United States v. Chestman
United States Court of Appeals for the Second Circuit
947 F.2d 551 (1991)
Ira Waldbaum, the controlling shareholder in Waldbaum, Inc., agreed to sell the corporation. Ira told several family members, including his sister, Shirley Witkin, about the pending sale, and told them to keep the information confidential. Shirley told her daughter, Susan Loeb, but told her to keep the information secret. Susan told her husband, Keith Loeb (Loeb), but stressed the need for secrecy. Loeb contacted a broker, Chestman (defendant), and told him that the company was going to be sold at a substantially higher price than its market price. Chestman purchased stock in Waldbaum, Inc. for himself and for Loeb. The U.S. government (plaintiff) brought suit against Chestman, and he was convicted of aiding and abetting Loeb’s misappropriation of nonpublic information in violation of Loeb’s fiduciary duty to the Waldbaum family and to Susan, in violation of Securities and Exchange Commission (SEC) Rule 10b-5 and section 10(b) of the Securities Exchange Act of 1934. The Second Circuit Court of Appeals set aside Chestman’s conviction.
Rule of Law
Holding and Reasoning (Meskill, J.)
Concurrence (Miner, J.)
Dissent (Winter, J.)