United States v. Gansman
2011 U.S. App. LEXIS 18664
2d Cir.2011Background
- Gansman was convicted at trial of six counts of securities fraud under the misappropriation theory after disclosing confidential information to Murdoch, who traded on it before deals were public.
- He worked in Ernst & Young and had confidential information about potential mergers and acquisitions.
- He argued to the jury that his relationship with Murdoch created a duty not to use the information for trading, supported by Rule 10b5-2.
- The District Court refused the exact proposed Rule 10b5-2 charge but gave a substantially similar instruction.
- Murdoch cooperated with the government, pleaded guilty to related counts, and testified against Gansman.
- Gansman was sentenced to one year and one day on each count, to run concurrently.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 10b5-2 defense instruction should have been given | Gansman entitled to Rule 10b5-2 defense charge | Rule 10b5-2 creates duties that could negate intent | Yes, but the modified instruction was legally sufficient |
| Whether the conscious avoidance instruction properly conveyed knowledge element | Instruction misstates law; must require actual belief | Instruction adequately conveyed knowledge/intent standard | No reversible error; instruction adequately communicated essential ideas |
| Whether polygraph-evidence cross-examination was properly limited | Murdoch polygraph results should be admissible for impeachment | Limit on cross-examination appropriate under Rule 403 | District Court acted within discretion; no abuse of discretion |
| Whether cross-examining Murdoch about her father's convictions was proper | Murdoch’s father’s convictions show bias/venom against Murdoch | Prejudicial third-party convictions may mislead jury | No abuse of discretion; evidence properly excluded due to prejudice concerns |
| Whether prosecutorial misconduct in closing required new trial | Prosecutor misstated fact about Murdoch’s web description; not cured | Mistake cured by court; statements fair argument overall | No reversible error; curative measures adequate |
Key Cases Cited
- United States v. O'Hagan, 521 U.S. 642 (Supreme Court 1997) (misappropriation theory explanation; fiduciary deception standard)
- United States v. Sabhnani, 599 F.3d 215 (2d Cir. 2010) (jury instruction sufficiency; overall charge adequate)
- United States v. White, 552 F.3d 240 (2d Cir. 2009) (prejudice requirement for flawed jury instructions)
- United States v. Curley, 639 F.3d 50 (2d Cir. 2011) (abuse-of-discretion review of evidentiary rulings)
- United States v. Caracappa, 614 F.3d 30 (2d Cir. 2010) (prosecutorial misconduct standard; remedial measures)
- SEC v. Rocklage, 470 F.3d 1 (1st Cir. 2006) (civil misappropriation theory; duty of trust scenarios)
- S.E.C. v. Yun, 327 F.3d 1263 (11th Cir. 2003) (civil liability for tippee; duty concepts)