Cleared stockbroker plans $150 million suit against prosecutors

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A Long Island man whose conviction in the so-called "squawk box" case was overturned because the federal government failed to turn over exculpatory evidence has notified the Justice Department he plans a $150 million lawsuit for malicious prosecution.

In a notice of claim filed late last month, a lawyer for stockbroker Kenneth Mahaffy of Huntington said the government cost him $1.7 million in legal fees and had "forever" damaged his reputation "when they knew there was no legal basis" for the charges.

"They didn't have a case and no one's being held accountable for the misconduct," said Mahaffy's lawyer, Eric Sanders.

Mahaffy and five others were convicted of conspiracy in 2009 in federal court in Brooklyn for an alleged scheme to give day traders advance notice of "confidential" client orders broadcast internally on speakers called "squawk boxes" by brokerage houses.

But in 2012, the Second Circuit Court of Appeals rebuked prosecutors, saying they had "unfairly skewed" the trial by withholding depositions in which some brokerage executives said the order information wasn't confidential and brokers weren't trained to keep it secret.

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In his notice of claim, which has to be filed six months before suing the government, Mahaffy said the Justice Department and the Securities and Exchange Commission maliciously prosecuted him in "collusion" with the brokerages where he worked.

The Justice Department had no comment.

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