Salman v. United States

137 S.Ct. 420 (2016)


Maher Kara was an investment banker who dealt with highly confidential information about mergers and acquisitions involving Citigroup’s clients. Maher enjoyed a close relationship with his older brother, Mounir. Mounir began to trade on the information Maher shared with him. At first, Maher was unaware of his brother’s trading activity, but eventually, he began to suspect that it was taking place. Maher began to assist the trading by sharing inside information with his brother about pending mergers and acquisitions. Mounir fed the information to others-including D, Mounir’s friend, and Maher’s brother-in-law. By the time the authorities caught on, D had made over $1.5 million in profits that he split with another relative who executed trades via a brokerage account on D’s behalf. D was indicted on one count of conspiracy to commit securities fraud, and four counts of securities fraud, Maher and Mounir pleaded guilty and testified at D’s trial. Maher testified that he shared inside information with his brother to benefit him and with the expectation that his brother would trade on it. While Maher explained that he disclosed the information in large part to appease Mounir (who pestered him incessantly for it), he also testified that he tipped his brother to “help him” and to “fulfill whatever needs he had.” Mounir told the jury that his brother’s tips gave him “timely information that the average person does not have access to” and “access to stocks, options, and what have you, that I can capitalize on, that the average person would never have or dream of.” D was found guilty and convicted. Maher and Mounir enjoyed a “very close relationship.” D appealed. Pointing to the Newman case, D argued that his conviction should be reversed. While the evidence established that Maher made a gift of trading information to Mounir and that D knew it, there was no evidence that Maher received anything of “a pecuniary or similarly valuable nature” in exchange-or that D knew of any such benefit. The Ninth Circuit disagreed and affirmed D’s conviction. The Supreme Court granted certiorari.  D contends that a gift of confidential information to a friend or family member alone is insufficient to establish the personal benefit required for tippee liability, claiming that a tipper does not personally benefit unless the tipper's goal in disclosing information is to obtain money, property, or something of tangible value.