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Three hundred and thirty-six we’re sure gripping pages of denial and self-exculpation aside, former hedge-fund manager Raj Rajaratnam simply could not talk his way around a suspiciously-timed 23-second phone call from his old buddy, presumably from the men’s room closest to Goldman Sachs’ boardroom. Luckily for Christopher J. Clark, he didn’t need any such explanations in his insider-trading trial.

U.S. District Judge Claude Hilton dismissed the SEC’s claims after regulators presented their evidence and before the case was sent to the jury. “There’s just simply no circumstantial evidence here that gives rise to an inference that he received the insider information,” Judge Hilton said Monday, according to a transcript.

To be sure, Clark’s trading in management consultancy CEB’s options sure as hell look like insider-trading: He didn’t quite bet the house on it shortly before it was acquired by tech research shop Gartner Inc., but he did bet his car, as well as liquidating his wife’s investments and taking out a further loan. This is all quite suspicious enough even in absence of the knowledge that Clark’s brother-in-law was CEB’s controller.

The SEC alleged that some of Mr. Clark’s earlier trades followed phone conversations with his brother-in-law, although court records didn’t detail what was said.

Yes, but, crucially, those weren’t the trades at issue in the complaint. Of course, if they’d had evidence that Clark had, in fact, spoken to William Wright just before throwing so much money into CEB options—a 23-second phone call after a CEB board meeting in which the Gartner deal was discussed, perhaps—they’d probably have presented it, and this would be a different blog post. But, as Judge Hilton was at some pains to explain to the SEC lawyers, who aren’t used to losing insider-trading cases at trial, they didn’t, and occasionally calling your sister's husband is not disallowed by the securities laws.

“The government can speculate that he made a little too much money, he was a little too successful or more successful than he ought to be, so therefore he’s getting insider information,” Judge Hilton said, according to the hearing transcript. “But there’s no evidence of it.”

SEC Takes Rare Court Loss in Insider-Trading Case [WSJ]

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