September 20, 2021

Volume XI, Number 263

Advertisement

September 20, 2021

Subscribe to Latest Legal News and Analysis

Illinois District Court Reaffirms Rule 10b5-1 Standard and Denies Motion to Dismiss Insider Trading Charges

The US District Court for the Northern District of Illinois denied a motion to dismiss a 16-count indictment for insider trading, finding the government adequately alleged each element of the offense.  

Steven Dombrowski was the Director of Audit at Allscripts Healthcare Solutions, Inc., a publicly traded company. The government alleged that Dombrowski’s position gave him access to material, nonpublic information, including advance knowledge of an April 2012 report that Allscripts’ earnings were lower than expected. Before the report was released, Dombrowski purportedly used his wife’s trading account to trade Allscripts stock and netted a profit of about $286,000.  

Dombrowski filed a motion to dismiss the insider trading charges. Citing cases that includedUnited States v. Smith, 155 F.3d 1051, 1066 (9th Cir. 1998) and SEC v. Adler, 137 F.3d 1325, 1337 (11th Cir. 1998), Dombrowski argued that, to prove he had traded “on the basis of” inside information, the government had to show he “used [such] information or that the information caused him to trade as he did,” and not he merely traded “while possessing inside information.”   

The District Court denied the motion, finding that SmithAdler and the like had been decided prior to the promulgation in 2000 of Rule 10b5-1, and it is now clear under that Rule that “awareness” of inside information is sufficient. As such, the government need not allege that a defendant “used” inside information. The District Court also noted that the indictment provided sufficient detail such that Dombrowski was aware of the charges and able to mount a defense against them.  

United States v. DombrowksiCase No. 14-CR-41 (N.D. Ill. July 15, 2014).

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume IV, Number 206
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Michael Rosensaft, white collar criminal litigator, Katten, New York Law Firm
Partner

Michael M. Rosensaft focuses his litigation practice on representing individuals and businesses in white collar criminal matters, regulatory enforcement matters, corporate internal investigations, insurance and health care fraud and complex civil litigation.

Prior to joining Katten, he served as an Assistant US Attorney for the Southern District of New York. In that capacity, Michael oversaw the investigation and prosecution of numerous criminal cases involving terrorism, international money laundering, export violations, bribery of foreign...

212-940-6631
Tenley Mochizuki, Katten Muchin Law Firm, Litigation Lawyer
Associate

Tenley Mochizuki concentrates her practice in litigation and dispute resolution matters.

While attending law school, Tenley participated in the Advocacy for the Elderly Clinic and worked on the Virginia Environmental Law Journal. Before joining the firm, she worked in a medical office, a primate cognition laboratory and various nonprofit organizations.

212-940-8568
Advertisement
Advertisement
Advertisement