Artur Davis , a former Democratic congressman from Alabama (2003–2011), has written an intriguing piece for MarketWatch, suggesting that the Supreme Court may eviscerate the vague “crime” of insider trading, just as it did the vague doctrine of “honest services.” (See “ Court could redefine insider trading .”)
Davis is certainly no pro-capitalist. He interned at the egregious Southern Poverty Law Center and delivered one of the seconding speeches for Barack Obama at the 2008 Democratic Convention. But Davis did get his law degree, cum laude, from Harvard University, and he did vote against Obamacare—the only black Democrat to do so.
In his discussion of insider trading, Davis makes the obvious point: “For decades, without a single federal criminal or civil statute ever using the actual words ‘insider trading,’ regulators and prosecutors have expanded the definition and reach of the concept.”
For example, “the Supreme Court has explicitly said that a defendant in an insider-trading case must have a personal benefit at stake.” But, Davis says, consider the case of Don Chu, the first person arrested as part of U.S. Attorney Preet Bhara’s crusade against “rampant” insider trading. “The complaint filed in the case describes Chu on tape telling a friend that ‘I want to help you make money,’ but the government’s theory of how he derived his own gain from playing match-maker is unclear.”
It is hardly to be expected that someone like Davis would call for the complete elimination of the “insider trading” offense. But he does say that, if the Court follows the methodology it used with “honest services,” a majority may well “narrow insider trading cases to a core set of well-established offenses.”
Anti-capitalists like Preet Bhara would howl that businessmen were being permitted to commit crimes. But as Davis says: “The real issue is the inherently democratic idea that vague, ill-defined laws invite excess and overreaching.” And, of course, what the anti-capitalists would actually be howling about was any restraint on their ability to perpetrate “excess and overreaching.”