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Florida Law Review

Abstract

For nearly forty years, regardless of whether confidential information belonged to a government entity or a private-sector business, its misappropriation could be punished as a property crime. Lower federal courts relied on Carpenter v. United States, a well-known Supreme Court decision holding that an employer’s confidential information constitutes “property” within the meaning of the federal mail and wire fraud statutes. Carpenter unanimously affirmed the mail and wire fraud convictions of a reporter and his co-conspirators who had traded securities based on pre-publication information belonging to the Wall Street Journal. The Court then reaffirmed Carpenter in United States v. O’Hagan, a decision that involved a law firm partner who had purchased the securities of a tender offer target on the basis of confidential client information. The agency law principles that grounded the holdings in Carpenter and O’Hagan draw no distinction between self-serving employees in the public and private sectors. When confidential information is used for personal profit, both public and private entities are deprived of their information’s exclusive use, and the misappropriators are unjustly enriched.

Remarkably, both the Department of Justice (DOJ) in a series of flip-flops and a divided Second Circuit have been construing Kelly v. United States, a 2020 Supreme Court decision, to require a property crime carve-out for most confidential government information. More commonly known as the “Bridgegate” case, Kelly overturned the wire fraud convictions of two public officials appointed by New Jersey Governor Chris Christie. These officials tricked public transit workers into realigning traffic lanes on the George Washington Bridge, causing massive gridlock that infuriated the constituents of a rival politician. Although the Court recognized that the officials acted deceptively and corruptly, it unanimously held that the officials’ scheme to alter the exercise of an agency’s regulatory authority did not deprive the government of “property” within the meaning of the wire fraud statute.

This Article shows that the DOJ and the Second Circuit have been incorrectly extrapolating from Kelly—applying it to schemes involving the misappropriation of confidential information belonging to regulatory agencies, even though its facts did not involve any misappropriation of government information. As part of that thesis, this Article calls attention to Kousisis v. United States, a 2025 wire-fraud decision by the Supreme Court, which clarifies Kelly and limits its precedent to instances where an interference with the exercise of regulatory authority was the actual object of the defendant’s fraudulent scheme.

In an effort to restore the venerable status of confidential government information as “property” and to stem the tide of confusion that is spilling over into insider trading law more generally, this Article makes three important contributions. First, it draws essential distinctions between schemes designed to alter the exercise of regulatory authority (such as in Kelly) and schemes designed to obtain and use confidential government information for personal profit (such as in a litany of prosecutions that, until recently, routinely resulted in property-crime convictions or guilty pleas). Second, it spotlights both the substantial market value of confidential government information and two entirely overlooked federal statutes with provisions that regard such information as the government’s property. Third, it advances important prudential reasons for eliminating the carve-out of misappropriated government information from federal mail and wire fraud and other property crimes. Especially at a time when confidence in governmental actors is at an all-time low, clarifying the property status of confidential government information should be a high priority for courts, the DOJ, Congress, and scholars.

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