NCJ Number
150637
Journal
Annals of the American Academy of Political and Social Science Volume: 525 Dated: (January 1993) Pages: 46-58
Date Published
1993
Length
13 pages
Annotation
The Securities and Exchange Commission (SEC) stepped up its enforcement of insider trading violations in the 1980's, and an intensive case study demonstrates the intricacies involved in proving both civil and criminal insider trading charges.
Abstract
In 1988, the California office of the SEC filed a civil insider trading action against Donald and Carl Karcher, president and founder, respectively, of a fast food chain. At this time, insider trading was a well-known priority of the SEC. With increased sanctions for insider trading legislated just months before by the Insider Trading Sanctions Act (ITSA) of 1984, the Karcher case was one of the first to use the ITSA's triple damages provision. The only criminal charge in the Karcher episode was brought against the company's head accountant, but civil charges were brought against the Karcher family. The Karcher case offers important insights into the way in which insider cases are perceived, handled, and adjudicated. The case also provides empirical evidence regarding difficulties in litigating a white collar offense. The accused can afford effective and astute legal representation, but the offense is essentially financial, with no eyewitness testimony or visible victims to take the stand. Further, defendants are usually well-respected, established members of the community. Unlike certain other crimes, such as bank robbery, where the offense is not debated, the prosecutor in insider trading cases must prove that an offense was indeed committed. Complexities associated with defining white collar crime and reliance on circumstantial evidence are common problems that prosecutors of white collar crime must overcome. 39 footnotes