954 F.3d 45
1st Cir.2020Background
- Ariad Pharmaceuticals (Cambridge) developed Iclusig; Maureen Curran was Ariad’s head of pharmacovigilance and had access to confidential FDA-related safety information.
- Curran instructed then-husband Dr. Harold Altvater to stop trading during a company blackout, but Altvater made three series of trades in 2013 shortly before public FDA disclosures.
- Altvater testified in an SEC deposition (July 28, 2016). A grand jury indicted him on three counts of securities fraud (insider trading) in 2017; a jury convicted him in October 2018.
- The trades at issue: (1) Oct. 3–4, 2013 sales before an Oct. 9 announcement halting trials; (2) Oct. 24, 2013 sales shortly after an FDA meeting and before an Oct. 31 announcement; (3) Dec. 4, 2013 purchase and subsequent Jan. 2014 sale after confidential filings and public resumption.
- District Court sentenced Altvater to 18 months’ imprisonment and one year supervised release; he appealed several evidentiary rulings and claimed confrontation and Rule 106 violations.
Issues
| Issue | Plaintiff's Argument (United States) | Defendant's Argument (Altvater) | Held |
|---|---|---|---|
| Admissibility of substantially redacted SEC deposition (Rule 106) | Redacted transcript was not misleading; excerpts admitted as party admissions were proper. | Redactions distorted context; Rule 106 required admission of the full deposition. | Court affirmed: defendant failed to show each redacted portion was necessary to avoid distortion; abuse-of-discretion review. |
| Limitations on cross-examining MacMillan about Altvater’s unrecorded statements (Confrontation Clause / completeness) | Court gave "some leeway" and allowed questioning about European market; no unfair prejudice or deprivation of confrontation rights. | Exclusion of portions of the phone conversation distorted evidence and violated Confrontation/Rule 106. | Affirmed: no shown prejudice; defendant made no offer of proof as to excluded content. |
| Exclusion of November 12, 2013 email (admission without live witness) | Email was cumulative / inadmissible without sponsoring witness. | Email would show MacMillan’s independent views and who initiated conversation. | Affirmed: defendant waived challenge to court’s ruling that email could not be admitted absent a witness. |
| Admission of Curran’s testimony about her reaction and trust (Rule 401/403; duty of trust under misappropriation theory) | Testimony was relevant to show a duty of trust/confidence under SEC Rule 10b5‑2 and the government’s misappropriation theory. | Marriage and cohabitation alone presumptively suffice; testimony about feelings was minimally probative and unfairly prejudicial. | Affirmed: even if admission were erroneous, any Rule 403 error was harmless given strong evidence of guilt. |
| Exclusion of New York Times article (public information defense) | Article not probative for earlier trades; its exclusion did not affect verdict. | Article showed public information that could explain trades as non‑insider-based. | Affirmed: article post‑dated counts 1–2 and did not undermine evidence for count 3; any error harmless. |
Key Cases Cited
- United States v. Verdugo, 617 F.3d 565 (1st Cir. 2010) (discussing the rule of completeness and context for out-of-court statements)
- United States v. Awon, 135 F.3d 96 (1st Cir. 1998) (Rule 106 does not admit unrelated portions of a statement)
- United States v. Bucci, 525 F.3d 116 (1st Cir. 2008) (standard of review and deference for Rule 106 rulings)
- O'Hagan v. United States, 521 U.S. 642 (1997) (establishing the misappropriation theory of insider trading)
- United States v. Parigian, 824 F.3d 5 (1st Cir. 2016) (duty of trust and confidence as element in misappropriation theory)
- United States v. Dunbar, 553 F.3d 48 (1st Cir. 2009) (harmless‑error framework for improperly admitted evidence under Rule 403)
- United States v. Spencer, 873 F.3d 1 (1st Cir. 2017) (presumption that jurors follow limiting instructions)