Leon Cooperman is a frugal man, except when it comes to giving political enemies a piece of his mind, and restoring his reputation. Faced with allegations that he did a bit of insider-trading—a bit of alleged insider-trading inadvertently brought to the SEC’s attention by his own son—Cooperman responded with a series of angry outbursts, a pledge to spend whatever it took to win, and a novel theory of the crime, specifically: That promises made not to trade on non-public, material information proffered before the assurance was uttered don’t count, like saying “off the record” after the incriminating statement was made. Sure, he may have promised not to use the information for his benefit after he had it, but that just makes him a bad person, and not a criminal.
Well, Cooperman’s astronomical legal bills are only going to get bigger, because U.S. District Judge Juan Sanchez isn’t buying it.
“You may have broken your promise not to trade, but you haven’t misappropriated," Daniel Kramer, a lawyer for Cooperman, said during the hearing. “Not every broken promise is fraud….”
Sanchez said accepting Cooperman’s argument would create a “loophole” that would shield companies and outsiders from liability when an insider provides confidential information. Previous cases show that the SEC’s theory of insider trading in the case doesn’t require an agreement not to trade to precede the disclosure of such information, the judge said.
“Courts have made clear that the central concern of insider trading under the misappropriation theory is the deception that occurs at the time the outsider uses material nonpublic information to trade in securities,” Sanchez said.