* James Gansman convicted on 6 counts, got 1 year prison
* Flawed jury charge didn't prejudice defense
By Jonathan Stempel
NEW YORK, Sept 9 A U.S. court upheld an insider
trading conviction of a former partner at accounting firm Ernst
& Young LLP, even though the trial judge failed to instruct
jurors on a valid defense he had to securities fraud charges.
The 2nd U.S. Circuit Court of Appeals in New York on Friday
said the defendant James Gansman did not deserve a new trial
because he was not prejudiced by the slightly different jury
charge given by his trial judge. It also turned aside several
other issues raised in the appeal.
Gansman had been appealing his May 2009 conviction on six
securities fraud counts, for which he later served one year and
one day in prison. The 50-year-old Gansman was released in
March, federal prison records show.
Prosecutors said Gansman tipped Donna Murdoch, with whom he
was having an affair, between 2005 and 2007 about potential
mergers and acquisitions involving clients at Ernst & Young,
where he worked in New York until October 2007, and that she
made about $390,000 of illegal trading profit from the tips.
Murdoch pleaded guilty in December 2008 to 17 criminal
counts and cooperated with the government against Gansman.
In his appeal, Gansman said trial judge Miriam Goldman
Cedarbaum should have instructed jurors that if he had shared
any material non-public information with Murdoch, it was as
part of a long "relationship of trust and confidence," and that
he never expected her to trade on the information.
The proposed charge was intended to closely mirror a U.S.
Securities and Exchange Commission insider trading rule.
Writing for the 2nd Circuit, Judge Jose Cabranes said
Gansman "had the right" to invoke the rule's language, and
"could have been properly acquitted" had jurors agreed with his
theory. But he said the actual jury charge was "legally
sufficient," despite making no reference to any duty of trust.
"The theory of the defense was adequately conveyed to the
jury and defendant suffered no prejudice as a result of the
district court's instruction, even though the instruction did
not use the exact words Gansman preferred," he wrote.
Barry Bohrer, a partner at Morvillo, Abramowitz, Grand,
Iason, Anello & Bohrer representing Gansman, said: "We are
gratified that we were able to clarify the law of insider
trading, but are disappointed we could not get the benefit in
the charge to the jury. We won the battle, but not the war."
Murdoch was sentenced on July 27 to two years probation,
including six months of home confinement, court records show.
The case is U.S. v. Gansman et al, 2nd U.S. Circuit Court
of Appeals, No. 10-0731.
(Editing by Steve Orlofsky)