This post was written by Amy Greer.

I guess we will see whether SEC Chairman Mary Jo White revisits her decision to try more cases, given the unattractive string of losses that is piling up.  Most recently, a Federal District Judge in the Northern District of Georgia, after a bench trial, found in favor of defendant Ladislav “Larry” Schvacho, who faced insider trading charges. Mr. Schvacho traded in the shares of Comsys, where his very close friend happened to be the Chief Executive Officer. Problem was, the SEC had no evidence to offer except the trading itself and the fact (but not the substance) of a series of telephone calls and contacts between the friends, such contacts being completely in keeping with the men’s usual conduct. Seems these guys routinely kept in close contact by telephone and visited with one another often. Their frequency of communications were not at all unusual and did not change one bit around the time of the trading at issue. In fact, Mr. Schvacho had been trading in his friend’s company for many years, but he had never told him for fear of risking their friendship. According to Mr. Schvacho, he traded because he had confidence in his pal’s skills and because he believed that Comsys, a specialized staffing company, would benefit from the post-recession upswing. Not surprisingly, the court found the evidence completely lacking.

Notwithstanding what we’re seeing these days from U.S. Attorneys’ Offices, aided by wiretaps and cooperating witnesses facing jail time, insider trading allegations are always hard to prove. When I was at the SEC, we knew that bringing some of these cases to trial would be difficult, so we worked hard to get them settled. But you can’t settle them all, and when they don’t settle, judgment about which cases to fight is crucial. You need to have real evidence: documents, emails or text messages, or a tipper or tippee who is willing to testify. Absent that, these cases can’t successfully be tried. Frankly, given the evidence in Schvacho, or the complete lack thereof, it’s hard to believe this case made it through what usually is a pretty rigorous internal Enforcement Division process, much less was authorized by the Commission. If the chairman is looking for more cases to try, the Commission will need to look critically at the quality of the cases it brings, without so much emphasis on quantity.