An appeals court delivered an embarrassing blow to
government prosecutors yesterday by tossing the convictions of six traders and
brokers in the long-running “squawk box” case the NY Post has told us.. In a
scathing 38-page ruling, the US Second Circuit Court of Appeals in Manhattan
slammed prosecutors for withholding evidence. The three-judge panel found that
the government wrongfully withheld as many as 30 transcripts from the defense
that might have swayed the jury.
The appeals court also gave the defendants hope that the win
was more than temporary when it warned prosecutors against trying the case for
a third time. The six defendants were convicted in 2009, following a mistrial
in 2007.
In 2005, prosecutors charged Ghysels and fellow brokers
Kenneth Mahaffy, formerly of Merrill Lynch and Citigroup, and Timothy
O’Connell, formerly of Merrill, with giving traders access to their brokerage
“squawk boxes,” which let brokerages communicate trade orders and other business
to brokers. Three former Watley officials, Keevin Leonard, Robert Malin and
Linus Nwaigwe, were also convicted.
The brokers indisputably placed open phone lines next to the
boxes so the traders could listen and make trades based on what they had heard.
But their convictions for conspiring to commit securities fraud rested largely
on the jury’s belief that the information was confidential, which it was not..
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