United States V. O’hagan Case Brief

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CASE BRIEF-Week 8 Style of Case and Citation: United States v. O’Hagan, 521 U.S. 642, 117 S. Ct. 2199, 138 L. Ed. 2d 724, 1997 U.S. Court Rendering Final Decision: US Supreme Court Identification of Parties and Procedural Details: Respondent, James O’Hagan, was an outsider who had access to confidential information, and he profited from the information at the expense of the company and other shareholders. The Securities and Exchange Commission (SEC) accused Respondent of Section:10(b) and Section:14(e) violations. Discussion of the Facts: Respondent was a partner in a law firm, Dorsey & Whitney, which was representing a company that was potentially tendering an offer for common stock of the Pillsbury Company. Respondent was not personally involved in the representation, but he was aware of the transaction enough to know that if he purchased Pillsbury securities now that they would increase in value once the offer went through. Respondent was going to use the profits from this transaction to replace money that he embezzled from the firm and its clients. After the offer went through, he made a $4.3 million profit. The SEC investigated Respondent’s transactions and claimed he violated Section:10(b) and Section:14(e) for misappropriating confidential information. A jury convicted Respondent. Statement and Discussion of the Legal Issues in Dispute: There are two issues regarding Section:10(b) and Section:14(e). The first issue is whether Respondent violated Section:10(b) and Rule 10b-5 when he misappropriated nonpublic information to personally benefit through the trading of securities. The second issue is whether Rule 14e-3(a) exceeds the SEC’s rule-making authority as granted by the Securities and Exchange Act. Subject Court Final Decision: Respondent did violate Section:10(b) and Rule 10b-5 because all of the element of the rule were met.

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