Former Exec's Insider Trading Conviction Upheld, Despite ‘Newman'

Stay current on changes and developments in corporate law with a wide variety of resources and tools.

By Michael Greene

March 6 — A federal district court judge March 3 upheld the insider trading conviction of ex-Foundry Networks Inc. executive David Riley, even assuming the court's jury instruction was error in light of the Second Circuit's decision in U.S. v. Newman.

“Although the Court's instructions to the jury would have been different following Newman, the evidence adduced at trial left no reasonable doubt of Riley's guilt,” wrote U.S. District Court for the Southern District of New York Judge Valerie Caproni in her opinion denying a request for a new trial.

Jury Instructions

Last October a federal jury found the ex-Foundry executive guilty on two counts of securities fraud and one count of conspiracy to commit securities fraud for leaking tips about the company's pending acquisition by Brocade Communications Systems Inc.

Almost two months after the conviction, the U.S. Court of Appeals for the Second Circuit Dec. 10, in a landmark ruling, overturned the convictions of two alleged insiders holding that “in order to sustain a conviction for insider trading, the Government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information in exchange for a personal benefit”.

Relying on the Second Circuit's decision, Riley moved for a judgment of acquittal or, in the alternative, for a new trial, arguing among other things that the court's jury instruction regarding the personal benefit element of securities fraud was in error.

Caproni, however, concluded, even assuming her jury instruction was in error, that any rational jury would have found, beyond a reasonable doubt, that Riley obtained a personal benefit in exchange for confidential information.

She opined that, at a minimum, Riley obtained three “concrete personal benefits”—help with his side business, investment advice and help in securing his next job.

She additionally found that even if none of the specific benefits alone would be sufficient to satisfy Newman's “person benefit standard,” the totality of the circumstance clearly demonstrated a quid pro quo relationship in which each party was trying to benefit the other.

Accordingly, after considering all of Riley's arguments, the court found the evidence was more than sufficient to support the jury's conclusion that Riley tipped inside information in anticipation of receiving a personal benefit.

To contact the reporter on this story: Michael Greene in Washington at

To contact the editor responsible for this story: Kristyn Hyland at

The opinion is available at


Request Corporate on Bloomberg Law