U.S. v. O'Hagan case Facts

In the U.S. v. O'Hagan case, the defendant, James Herman O'Hagan, was a partner in a major Minneapolis firm, and was involved in a corporate acquisition as a representative of the acquiring corporation (Corley, et al., 2002). D allegedly used insider information to purchase stock before the details of the acquisition were made public.

History discovered in 1988 that Grand Met PLC, one of his clients, planned to acquire Pillsbury Company (Corley, et al.). D purchased Pillsbury stock and options to acquire Pillsbury stock. D made four million dollars when the acquisition was announced.

D's actions caught the attention of the plaintiff, the Securities Exchange Commission (SEC) and the local U.S. attorney. D was convicted of 57...

Court of Appeals overturned the decision, stating that Rule 10b-5 did not reach the use of inside information by a non-insider, as long as the non-insider did not deceive a participant in the trade (Corley, et al.).
In addition, it ruled that, because there was no breach of fiduciary duty by the defendant to the company that owned the stock or the trade participants, there was inadequate association between the misappropriation and the sale to allow the use of…