Supreme Court stops insider trading retrial of Enron executive

The U.S. Supreme Court ruled today that F. Scott Yeager, a former executive at Enron Broadband Services, cannot be retried for insider trading. In 2005 Yeager was acquitted of securities and wire fraud charges, but the jury deadlocked on insider trading charges. The government attempted to retry Yeager on the insider trading charges, but Yeager protested that such a retrial would violate the Double Jeopardy Clause of the Constitution.

Since Yeager had been acquitted of the fraud charges, he argued, the jury must have found that he had not possessed insider information, and if he had not possessed insider information, it was impossible for him to have traded on the basis of such information.

Generally courts are not allowed to consider jury’s motivations, but the lower courts had trouble reconciling his jury’s acquittal on some charges with the deadlocking on others, since there were so many factors in common between the charges.

The Supreme Court decision, authored by Justice Stevens, said that courts can consider what a jury decided, but not what a jury failed to decide. In other words, the court must consider whether an insider trading charge would be allowed, taking into account only the earlier acquittal on fraud charges. Juries may have many reasons for deadlocking, and it is impossible to know why they did what they did.

Because the fraud charges were found by the lower court to be based on the same basis as the insider trading charges, the insider trading charges are now barred from prosecution. The Supreme Court decision did leave open a small door for a lower court to reconsider its analysis of the legal issues: if a lower court finds that it is possible to have committed insider trading and not fraud, a new trial may be possible.

The decision was 6-3. Justice Kennedy agreed with the majority on the Double Jeopardy interpretation, but wrote separately to say that the lower court must reconsider the legal analysis of the two charges.

The case was Yeager v. United States.