After many years of bringing hundreds of lawbreakers to justice, it appears to be the turn of U.S. Attorney Preet Bharara now to face the court. A lawsuit filed by an ex-hedge fund founder who claimed his constitutional rights were violated during a sweeping 2010 insider-trading raid can proceed. A federal court judge in New York has allowed a case against Preet Bharara to go to the discovery stage and denied the “Sheriff “of Wall Street’s motion to dismiss the civil rights claims of a former hedge fund manager targeted but never charged. The plaintiff in the case called the judge’s ruling a “first step’ in holding the government accountable for “troubling conduct.”
Legal experts say this is a rare and unusual case that may require the high profile, nationally recognized U.S. Attorney for Manhattan, some of his assistant attorneys, and the FBI, to submit hundreds of documents to do with the discovery process, in a case that may end up in a jury trial. “The Ganek case presents a relatively rare instance of a plaintiff’s claims prevailing over the defense of qualified immunity,” jdsupra.com, a legal news website, maintained.
On this March 10, federal Judge William H. Pauley permitted the civil rights case against Bharara et al to go forward. “The unusual decision on Thursday means the government must provide evidence about its work to Ganek and perhaps defend itself before a jury,” Bloomberg news reported. “Discovery is now appropriate to ascertain whether this case is about a simple misunderstanding or whether something more troubling was afoot,” Pauley wrote in the 35-page ruling.
David Ganek, a former hedge-fund manager at Level Global Investors LLC, a now defunct company, alleged his civil rights were violated in the course of an investigation; that in effect, as a law-enforcement officer, Bharara did not protect him from the violation; and despite knowing about it, did not clear up a misrepresentation about him, causing his company to fail.
Credited with securing more than 80 convictions after his pledge to crackdown on insider trading when he came into office in August 2009, Bharara, who supervises an office of more than 220 assistant U.S. attorneys, handling cases of domestic and international terrorism, narcotics and arms trafficking, white collar crime, public corruption, gang violence, organized crime, and civil rights violations, is being sued for violating the civil rights of a citizen, an irony not lost on critics of what they see as Bharara’s high-handed prosecutorial tactics.
According to media reports, including jdsupra.com, a November 2010 FBI raid of Ganek’s offices involved search of personal files and mobile phones, in the presence of journalists, causing investors anxiety, despite no resulting charges against Ganek.
The lawyer for Ganek informed Bharara the firm may have to close unless the U.S. Attorney publicly clarified that Ganek was not the target of investigation. Bharara did not make any clarification, the news report says, and the firm closed in February 2011.
Some of the 100 or so white collar cases brought by Bharara have been dismissed. Two years ago, a related case, U.S. v. Newman, was vacated by the Second Circuit on grounds that prosecutors were unable to prove that the two accused hedge fund managers knew that the corporate insider who gave them the information did it for “personal benefit.” Several other convictions were also reversed after this.
Ganek’s case which he filed in February 2015, rested on the affidavit used to get the search warrant for the FBI raid of Level Global offices. The affidavit Ganek claims, was partly fabricated as it related to him; that the research analyst who provided the affidavit, actually told the FBI that he never informed Ganek about the sources of the “inside information,” and that this was known from his testimony at the Newman trial. Which means, according to Ganek, that some parts of affidavit for the search warrant, were manufactured in a bid to get the warrant. This, he says, violated his Fourth and Fifth Amendment rights.
Judge Pauley ruled that Ganek had “adequately pled” that the affidavit in question “contained materially false statements and omissions” and therefore met the probable cause requirement regarding violation of his Fourth Amendment rights.
On his Fifth Amendment rights claim of “not to be deprived of liberty as a result of the fabrication of evidence by a government officer” Judge Pauley also ruled that Ganek had pled sufficiently. Furthermore, the judge also upheld Ganek’s “failure to intervene” claim that Bharara and others did not carry out their duty “to protect the constitutional rights of citizens from infringement by other law enforcement officers.” Bharara, the judge said, failed to clarify that Ganek was not the target of the investigation despite learning that the research analyst’s affidavit was incorrect.