U.S. prosecutors said they are prepared to drop charges against five men accused of engaging in insider trading ahead of an International Business Machines Corp (NYSE: IBM) acquisition, citing an appellate court ruling that limited the ability of authorities to pursue such cases.
In an unusual letter late Wednesday, prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan asked U.S. District Judge Andrew Carter to dismiss the indictment.
If Carter does so, Bharara's office could appeal his ruling last week that the December appellate court decision applied to the case. The appellate ruling prompted the judge to throw out the guilty pleas of four of the five men.
But prosecutors said if Carter does not dismiss the indictment, they intend to drop the charges, saying the evidence "falls short" of the appellate court's standards.
A hearing is scheduled for later Thursday. A Bharara spokeswoman declined comment.
In the IBM case, prosecutors said Michael Dallas, a lawyer at IBM's law firm, in 2009 told Trent Martin, then an analyst at Royal Bank of Scotland Group Plc, about IBM's planned $1.2-billion U.S. acquisition of SPSS Inc.
While Dallas expected his friend Martin not to tell anyone else, the analyst bought SPSS stock and told his roommate, then Euro Pacific Capital Inc trader Thomas Conradt.
Conradt told his colleagues, traders David Weishaus, Daryl Payton and Benjamin Durant, according to authorities.
IBM shares dipped 97 cents early Thursday to $150.58 U.S., near the bottom of a 52-week trading range of $150.50 U.S. to $199.21 U.S.
