Federal prosecutors in Brooklyn Wednesday said they will retry six men for a third time in the so-called "squawk box" trading case that originated on Long Island, despite a scolding from the 2nd U.S. Circuit Court of Appeals in August.
The men were charged in 2005 with piping large orders that brokerage houses broadcast on their in-house "squawk boxes" to a day-trading firm in Manhattan that used the tipoffs in a rapid-fire trading strategy. A jury in 2007 deadlocked on the central conspiracy charge, and a 2009 conviction was overturned when the appeals court found prosecutors had withheld exculpatory evidence.
"I have consulted with my front office and we have decided to proceed with the case," prosecutor James McMahon told U.S. District Judge John Gleeson.
In August, the 2nd Circuit said the government had "unfairly skewed" the previous trials by hiding evidence that brokerages did not think large orders announced on "squawk boxes" to be confidential. The court, in an unusual note, also wrote, "We wonder whether the government will choose to subject the defendants to yet a third trial."
For the defendants, whose lives have been in limbo for seven years, the appeals court's comment raised hopes that Brooklyn U.S. Attorney Loretta Lynch might drop the case.
"Their decision was disappointing," said Andrew Frisch, the lawyer for defendant Ken Mahaffy, a former Merrill Lynch broker from Huntington.
"This case is like a big fat dead whale on a beach," said another defendant, Keevin Leonard of Montvale, N.J. "No one knows what to do."
Mahaffy and Timothy O'Connell of Carle Place, who worked at Merrill Lynch's Garden City office, and former Lehman Brothers broker David Ghysels of West Palm Beach, Fla., were charged with providing access to brokerage orders. Three officials of the day-trading firm A.B. Watley -- Linus Nwaigwe of Valley Stream, Robert Malin of New York City, and Leonard -- were charged with trading on the information.
The defendants all insist that what they did wasn't a crime.
Prosecutor McMahon said the government wanted six weeks to explore possible pleas with the defendants, and Gleeson gave him until Jan. 4. But one defense lawyer said the opening offer was for his client to serve 2 years in jail, which was "not acceptable."