Please take a look at the case below. This is one of the more famous insider trading cases of recent years and involved a writer of a Wall Street Journal column providing information to others in advance of publication of the article. Under what theory of insider trading should the prosecution of this case proceed? Is it important that we vigorously prosecute insider trading? How much insider trading goes on and is rarely caught (the Martha Stewart situation)?

Business Ethics R. Foster Winans, a reporter for the Wall Street Journal, was one of the writers of the “Heard on the Street” column, a widely read and influential column in theJournal. This column frequently included articles that discussed the prospects of companies listed on national and regional stock exchanges and the over-the-counter market. David Carpenter worked as a news clerk at the Journal. The Journal had a conflict-of-interest policy that prohibited employees from using nonpublic information learned on the job for their personal benefit. Winans and Carpenter were aware of this policy.

Kenneth P. Felis and Peter Brant were stockbrokers at the brokerage house of Kidder Peabody. Winans agreed to provide Felis and Brant with information that was to appear in the “Heard” column in advance of its publication in the Journal. Generally, Winans would provide this information to the brokers the day before it was to appear in the Journal. Carpenter served as a messenger between the parties. Based on this advance information, the brokers bought and sold securities of companies discussed in the “Heard” column. During 1983 and 1984, prepublication trades of approximately 27 “Heard” columns netted profits of almost $690,000. The parties used telephones to transfer information. The Wall Street Journal is distributed by mail to many of its subscribers.

Eventually, Kidder Peabody noticed a correlation between the “Heard” column and trading by the brokers. After an SEC investigation, criminal charges were brought against defendants Winans, Carpenter, and Felis in U.S. District Court. Brant became the government’s key witness. Winans and Felis were convicted of conspiracy to commit securities, mail, and wire fraud. Carpenter was convicted of aiding and abetting the commission of securities, mail, and wire fraud.