Insider trading charges dismissed against former Granny Goose Foods executive

The Associated Press
Thursday November 22, 2001

SAN FRANCISCO — Federal prosecutors considered Wednesday whether to appeal a federal judge’s ruling dismissing insider trading charges against a former chief executive of now-defunct Granny Goose Foods, Inc. 

Keith Kim attended a 1999 Colorado retreat hosted by the Young President’s Club, an exclusive organization for the nation’s top young executives. He found out there that Meridian Data was about to merge with Quantum Corp., but according to club rules, business discussions are to remain confidential. 

Even so, Kim bought stock in Meridian on the information and made $832,000 when the merger closed two months later. 

U.S. District Judge Charles Breyer said Kim did not engage in insider trading and dismissed the bulk of the government’s case. 

“While members of a club may feel a special bond, there is nothing so special about their relationship ... that it gives rise to a legal duty not to trade on confidential information,” Breyer wrote late Tuesday. 

The Securities and Exchange Commission issued new regulations last year prohibiting trading based on information that the investor had agreed to keep confidential. The change does not apply retroactively to Kim, Breyer wrote, and strengthens the argument that his conduct was legal at the time. 

Federal prosecutors may ask the 9th U.S. Circuit Court of Appeals to review Breyer’s decision.