Law firm 'wine and dine' event with client led to insider-trading case against partner's husband
Posted Feb 07, 2013 03:20 pm CST
The husband of a partner at a well-known law firm is facing an insider-trading case, after allegedly using information he obtained in connection with a planned “wine and dine” event with a Silicon Valley client.
James Balchan, an information technology specialist in Houston, is accused in a federal complaint filed there Wednesday by the Securities and Exchange Commission of purchasing shares of National Semiconductor Corp. after learning that the company was about to be acquired by Texas Instruments, reports the Recorder.
News of the looming acquisition leaked, the SEC says, when National Semiconductor’s general counsel had to cancel plans to attend an event hosted in his honor by Baker & Hostetler, due to then-ongoing secret negotiations with Texas Instruments.
The GC told one Baker partner, who told Baker partner Tonya Jacobs, who told her husband, Balchan, the complaint alleges. Jacobs, who worked at Baker & Hostetler from 1994 to 2012, is not accused of any wrongdoing, nor is the law firm, the Recorder reports.
Its article says Balchan has agreed to settle the SEC case for $60,000, but has not admitted any wrongdoing.
Such scenarios, partner Raymond Marshall of Bingham McCutchen told the legal publication are “all too common” and emphasize the need to exercise care about what lawyers discuss in public.
“All firms, including ours, have a very vigorous standard of not discussing client business outside the firm,” said Marshall, who co-chairs his firm’s white-collar investigations and enforcement practice group. “That means no elevator speak. No conversations to be overheard at lunch. No Super Bowl party chat about what you’re working on.”
If such information is revealed, however, it’s not only a breach of trust but illegal to trade on it, noted Marc Fagel, who heads the SEC’s San Francisco office.
“Spouses or other members of an attorney’s family may learn highly confidential information about a company when having casual conversation,” he said in a written statement. “Using that confidential information to buy or sell stock as Balchan did is not only a breach of trust, but also a violation of the federal securities laws.”
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