HIGH PROFILE INSIDER TRADING PROBE

Professional golfer Phil Mickelson was reportedly interviewed by the FBI last Thursday in connection with an ongoing Securities & Exchange Commission insider trading probe. According to the Wall Street Journal the SEC is looking into whether well know investor Carl Icahn and others improperly traded on non-public information. Mickelson is not believed to be a specific target of the investigation. Photo by Steven Newton CC Attribution 2.0 Generic While there are many unanswered questions, the basic facts are that in February 2011 Icahn began investing in Clorox, Co. and in short time accumulated a 9.1% stake in the company. Then on July 15, 2011 Icahn made a 10.2 billion dollar offer to purchase the company. As a result of this tender offer the stock price jumped significantly. There was apparently suspicious options trading activity in the days leading up to the tender offer. While not stated specifically the question is whether Icahn tipped off others about the tender offer who then purchased options prior to the tender offer being announced. Based on the limited factual information available, it is unclear what specific securities laws, if any, may have been violated. The Wall Street Journal also reported that this particular probe is part of an increased focus by the SEC on insider trading since 2008. During this time 90 people have been formally charged leading to a whopping 85 convictions and guilty pleas. The remaining 5 cases remain...

CELL PHONES PROTECTED FROM WARRANTLESS SEARCHES

The Supreme Court of the United States in a unanimous decision ruled that the police may not search your cell phone without a warrant simply because you have been arrested. FACTS The decision involved two separate cases. In the first case David Riley was stopped by a police officer for driving with an expired tag. During the stop the officer learned that Riley’s license had been suspended and the car was impounded. An inventory search of the car was then conducted and Riley was arrested for possession of concealed and loaded firearms. During the search of Riley incident to his arrest, his “smart pho, Riley was charged with additional crimes. Prior to trial Riey’s attorney moved to suppress all evidence that the police had obtained from his cell phone. In the second case, an officer performing routine surveillance saw Brima Wurie make a drug sale from a car. Wurie was arrested. At the police station her two cell phones were taken. The officers noticed that one of the phones was repeatedly receiving calls from a particular number. They used the an online directory to trace the number to an apartment where after executing a warrant crack cocaine and other drug related items were found. The lawyer for Wurie moved to suppress the evidence arguing that it was the fruit of an unconstitutional search of the cell phone. OPINION The Fourth Amendment provides that people have the right to be secure from unreasonable searches and seizures. Generally for a search to be reasonable, a warrant is required. Without a warrant a search is only reasonable if it falls within a...

THE SECURITIES AND EXCHANGE COMMISSION’S HOME FIELD ADVANTAGE

Securities and Exchange Commission The expansion of the rule making powers of our federal bureaucratic agencies has led to the increasing use of in-house judges to decide regulatory enforcement actions. Currently more than two dozen federal agencies regularly use in-house administrative law judges. One of those agencies is the Securities and Exchange Commission. The SEC has been in the news lately as it attempts to defend its own increased use of in-house judges as a result of the Dodd-Frank financial reform law. For many years critics of the SEC’s administrative process have claimed that the process is suspect because the SEC gets to hand pick the judge who will decide the case. Not surprisingly, getting to pick the judge gives you a significant home field advantage. According to the Wall Street Journal, between October 2010 and March 2015 the SEC won 90% of the cases which were decided by its in-house judges. This 90% success rate is much better than 69% success rate the SEC achieved over the same period when the enforcement action was brought in a federal court. The SEC’s home field advantage continues on appeal where the initial review is before the SEC’s own Commissioners rather than a federal appeals court. According to the Wall Street Journal, on the Commissioners found in favor of the SEC 95% of the time. The SEC’s justification for using internal administrative law judges is that the process is faster and more efficient than cases in federal court. Obviously, one of the reasons that the process is faster is because the due process rights of the accused are limited. Although the...