Unfinished Preet Bharara Business

Prosecutors smear David Ganek again to stop a public trial.


David Ganek at the 6th annual CNBC Institutional Investor Delivering Alpha Conference in September 2016.

David Ganek at the 6th annual CNBC Institutional Investor Delivering Alpha Conference in September 2016. PHOTO: NBCU PHOTO BANK/GETTY IMAGES

President Trump dumped Preet Bharara as U.S. Attorney for the Southern District of New York, and the celebrity prosecutor is conducting another media vindication tour. But a few problems from his tenure are left to resolve, including the ongoing legal crusade against David Ganek.

When we last checked on this saga, the Southern District had appealed a district judge’s ruling that discovery and trial could proceed in Mr. Ganek’s lawsuit against Mr. Bharara and the Federal Bureau of Investigation. The investor alleges that law enforcement violated his civil and constitutional rights with a 2010 insider-trading raid on his hedge fund, Level Global. The press was tipped off beforehand, Mr. Ganek was named as a suspect, and the reputational damage of the media circus ruined the firm.

Mr. Ganek was never charged with a crime, and the fraud conviction of one of his portfolio managers was overturned on appeal as an appellate court held that Mr. Bharara’s insider-trading theories exceeded the law. The feds now concede—or used to—that the affidavits used to obtain the Level Global search warrant contained false information about Mr. Ganek’s involvement in this non-scheme. Maybe these misrepresentations were honest mistakes, but that’s all the more reason to review evidence of the investigation such as emails and interview transcripts in public.


Instead, the Southern District is hiding behind the doctrine of prosecutorial immunity—and re-smearing Mr. Ganek to evade accountability for its botched investigation. At oral arguments late last month, a Second Circuit Court of Appeals panel seemed skeptical of the government’s arguments. So under questioning deputy U.S. attorney Sarah Normand accused Mr. Ganek of participating in “a scheme with regard to many, many pieces of inside information from many public companies.”

This accusation was never raised in the copious pretrial and appeal briefings, and presumably if prosecutors had anything solid on Mr. Ganek they’d have sought an indictment at the height of Mr. Bharara’s insider-trading bubble. Judge Reena Raggi noted that “certainly there’s no evidence at trial, or in the record that you’ve put forward, that the confidential informant or the cooperator ever said to law enforcement that Mr. Ganek did know that he was trading in whole or in part on inside information. That’s the record that we’ve got before us. That’s a statement made in the affidavit [that] is not true.”

The case’s larger import concerns accountability for alleged prosecutorial misconduct. Judge Alex Kozinski of the Ninth Circuit recently noted that improper and abusive behavior by prosecutors has reached “epidemic proportions.” If Mr. Bharara’s false affidavit was deliberate, it violated due process.

There’s also emerging evidence that something was rotten in Mr. Bharara’s operation. The FBI special agent who supervised securities fraud investigations in New York, David Chaves, who is also a defendant in the Ganek case, was recently cited for leaking confidential grand jury information in the insider-trading case of sports gambler William “Billy” Walters. Judge Kevin Castel issued an unusual order instructing the FBI to provide updates on Mr. Chaves’s internal disciplinary process.

According to emails revealed in the Walters case, Mr. Bharara knew about the leaks pouring out of the FBI’s white-collar unit, including to reporters at the Journal. He called it “outrageous and harmful” in a 2014 email, but as far as we know he did nothing to stanch the leaking. Earlier this year the FBI reached a rare settlement with the wife of a convicted inside-trader who was wiretapped in violation of the FBI’s eavesdropping guidelines. The terms aren’t public.

In other words, there’s a pattern of troubling behavior and a problematic culture inside Mr. Bharara’s old shop. Not least because there are so few consequences for prosecutorial abuse, the Second Circuit should allow Mr. Ganek’s suit to head to trial. 

Appeared in the Apr. 20, 2017, print edition.


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