminal laws in favor of defendants,” Scalia wrote, adding that, since Whitman’s appeal did not directly deal with the deference issue, “I agree with the court that we should deny the petition. But when a petition properly presenting the question comes before us, I will be receptive to granting it.” 

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