484 U.S. 19 (1987)
In 1981, R. Foster Winans joined the Wall Street Journal as a reporter.1 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.2 The column had the potential to affect the price of the stocks it examined, although the columns at issue contained no corporate inside information.3 The Journal maintained an official policy that the contents and timing of the column were confidential prior to publication.4
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.5 The group bought or sold securities based on the probable market impact of the column.6 The group agreed to share the profits.7 Over a four-month period the brokers executed prepublication trades tied to 27 columns, generating net profits of about $690,000.8
Kidder Peabody noticed correlations between the “Heard” articles and trading in the Clark and Felis accounts in November 1983 and began inquiries.9 The Securities and Exchange Commission later opened an investigation.10 After the conspirators quarreled, Winans and petitioner David Carpenter, Winans’ roommate, disclosed the entire scheme to the SEC on March 29, 1984.11 Brant, who had pleaded guilty under a plea agreement, testified for the government at the subsequent bench trial.12
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.13 With a minor exception the Court of Appeals for the Second Circuit affirmed the convictions.14 The Supreme Court granted certiorari.15
Whether criminal liability under Section 10(b) and Rule 10b-5 can be imposed when the only alleged victim of fraud is the newspaper and it has no interest in the securities traded?16
When the Supreme Court is evenly divided with respect to the convictions under the securities laws, the judgment below is affirmed on those counts.17
Yes. The Court is evenly divided with respect to the convictions under the securities laws.18 For that reason the judgment below is affirmed on those counts.19 This disposition leaves in place the convictions under Section 10(b) and Rule 10b-5 even though the Court did not resolve the underlying question of whether liability may attach when the newspaper is the only alleged victim.
Criminal liability under Section 10(b) and Rule 10b-5 can be imposed as the judgment below is affirmed.20
Whether a scheme in which an employee provides advance information about a newspaper column to others for securities trading constitutes a scheme to defraud the newspaper under the mail and wire fraud statutes?21
Sections 1341 and 1343 reach any scheme to deprive another of money or property by means of false or fraudulent pretenses, representations, or promises.22 The concept of fraud includes the act of embezzlement, which is the fraudulent appropriation to one’s own use of the money or goods entrusted to one’s care by another.23
Yes. The District Court found that Winans’ undertaking at the Journal was not to reveal prepublication information about his column.24 This promise became a sham when, in violation of his duty, he passed along to his co-conspirators confidential information belonging to the Journal.25 He acted pursuant to an ongoing scheme to share profits from trading in anticipation of the “Heard” column’s impact on the stock market.26
Winans continued in the employ of the Journal, appropriating its confidential business information for his own use, all the while pretending to perform his duty of safeguarding it.27
The conspiracy to trade on the Journal’s confidential information is within the reach of the mail and wire fraud statutes.28
Whether the newspaper's interest in the confidentiality of the column's timing and contents qualifies as property under the mail and wire fraud statutes?29
Yes. The Journal, as Winans’ employer, was defrauded of much more than its contractual right to his honest and faithful service.32 The object of the scheme was to take the Journal’s confidential business information—the publication schedule and contents of the “Heard” column.33 Its intangible nature does not make it any less “property” protected by the mail and wire fraud statutes.34
The newspaper's interest in the confidentiality of the column's timing and contents qualifies as property under the mail and wire fraud statutes.35
Whether circulation of the newspaper column through the mail and wire services satisfies the requirement that those mediums be used to execute the fraudulent scheme?36
The use of the mail and wire services to print and send the Journal to its customers satisfies the requirement that those mediums be used to execute the scheme.37 This holds when circulation of the column is an essential part of the scheme.
The requirement that the mail and wire services be used to execute the fraudulent scheme is satisfied.40