Articles Posted in Securities Law

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From 1997-2001, Nacchio served as Qwest's CEO. Based on 2001 stock trades, Nacchio reported a net gain of $44,632,464.38 on his return and paid $17,974,832 in taxes. In 2007, Nacchio was convicted of 19 counts of insider trading, 15 U.S.C. 78j, 78ff. Following a remand, the court resentenced Nacchio to serve 70 months in prison, pay a 19 million dollar fine, and forfeit the net proceeds, $44,632,464.38. Nacchio settled a concurrent SEC action, agreeing to disgorge $44,632,464. Nacchio’s criminal forfeiture satisfied his disgorgement obligation. The Justice Department notified participants in private securities class action litigation or SEC civil litigation concerning Qwest stock that they were eligible to receive a remission from Nacchio’s forfeiture. Nacchio sought an income tax credit of $17,974,832 for taxes paid on his trading profits. The IRS argued that his forfeiture was a nondeductible penalty or fine and that he was estopped from seeking tax relief because of his conviction. The Claims Court held that Nacchio could deduct his forfeiture payment under Internal Revenue Code 165, but not under I.R.C. 162 and was not collaterally estopped from pursuing special relief under I.R.C. 1341. The Federal Circuit reversed as to section 165;Nacchio failed to establish that his forfeiture was not a “fine or similar penalty.” Because establishing deductibility under another section of the code is a prerequisite to pursuing relief under section 1341, Nacchio cannot pursue a deduction under that section. View "Nacchio v. United States" on Justia Law

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The patent, titled "Automated Exchange for Trading Derivative Securities," discloses an invention directed to an automated exchange for trading options contracts that allocates trades among market professionals and that assures liquidity. The patent distinguishes an automated exchange from the traditional, floor-based "open-outcry" system, under which trading takes place through oral communications between market professionals at a central location in open view of other market professionals. The patent purports that it can "provide an automated system for matching previously entered orders and quotations with incoming orders and quotations on an exchange for securities, which will improve liquidity and assure the fair handling of orders." The district court held that the patent is not infringed by the trading system of Chicago Board Options Exchange. The Federal Circuit reversed in part. The district court erred in construing "system memory means," "matching," and "automated exchange." View "Chicago Bd. Options Exch., Inc. v. Int' Sec. Exch., L.L.C." on Justia Law