Brokers Say SEC Must Drop Suit After Insider Charges Tossed

(Bloomberg) — Two brokers who got insider trading-trading charges against them thrown out told a judge they shouldnt have to face a U.S. Securities and Exchange Commission lawsuit over the same trades.

After an appeals court ruling in another case making it harder for prosecutors to win insider-trading convictions, Benjamin Durant and Daryl Payton were among five men who won dismissal of charges involving International Business Machines Corp.s $1.2 billion purchase of SPSS Inc. Payton and Durant bought SPSS securities ahead of the announcement of the 2009 acquisition, earning Durant $53,000 in illegal profit and Payton $243,000, theSECalleges in its lawsuit in Manhattan federal court.

The judge who presided over the criminal case ruled in January that the government lacked enough evidence to meet the new standard set by the appeals court. The appellate court said that, to be found guilty, a defendant must know his tips came from someone who not only had a duty to keep them secret but also got a benefit for leaking them.

Durant and Payton on Monday asked U.S. District Judge Jed Rakoff to dismiss the SECs insider-trading case, arguing they were so removed from the original tipper, they didnt know whether the person had a duty to keep it secret or got any benefit in exchange for the information.

Lawyers Tip

Both Durant and Payton say the tips originated with a lawyer who worked on the deal and then passed it to a friend, Trent Martin. The U.S. says Martin passed the information on to his friend, Thomas Conradt, a broker, who then shared the data with his co-workers Payton and Durant.

The lawyer, who the government didnt name, wasnt accused of wrongdoing.

TheSEClacks evidence Martin got anything from Conradt and fails to allege the nature of Martins relationship with the lawyer or whether Martin got anything in exchange for disclosing the information, according to the joint request filed by Durants lawyer, Greg Morvillo, and Paytons lawyer, Matt Fishbein.

The civil case is Securities and Exchange Commission v. Payton, 14-cv-04644, U.S. District Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Conradt, 12-cr-00887, U.S. District Court, Southern District of New York (Manhattan).