By Nate Raymond
(Reuters) - A Massachusetts lawyer has admitted to trading on inside information about American Superconductor Corp that a fellow golfer was told in confidence by an executive, his attorney said on Wednesday.
Douglas Parigian, 56, pleaded guilty on Tuesday to conspiracy and securities fraud charges after a federal judge in Boston refused to dismiss the case in light of a recent appellate ruling that narrowed the reach of insider trading laws.
U.S. District Judge Denise Casper's decision, issued earlier on Tuesday, clears the way for a June 1 trial for the remaining defendant, golfing friend and marble salesman Eric McPhail.
Allison Koury, a lawyer for Parigian, said he was reserving the right to appeal Casper's ruling after his sentencing on Aug. 17. A spokeswoman for U.S. Attorney Carmen Ortiz in Boston confirmed the plea but otherwise had no immediate comment.
Casper's decision followed a December ruling by the 2nd U.S. Circuit Court of Appeals in New York that curtailed authorities' ability to pursue insider trading.
The court, in reversing the convictions of hedge fund managers Todd Newman and Anthony Chiasson, ruled that prosecutors must prove a trader knew a tip's source received a benefit in exchange.
The court also narrowed what constitutes a benefit, saying it must be of "some consequence," not just friendship.
While the decision only applied to judges in New York, Vermont and Connecticut, Parigian, McPhail and defendants in other states began citing it in their cases.
Prosecutors said McPhail learned secret information about American Superconductor from an executive who belonged to his country club.
Despite hearing the information in confidence, McPhail tipped off several golfing friends, including Parigian, who earned more than $267,000 from trading, prosecutors said.
McPhail and Parigian were indicted in July, while four other golfers reached civil settlements with the U.S. Securities and Exchange Commission for a total of $145,309.
In court papers, Parigian and McPhail said prosecutors failed to allege the executive received what would constitute a benefit under the 2nd Circuit's decision and that authorities failed to say Parigian knew about it.
But Casper said the American Superconductor executive was the "unknowing source" of the actual tipster, McPhail. As a result, prosecutors did not need to allege the executive received anything in exchange for the information.
The case is U.S. v. McPhail, U.S. District Court, District of Massachusetts, No. 14-cr-10201.
(Reporting by Nate Raymond in New York; Editing by Noeleen Walder and Lisa Von Ahn)