A Brief Note On Willful Blindness And Criminal Law
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C. A tippee can satisfy the knowledge requirement of insider trading with imputed knowledge.
A tippee has knowledge of a tipper’s breach if the tippee is willfully blind to the breach. Criminal law has long provided that a person cannot avoid liability by hiding from facts that a reasonable person would know. Stone v. United States, 113 F.2d 70, 75 (6th Cir. 1940). Willful blindness is an alternative method of proving that a defendant acted knowingly or willfully. Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068–69 (2011). Courts use the doctrine to prevent defendants from escaping liability by “deliberately shielding themselves from clear evidence.” Id. A willfully blind defendant is just as culpable as a defendant who has actual knowledge. Id.
This Court has held that two elements must be met for a defendant to be willfully blind. The first element is the “defendant must subjectively believe that there is a high probability that a fact exists.” Id. at 2070. The second element is the “defendant must take deliberate actions to avoid learning of that fact.” Id. This Court went on to state that “a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” Id. at 2070–71. Circuit courts have held that the exact language of Global-Tech does not have to be used if the jury instructions adequately explain the substance of the two elements. United States v. Jinwright, 683 F.3d 471, 480 (4th Cir. 2012).
Tippees can be held liable for insider trading under a theory of willful blindness. First, the theory of willful blindness is generally applicable to all criminal statutes where ...
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...rmine whether prosecutors have similar motive and opportunity at a grand jury hearing as they would at trial.
For many years, there has been a circuit split on how to interpret the former testimony exception for grand jury hearings. Some circuits, such as the Second Circuit, have adopted a balanced approach, where the court evaluates the facts to determine whether a prosecutor has the same motive and opportunity to develop testimony. United States v. DiNapoli, 8 F.3d 909, 914 (2d Cir. 1993). Other circuits, such as the Sixth Circuit, have adopted a categorical rule that prosecutors have the same motive and opportunity at a grand jury hearing as they do at trial. United States v. Foster, 128 F.3d 949, 955–56 (6th Cir. 1997). This Court should adopt the fact-based approach because of the practical and substantive differences between grand jury hearings and trials.