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Carpenter v. United States

Supreme Court of the United States

October 7, 1987, Argued ; November 16, 1987, Decided

No. 86-422

Opinion

 [*20]  [****5]  [***280]  [**318]     JUSTICE WHITE delivered the opinion of the Court.

 [1060]  Petitioners Kenneth Felis and R. Foster Winans were convicted of violating § 10(b) of the Securities Exchange Act of  [*21]  1934, 48 Stat. 891, 15 U. S. C. § 78j(b), 2 and Rule 10b-5, 17 CFR § 240.10b-5 (1987). 3 United States v. Winans, 612 F. Supp. 827 (SDNY 1985). They were also found guilty of violating the federal mail and wire fraud statutes,  [1061]  18 U. S. C. §§ 1341, 4 1343, 5 and were convicted for conspiracy under  [***281]  18  [*22]  U. S. C. § 371. 6 Petitioner David Carpenter, Winans' roommate, was convicted for aiding and abetting. With a minor exception, the Court of Appeals for the Second Circuit affirmed, 791 F. 2d 1024 (1986); we granted certiorari, 479 U.S. 1016 (1986).

 [****6]  [****7]   I

In 1981, Winans became a reporter for the Wall Street Journal (the Journal) and in  [**319]  the summer of 1982 became one of the two writers of a daily column, "Heard on the Street." That column discussed selected stocks or groups of stocks, giving positive and negative information about those stocks and taking "a point of view with respect to investment in the stocks that it reviews." 612 F. Supp., at 830. Winans regularly interviewed corporate executives to put together interesting perspectives on the stocks that would be highlighted in upcoming columns, but, at least for the columns at issue here, none contained corporate inside information or any "hold for release" information.  Id., at 830, n. 2. Because of the "Heard [****8]  " column's perceived quality and integrity, it had the potential of affecting the price of the stocks which it examined. The District Court concluded on the basis of testimony presented at trial that the "Heard" column "does have an impact  [*23]  on the market, difficult though it may be to quantify in any particular case." Id., at 830.

The official policy and practice at the Journal was that prior to publication, the contents of the column were the Journal's confidential information. Despite the rule, with which Winans was familiar, he entered into a scheme in October 1983 with Peter Brant and petitioner Felis, both connected with the Kidder Peabody brokerage firm in New York City, to give them advance information as to the timing and contents of the "Heard" column. This permitted Brant and Felis and another conspirator, David Clark, a client of Brant, to buy or sell based on the probable impact of the column on the market.  Profits were to be shared. The conspirators agreed that the scheme would not affect the journalistic purity of the "Heard" column, and the District Court did not find that the contents of any of the articles were altered to further the profit potential  [****9]  of petitioners' stock-trading scheme. Id., at 832, 834-835. Over a 4-month period, the brokers made prepublication trades on the basis of information given them by Winans about the contents of some 27 "Heard" columns. The net profits from these trades were about $ 690,000.

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484 U.S. 19 *; 108 S. Ct. 316 **; 98 L. Ed. 2d 275 ***; 1987 U.S. LEXIS 4815 ****; 5 U.S.P.Q.2D (BNA) 1059; 56 U.S.L.W. 4007; Fed. Sec. L. Rep. (CCH) P93,423; 14 Media L. Rep. 1853

CARPENTER ET AL. v. UNITED STATES

Prior History: CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.

Disposition:  791 F. 2d 1024, affirmed.

CORE TERMS

column, mail, confidential, stocks, contents, confidential information, wire fraud, defraud, trades, courts, business information, prepublication, convictions, profits, rights

Securities Law, Securities Exchange Act of 1934 Actions, Implied Private Rights of Action, Deceptive & Manipulative Devices, Criminal Law & Procedure, Fraud Against the Government, Mail Fraud, Elements, General Overview, Fraud, Wire Fraud, Conspiracy to Defraud, Inchoate Crimes, Conspiracy, Administrative Law, Freedom of Information, Defenses & Exemptions From Public Disclosure, Commercial Information & Trade Secrets, Contracts Law, Personal Property, Rights of Possessors, Trade Secrets Law, Federal Versus State Law, Freedom of Information Act Exemptions, Labor & Employment Law, Conditions & Terms, Trade Secrets & Unfair Competition, Trade Secrets, Statute of Frauds, Requirements, Theft & Related Offenses, Embezzlement, Governments, Fiduciaries, Employment Relationships, Fiduciary Responsibilities, Business & Corporate Law, Causes of Action & Remedies, Breach of Fiduciary Duty