Analyze all or a portion of Carpenter v. United States, using the Issue, Rule, Application, and Conclusion methodology in your comments below. Remember to “Blue Book” where appropriate.
Carpenter v. United States, 484 US 19 – Supreme Court 1987
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Facts: Winans is a reporter for the Wall Street Journal (WSJ). He is one of the authors of the “Heard on the Street” column. This daily column reports positive and negative information about various stocks. Because of the column’s perceived quality and integrity the column often has an effect on the stocks of the companies that are written about. Winans begins to systematically give advance notice to a stockbroker about the contents and timing of the column and whether the information will be positive or negative. The stockbroker then trades on these tips. Winans is aware that the WSJ views the contents of the column as the paper’s confidential information prior to publication.
Issues:
1) Has there been a violation of R. 10b-5?
2) Has there been a violation of the mail and wire fraud statute?
3) Did the WSJ have a property right in the contents and timing of the “Heard” column?
4) Was D’s conduct simply a violation of workplace rules or was it fraudulent activity as proscribed under the mail and wire statute?
5) Did D use mail or wire communication in the furtherance of a scheme to defraud?
Rules: R. 10b-5
Application:
1) The mail and wire fraud statute is limited to the protection of property rights
2) The federal mail and wire fraud statutes cover the stealing of intangible as well as tangible property.
3) “To defraud” in the mail fraud statute means: 1. wronging one in his property rights by dishonest methods or schemes and 2. deprivation of something of value by false pretense.
Conclusion:
1) The court is split 4-4 on the 10b-5 violation therefore it affirms the appelate courts finding of a violation.
2) There has been a violation of the mail and wire statute.
3) Confidential business information is property and the WSJ had a property right in keeping confidential and making exclusive use, prior to publication, of the schedule and contents of the “Heard” column.
4) D’s conduct was fraudulent activity as proscribed under the mail and wire statute. D promised not to reveal prepublication information, he violated this duty by passing on confidential information, pursuant to an ongoing scheme to share profits from trading in anticipation of the “Heard” column’s impact on the stock market.
5) Using the wires and the mail to print and send the WSJ to its customers satisfies the requirement that those mediums be used to execute the scheme at issue.