September 13, 2010 / 9:29 PM / 10 years ago

No MBA for NYU student in insider trading scheme

NEW YORK, Sept 13 (Reuters) - New York University is not required to award a business degree to a student who completed his course requirements before pleading guilty to conspiracy over insider trading, a federal judge said on Monday.

U.S. District Judge Lewis Kaplan ruled against Ayal Rosenthal, a part-time MBA student who tipped his brother in 2005 about a transaction involving public companies, which he learned about through his job at PriceWaterhouseCoopers LLP.

According to Kaplan, Rosenthal finished his courses at NYU’s Stern School of Business in December 2006, before Stern learned he was the target of a criminal probe, and was told in a dean’s letter the next month that he would get his degree.

In fact, that did not happen, and Rosenthal pleaded guilty on Feb. 8, 2007 to one count of conspiracy to commit securities fraud, for which he was sentenced to 60 days in prison.

After his release, the school voted to deny him his degree and the dean said the guilty plea was the “deciding factor.”

Rosenthal sued in June 2008, alleging that NYU’s actions were “unauthorized, excessive, and unfair,” and violated the university’s disciplinary rules.

The judge disagreed.

“Rosenthal managed to complete his course requirements only by concealing his criminal investigation from Stern,” Kaplan wrote. “In the last analysis, the authority and discretion to determine whether Rosenthal was qualified to receive an MBA degree from Stern properly rested with its faculty.”

Edward Hernstadt, a lawyer for Rosenthal, said he respectfully disagreed with the ruling. He declined to elaborate, saying he had yet to fully review the ruling.

Bonnie Brier, NYU’s general counsel, said: “We appreciate the court’s finding in the case. For us, there is an important legal principle in higher education that universities alone are entitled to determine who should and who should not receive diplomas.”

The SEC filed civil charges in February 2007 against seven people, including Rosenthal’s father and two brothers, over what it called an insider trading scheme that netted more than $3.7 million. Ayal Rosenthal was 26 at the time, the SEC said.

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