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    Business Associations Keyed to Hamilton

    View this case in different Casebooks
    Corporations Keyed to Hamilton

    United States v. Chestman

    Facts

    Waldbaum, the controlling shareholder of Waldbaum’s, Inc., told some members of the family that he was going to sell the corporation. Chestman (Defendant) learned from Loeb, who was married to Waldbaum’s niece, Waldbaum was to be sold to A & P for significantly more than the market price. Defendant was a broker for the junior members of the Waldbaum family. After receiving the information, but before the sale was announced publicly, Chestman (Defendant) purchased Waldbaum stock for himself and several of his customers, including Loeb. Loeb cooperated with the Securities and Exchange Commission (SEC) (Plaintiff) during its investigation, and ejected his profits and paid a fine. Defendant was indicted and convicted for violating Rules 10b-5 and 14e-3(a), for mail fraud and perjury. On appeal, a panel of the Second Circuit set aside Defendant’s conviction entirely. The United States (Plaintiff) appealed, resulting in this en banc rehearing by the Second Circuit.

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    United States v. Chestman