United States v. Timothy McGee
2014 U.S. App. LEXIS 15604
| 3rd Cir. | 2014Background
- McGee was convicted of securities fraud under misappropriation theory and perjury for statements before the SEC about PHLY's sale.
- Maguire, a PHLY insider and confidant in AA, disclosed inside information to McGee prior to PHLY's sale.
- McGee engaged in substantial PHLY trading funded by borrowed money after receiving the inside information, profiting after the sale's public announcement.
- McGee argued Rule 10b5-2(b)(2) exceeds SEC authority and challenged sufficiency of evidence and the denial of a new-trial motion based on newly discovered evidence.
- District Court denied defense challenges; a jury found reliance on a confidential relationship and misappropriation under Rule 10b5-2(b)(2).
- Appellate court affirmance hinges on Chevron deference to Rule 10b5-2(b)(2) and the existence of a history of confidences between McGee and Maguire.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of Rule 10b5-2(b)(2) under § 10(b) | McGee contends rule exceeds authority. | McGee claims misappropriation requires fiduciary duty; rule expands liability. | Rule 10b5-2(b)(2) valid; Chevron deference applies. |
| Sufficiency of evidence for securities fraud | Evidence shows a trust/confidence relationship and disclosure within it. | Sufficiency tenuous; no clear confidential relationship. | Evidence adequate; rational juror could find misappropriation. |
| Sufficiency of evidence for perjury | Maguire corroborated by trading and timing; statements false. | Trading alone could be explained by strategy; questioning ambiguous. | Evidence corroborated Maguire's testimony; perjury conviction supported. |
| New-trial motion based on newly discovered evidence | Affidavit could undermine Maguire's testimony. | Affidavit lacks direct link to heart of Maguire's testimony; not probative. | Court did not abuse discretion; no basis for new trial. |
Key Cases Cited
- O’Hagan, 521 U.S. 642 (U.S. 1997) (misappropriation liability extended beyond fiduciaries)
- Chiarella v. United States, 445 U.S. 222 (U.S. 1980) (duty to speak depends on specific relationship)
- Dirks v. SEC, 463 U.S. 646 (U.S. 1983) (no duty to disclose absent trusted relationship)
- Yun, 327 F.3d 1263 (11th Cir. 2003) (unsettled post-O’Hagan relationship contours)
- Cuban, 620 F.3d 551 (5th Cir. 2010) (recognition that misappropriation contours not fixed by one circuit)
- Brand X Internet Servs., 545 U.S. 967 (U.S. 2005) (prior judicial interpretations can foreclose agency reading only if unambiguous)
- Swallows Holding, Ltd. v. Comm’r, 515 F.3d 162 (3d Cir. 2008) (Chevron deference in agency interpretations)
- GenOn REMA, LLC v. EPA, 722 F.3d 513 (3d Cir. 2013) (statutory interpretation within Chevron framework)
- Chestman, 947 F.2d 551 (2d Cir. 1991) (misappropriation scope post-O’Hagan subject to scrutiny)
- Bronston v. United States, 409 U.S. 352 (U.S. 1973) (perjury and literal truth standards)