intangible property

In 1981, R. Foster Winans joined the Wall Street Journal as a reporter. In the summer of 1982, he became one of the two writers of its daily “Heard on the Street” column, which discussed selected stocks or groups of stocks and offered investment perspectives. The column had the potential to affect the price of the stocks it examined, although the columns at issue contained no corporate inside information. The Journal maintained an official policy that the contents and timing of the column were confidential prior to publication. In October 1983, Winans entered into a scheme with Peter Brant and Kenneth Felis, both connected with the Kidder Peabody brokerage firm, and with David Clark, a client of Brant, to supply advance information about the column’s timing and contents. The group bought or sold securities based on the probable market impact of the column. The group agreed to share the profits. Over a four-month period the brokers executed prepublication trades tied to 27 columns, generating net profits of about $690,000. Kidder Peabody noticed correlations between the “Heard” articles and trading in the Clark and Felis accounts in November 1983 and began inquiries. The Securities and Exchange Commission later opened an investigation. After the conspirators quarreled, Winans and petitioner David Carpenter, Winans’ roommate, disclosed the entire scheme to the SEC on March 29, 1984. Brant, who had pleaded guilty under a plea agreement, testified for the government at the subsequent bench trial. Winans, Felis, and Carpenter were convicted of violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, the federal mail and wire fraud statutes, and the conspiracy statute. Carpenter was convicted as an aider and abettor. With a minor exception the Court of Appeals for the Second Circuit affirmed the convictions. The Supreme Court granted certiorari.