United States Securities & Exchange Commission v. Ginsburg

362 F.3d 1292 (2004) United States Court of Appeals for the Eleventh Circuit 2004-03-19

SEC civil insider-trading action; jury verdict restored after district court judgment as a matter of law; penalties reinstated and injunction directed (result: claimant-won)

Facts

  1. 5 Importance to a reasonable investor satisfied proved
    The insider information in this case meets the materiality standard.
  2. 5 Importance to a reasonable investor satisfied proved
    The materiality of an uncertain prospective event “depend[s] at any given time upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.”
  3. 5 Importance to a reasonable investor satisfied proved
    Alan Box, EZ’s CEO, and Ginsburg discussed a specific share price, and Ginsburg knew both that Evergreen was interested in acquiring EZ and that EZ was talking to other companies.
  4. 5 Importance to a reasonable investor satisfied proved
    As for the nonpublic nature of the evidence, the jury heard testimony from Ron Peale, EZ’s CFO, that the talks were confidential.
  5. 5 Importance to a reasonable investor satisfied proved
    As to Katz, Ginsburg was clearly privy to information gleaned under a confidentiality agreement.
  6. 5 Importance to a reasonable investor satisfied proved
    The jury had before it sufficient evidence to conclude that Ginsburg’s June 16 meeting with Olds indicated to Ginsburg that a deal had to happen fast.
  7. 5 Importance to a reasonable investor satisfied proved
    The jury could reasonably infer that the information was material and nonpublic.
  8. 6 Intent to deceive, manipulate, or defraud satisfied proved
    Ginsburg was chairman and CEO of Evergreen Media Corporation, which owned and operated a number of radio stations. In 1996 Evergreen became interested in acquiring EZ, a corporation that owned radio stations. Ginsburg met with EZ’s CEO Alan Box on Friday, July 12, 1996, and Box told him EZ was considering several “strategic alternatives.” Before the meeting no decision had been made to sell the company. On Sunday evening, July 14, Ginsburg called Mark at 10:02 p.m., and they spoke for 26 minutes. The next day, Monday, July 15, Mark bought 3800 shares of EZ stock. Mark spoke with Jordan in person and on the telephone over the next few days, and they admit they discussed the purchase of EZ stock.
  9. 6 Intent to deceive, manipulate, or defraud satisfied proved
    On July 24, EZ’s investment banker faxed a letter to Ginsburg stating that EZ bids were due by July 26. At 7:40 a.m. July 25, a call was placed from Ginsburg’s cell phone to his parents’ home. Later that day Mark purchased 3200 shares of EZ stock for Mark and his wife’s joint account. On July 26, Mark purchased 4300 shares of EZ stock for the same joint account and 7500 shares for a trust account for his son. Also on July 26, Ginsburg, on Evergreen’s behalf, submitted a written offer to acquire EZ for cash and stock. On Sunday, July 28, a ten minute call was placed from Ginsburg’s home to Mark’s home. On Monday, July 29, Jordan bought 5000 shares of EZ stock, and an hour later Mark bought 30,000 shares.
  10. 6 Intent to deceive, manipulate, or defraud satisfied proved
    That same evening, June 16, a call was placed from a cell phone registered to Ginsburg to a phone registered to Mark. The next day, June 17, Mark bought 150,-000 shares of Katz. On July 14, Evergreen/Chancellor announced it would acquire Katz through a tender offer for Katz stock at $11 a share. On July 16 or 17, 1997, Mark sold 132,500 shares of Katz and tendered the rest, resulting in a total profit of $729,000.
  11. 6 Intent to deceive, manipulate, or defraud satisfied proved
    The SEC must prove violations of § 10(b) and § 14(e), and their supplementary Rules, by a preponderance of the evidence, and may use direct or circumstantial evidence to do so.
  12. 6 Intent to deceive, manipulate, or defraud satisfied proved
    Ginsburg offered evidence of public information about the companies as motivation for Mark’s trading, argued that the trades were consistent with prior trading history, and put forward innocent explanations for the calls.
  13. 6 Intent to deceive, manipulate, or defraud satisfied proved
    The call/trade pattern occurrences coupled with the jury’s right to disbelieve the innocent explanations of the calls and trades are enough to support the verdict.