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May 26 — Criminal defense lawyer Douglas Parigian lost his bid May 26 to dismiss criminal charges he traded on inside information about American Superconductor Corp. after being tipped by a golfing buddy ( United States v. Parigian, 2016 BL 167983, 1st Cir., No. 15-1994, 5/26/16 ).
The prosecution adequately alleged that the tipster benefited from conveying the information, the U.S. Court of Appeals for the First Circuit said.
In so deciding, Judge William J. Kayatta Jr. acknowledged that the Second Circuit in United States v . Newman “adopted a more discriminating definition of the benefit to the tipper,” saying the mere existence of a personal relationship wasn't enough (238 SLD, 12/11/14).
Nonetheless, the First Circuit wrote, it must follow its own controlling precedent. It said the alleged friendship between Parigian and his friend Eric McPhail “plus an expectation that the tippees would treat McPhail to a golf outing and assorted luxury entertainment is enough to allege a benefit, if a benefit is required.”
In addition, the court held, the alleged relationship between Parigian and McPhail was enough to show the breach of trust needed to support conviction under the misappropriation theory of insider trading.
Beginning around July 2009, McPhail allegedly began tipping Parigian and others to inside information regarding AMSC’s business activities and earnings. According to prosecutors, McPhail obtained the information during social outings with a senior AMSC executive.
The AMSC executive allegedly trusted McPhail to keep the information confidential and didn't know McPhail was sharing the information with Parigian and others.
Between July 2009 and April 2011, Parigian repeatedly traded on the information for approximately $275,000 in unlawful profits and losses avoided.
Parigian previously pleaded guilty to the charges on condition that he be allowed to challenge the indictment. He was sentenced to eight months of home confinement (160 SLD, 8/19/15).
To contact the reporter on this story: Phyllis Diamond in Washington at firstname.lastname@example.org
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To see the decision, go to http://www.bloomberglaw.com/public/document/US_v_Parigian_Docket_No_1501994_1st_Cir_Aug_31_2015_Court_Docket
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