SALMAN v. UNITED STATES
No. 15-628
SUPREME COURT OF THE UNITED STATES
December 6, 2016
580 U. S. ____ (2016)
ALITO, J.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
SALMAN v. UNITED STATES
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
No. 15–628. Argued October 5, 2016—Decided December 6, 2016
Petitioner Salman was indicted for federal securities-fraud crimes for trading on inside information he received from a friend and relative-by-marriage, Michael Kara, who, in turn, received the information from his brother, Maher Kara, a former investment banker at Citigroup. Maher testified at Salman’s trial that he shared inside information with his brother Michael to benefit him and expected him to trade on it, and Michael testified to sharing that information with Salman, who knew that it was from Maher. Salman was convicted.
While Salman’s appeal to the Ninth Circuit was pending, the Second Circuit decided that Dirks does not permit a factfinder to infer a personal benefit to the tipper from a gift of confidential information to a trading relative or friend, unless there is “proof of a meaningfully close personal relationship” between tipper and tippee “that gener-
The Ninth Circuit declined to follow Newman so far, holding that Dirks allowed Salman’s jury to infer that the tipper breached a duty because he made “‘a gift of confidential information to a trading relative.‘” 792 F. 3d 1087, 1092 (quoting Dirks, 463 U. S., at 664).
Held: The Ninth Circuit properly applied Dirks to affirm Salman’s conviction. Under Dirks, the jury could infer that the tipper here personally benefited from making a gift of confidential information to a trading relative. Pp. 6–12.
(a) Salman contends that a gift of confidential information to a friend or family member alone is insufficient to establish the personal benefit required for tippee liability, claiming that a tipper does not personally benefit unless the tipper’s goal in disclosing information is to obtain money, property, or something of tangible value. The Government counters that a gift of confidential information to anyone, not just a “trading relative or friend,” is enough to prove securities fraud because a tipper personally benefits through any disclosure of confidential trading information for a personal (non-corporate) purpose. The Government argues that any concerns raised by permitting such an inference are significantly alleviated by other statutory elements prosecutors must satisfy. Pp. 6–8.
(b) This Court adheres to the holding in Dirks, which easily resolves the case at hand: “when an insider makes a gift of confidential information to a trading relative or friend . . . [t]he tip and trade resemble trading by the insider himself followed by a gift of the profits to the recipient,” 463 U. S., at 664. In these situations, the tipper personally benefits because giving a gift of trading information to a trading relative is the same thing as trading by the tipper followed by a gift of the proceeds. Here, by disclosing confidential information as a gift to his brother with the expectation that he would trade on it, Maher breached his duty of trust and confidence to Citigroup and its clients—a duty acquired and breached by Salman when he traded on the information with full knowledge that it had been improperly disclosed. To the extent that the Second Circuit in Newman held that the tipper must also receive something of a “pecuniary or similarly valuable nature” in exchange for a gift to a trading relative, that rule is inconsistent with Dirks. Pp. 8–10.
(c) Salman’s arguments to the contrary are rejected. Salman has cited nothing in this Court’s precedents that undermines the gift-giving principle this Court announced in Dirks. Nor has he demonstrated that either §10(b) itself or Dirks‘s gift-giving standard “leav[e]
792 F. 3d 1087, affirmed.
ALITO, J., delivered the opinion for a unanimous Court.
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 15–628
BASSAM YACOUB SALMAN, PETITIONER v. UNITED STATES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
[December 6, 2016]
JUSTICE ALITO delivered the opinion of the Court.
These persons also may not tip inside information to
Petitioner Bassam Salman challenges his convictions for conspiracy and insider trading. Salman received lucrative trading tips from an extended family member, who had received the information from Salman’s brother-in-law. Salman then traded on the information. He argues that he cannot be held liable as a tippee because the tipper (his brother-in-law) did not personally receive money or property in exchange for the tips and thus did not personally benefit from them. The Court of Appeals disagreed, holding that Dirks allowed the jury to infer that the tipper here breached a duty because he made a “‘gift of confidential information to a trading relative.‘” 792 F. 3d 1087, 1092 (CA9 2015) (quoting Dirks, supra, at 664). Because the Court of Appeals properly applied Dirks, we affirm the judgment below.
I
Maher Kara was an investment banker in Citigroup’s healthcare investment banking group. He dealt with highly confidential information about mergers and acquisitions involving Citigroup’s clients. Maher enjoyed a
Ultimately, Maher began to assist Michael’s trading by sharing inside information with his brother about pending mergers and acquisitions. Maher sometimes used code words to communicate corporate information to his brother. Other times, he shared inside information about deals he was not working on in order to avoid detection. See, e.g., App. 118, 124–125. Without his younger brother’s knowledge, Michael fed the information to others—including Salman, Michael’s friend and Maher’s brother-in-law. By the time the authorities caught on, Salman had made over $1.5 million in profits that he split with another relative who executed trades via a brokerage account on Salman’s behalf.
Salman was indicted on one count of conspiracy to commit securities fraud, see
The evidence at trial established that Maher and Michael enjoyed a “very close relationship.” App. 215. Maher “love[d] [his] brother very much,” Michael was like “a second father to Maher,” and Michael was the best man at Maher’s wedding to Salman’s sister. Id., at 158, 195, 104–
For his part, Michael told the jury that his brother’s tips gave him “timely information that the average person does not have access to” and “access to stocks, options, and what have you, that I can capitalize on, that the average person would never have or dream of.” Id., at 251. Michael testified that he became friends with Salman when Maher was courting Salman’s sister and later began sharing Maher’s tips with Salman. As he explained at trial, “any time a major deal came in, [Salman] was the first on my phone list.” Id., at 258. Michael also testified that he told Salman that the information was coming from Maher. See, e.g., id., at 286 (“Maher is the source of all this information“).
After a jury trial in the Northern District of California, Salman was convicted on all counts. He was sentenced to 36 months of imprisonment, three years of supervised release, and over $730,000 in restitution. After his motion for a new trial was denied, Salman appealed to the Ninth Circuit. While his appeal was pending, the Second Circuit issued its opinion in United States v. Newman, 773 F. 3d 438 (2014), cert. denied, 577 U. S. ___ (2015). There, the Second Circuit reversed the convictions of two portfolio
Pointing to Newman, Salman argued that his conviction should be reversed. While the evidence established that Maher made a gift of trading information to Michael and that Salman knew it, there was no evidence that Maher received anything of “a pecuniary or similarly valuable nature” in exchange or that Salman knew of any such benefit. The Ninth Circuit disagreed and affirmed Salman’s conviction. 792 F. 3d 1087. The court reasoned that the case was governed by Dirks‘s holding that a tipper benefits personally by making a gift of confidential information to a trading relative or friend. Indeed, Maher’s disclosures to Michael were “precisely the gift of confidential information to a trading relative that Dirks envisioned.” 792 F. 3d, at 1092 (internal quotation marks omitted). To the extent Newman went further and required additional gain to the tipper in cases involving gifts
We granted certiorari to resolve the tension between the Second Circuit’s Newman decision and the Ninth Circuit’s decision in this case.2 577 U. S. ___ (2016).
II
A
In this case, Salman contends that an insider’s “gift of confidential information to a trading relative or friend,” Dirks, 463 U. S., at 664, is not enough to establish securities fraud. Instead, Salman argues, a tipper does not personally benefit unless the tipper’s goal in disclosing inside information is to obtain money, property, or something of tangible value. He claims that our insider-trading precedents, and the cases those precedents cite, involve situations in which the insider exploited confidential information for the insider’s own “tangible monetary profit.” Brief for Petitioner 31. He suggests that his
The Government disagrees and argues that a gift of confidential information to anyone, not just a “trading relative or friend,” is enough to prove securities fraud. See Brief for United States 27 (”Dirks‘s personal-benefit test encompasses a gift to any person with the expectation that the information will be used for trading, not just to ‘a trading relative or friend‘” (quoting 463 U. S., at 664; emphasis in original)). Under the Government’s view, a tipper personally benefits whenever the tipper discloses confidential trading information for a noncorporate purpose. Accordingly, a gift to a friend, a family member, or anyone else would support the inference that the tipper exploited the trading value of inside information for personal purposes and thus personally benefited from the disclosure. The Government claims to find support for
The Government also argues that Salman’s concerns about unlimited and indeterminate liability for remote tippees are significantly alleviated by other statutory elements that prosecutors must satisfy to convict a tippee for insider trading. The Government observes that, in order to establish a defendant’s criminal liability as a tippee, it must prove beyond a reasonable doubt that the tipper expected that the information being disclosed would be used in securities trading. Brief for United States 23–24; Tr. of Oral Arg. 38. The Government also notes that, to establish a defendant’s criminal liability as a tippee, it must prove that the tippee knew that the tipper breached a duty—in other words, that the tippee knew that the tipper disclosed the information for a personal benefit and that the tipper expected trading to ensue. Brief for United States 43; Tr. of Oral Arg. 36–37, 39.
B
We adhere to Dirks, which easily resolves the narrow issue presented here.
In Dirks, we explained that a tippee is exposed to liability for trading on inside information only if the tippee participates in a breach of the tipper’s fiduciary duty. Whether the tipper breached that duty depends “in large part on the purpose of the disclosure” to the tippee. 463 U. S., at 662. “[T]he test,” we explained, “is whether the insider personally will benefit, directly or indirectly, from his disclosure.” Ibid. Thus, the disclosure of confidential information without personal benefit is not enough. In
Our discussion of gift giving resolves this case. Maher, the tipper, provided inside information to a close relative, his brother Michael. Dirks makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to “a trading relative,” and that rule is sufficient to resolve the case at hand. As Salman’s counsel acknowledged at oral argument, Maher would have breached his duty had he personally traded on the information here himself then given the proceeds as a gift to his brother. Tr. of Oral Arg. 3–4. It is obvious that Maher would personally benefit in that situation. But Maher effectively achieved the same result by disclosing the information to Michael, and allowing him to trade on it. Dirks appropriately prohibits that approach, as well. Cf.
To the extent the Second Circuit held that the tipper must also receive something of a “pecuniary or similarly valuable nature” in exchange for a gift to family or friends, Newman, 773 F. 3d, at 452, we agree with the Ninth Circuit that this requirement is inconsistent with Dirks.
C
Salman points out that many insider-trading cases—including several that Dirks cited—involved insiders who personally profited through the misuse of trading information. But this observation does not undermine the test Dirks articulated and applied. Salman also cites a sampling of our criminal-fraud decisions construing other federal fraud statutes, suggesting that they stand for the proposition that fraud is not consummated unless the defendant obtains money or property. Sekhar v. United States, 570 U. S. 729 (2013) (Hobbs Act); Skilling v. United States, 561 U. S. 358 (2010) (honest-services mail and wire fraud); Cleveland v. United States, 531 U. S. 12 (2000)
We reject Salman’s argument that Dirks‘s gift-giving standard is unconstitutionally vague as applied to this case. Dirks created a simple and clear “guiding principle” for determining tippee liability, 463 U. S., at 664, and Salman has not demonstrated that either §10(b) itself or the Dirks gift-giving standard “leav[e] grave uncertainty about how to estimate the risk posed by a crime” or are plagued by “hopeless indeterminacy,” Johnson v. United States, 576 U. S. ___, ___, ___ (2015) (slip op., at 5, 7). At most, Salman shows that in some factual circumstances assessing liability for gift-giving will be difficult. That alone cannot render “shapeless” a federal criminal prohibition, for even clear rules “produce close cases.” Id., at ___, ___ (slip op., at 9, 10). We also reject Salman’s appeal to the rule of lenity, as he has shown “no grievous ambiguity or uncertainty that would trigger the rule’s application.” Barber v. Thomas, 560 U. S. 474, 492 (2010) (internal quotation marks omitted). To the contrary, Salman’s conduct is in the heartland of Dirks‘s rule concerning gifts. It remains the case that “[d]etermining whether an insider personally benefits from a particular disclosure, a question of fact, will not always be easy for courts.” 463 U. S., at 664. But there is no need for us to address those difficult
III
Salman’s jury was properly instructed that a personal benefit includes “the benefit one would obtain from simply making a gift of confidential information to a trading relative.” App. 398–399. As the Court of Appeals noted, “the Government presented direct evidence that the disclosure was intended as a gift of market-sensitive information.” 792 F. 3d, at 1094. And, as Salman conceded below, this evidence is sufficient to sustain his conviction under our reading of Dirks. Appellant’s Supplemental Brief in No. 14–10204 (CA9), p. 6 (“Maher made a gift of confidential information to a trading relative [Michael] . . . and, if [Michael’s] testimony is accepted as true (as it must be for purposes of sufficiency review), Salman knew that Maher had made such a gift” (internal quotation marks, brackets, and citation omitted)). Accordingly, the Ninth Circuit’s judgment is affirmed.
It is so ordered.