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HOW AN INSIDER TRADING SCANDAL BECAME AN “INSIDER LEAK” SCANDAL SOMETHING’S ROTTEN IN THE JUSTICE DEPARTMENT

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Until March, the New York Democrat and former chief counsel to Senator Chuck Schumer was for eight years the U.S. Attorney for the Southern District of Manhattan. That high profile office gave him a platform to launch crusades against insider trading and political corruption. Since leaving office he has become the senior legal analyst for CNN, host of his own legal podcast and an anti-Trump King of Twitter with 96,000 followers.

Bharara’s days as U.S. Attorney were heady and filled with media accolades. The Washington Post described him as the new “Sheriff of Wall Street.” The New York Times noted that “Bharara is a charismatic figure who is comfortable in front of cameras, can talk tough, and has a knack for the witty sound bite.”

The only problem is that like an Icarus who flew too close to the sun, Bharara’s record has been melting recently. The New Yorker magazine wrote in August that “incursions on Bharara’s record have piled up, casting his legacy into doubt… several of his high-profile cases have unraveled.” His successful prosecutions of former New York Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos have both been overturned following a Supreme Court ruling that narrowed the list of government actions that count as illegal favors. Governor Andrew Cuomo suggested his fellow Democrat had overreached when he went after Skelos and Silver. “If you’re using the legal system to quote unquote reform government, you have to do it legally,” the governor warned.

Nor have some of Bharara’s Wall Street cases fared well. After a judge ruled that the FBI had violated the rights of financier Benjamin Wey by searching his home and office, Bharara’s former office was in August forced to drop all charges. The month before, the case Bharara’s office had built against two traders accused of wrongdoing involving JPMorgan fell apart.

The media is also taking a second look at Bharara’s record. The Wall Street Journal editorial page noted in September that his pursuit of two hedge-fund managers for allegedly trading on information won a unanimous rebuke from a three-judge panel of the Second Circuit Court of Appeals. The Journal noted the case “repudiated the government’s argument that a gift of confidential information to anyone is enough to prove insider trading.”

The Second Circuit slapdown may figure prominently in another appeal of a controversial Bharara insider trading prosecution. Last April, renowned sports bettor and Las Vegas businessman Bill Walters was convicted of charges that he received illegal stock tips from Thomas Davis, the former chairman of Dean Foods, the nation’s largest milk processor.

Davis helped the government convict Walters as the lone witness against him. As a cooperating witness, his sentencing has been delayed. Prosecutors said Walters began trading in 2006 on secrets Davis told him and amassed millions in illegal profits. In July, a judge sentenced Walters to five years in jail and a $10 million fine. He is scheduled to report to federal prison on October 10.

But there is likely an “original sin” that taints the government’s entire case against Walters. The initial investigation of Davis and Walters, which also tangentially involved golfer Phil Mickelson and investor Carl Icahn, had stalled in 2014, as federal wiretaps of Davis and Walters turned up nothing incriminating.

But then both the New York Times and the Wall Street Journal reported in May, 2014 that the FBI was conducting an investigation and used secret grand jury testimony to provide details of the probe. Lawyers for Walters claimed at the time that FBI agents leaked secrets about the probe to prod targets to incriminate themselves. Both Bharara’s office and the FBI strongly denied any such breach of grand jury secrecy at the time.

But finally late last year, Federal District Judge Kevin Castel ordered an inquiry into the leaks. After finally launching a probe, the government admitted that David Chaves, the chief FBI agent in charge of Wall Street investigations, had met New York Times reporters for dinner as far back as April 2013 to talk about the Walters case, which he believed was “dormant.” Several months later, Chaves told a Wall Street Journal reporter about the probe leading to what became a form of “insider information trading” between reporters and the FBI.

Chaves admitted that he had been the main source for both the New York Times and Wall Street Journal stories of May 2014. He claimed that he and five senior FBI agents had met with reporters that month to barter information on the case in exchange for a delay in publishing the story. Chaves also admits that in exchange he would “from time to time” receive updates from one reporter on what she had learned about the Walters case. He also claimed that Bharara’s U.S. Attorney office knew of the meeting between reporters and the senior FBI agents.

His confession has led to Chaves’ suspension from work and a full-fledged investigation of the leaks by the Justice Department and its Office of Inspector General. Bharara’s office has failed to provide a full explanation of why it for two years denied any leaks of secret grand jury material to reporters. In court filings, it merely stated the delay was due to unspecified “errors” that it does “not take pride in or excuse.”

Lawyers for Walters say they have found evidence of a pattern of illegal leaks out of Bharara’s office in several other of his most famous insider trading cases. In the case of their client, they claim the leaks amount to an obstruction of justice “as part of a deliberate plan to bolster an investigation” that was stalled and going nowhere. The leaks were designed to prod targets to incriminate themselves after the wiretap on Walters’ phone failed to turn up evidence.

Those arguments weren’t enough to convince Federal Judge Castel to stop Walter’s trial on insider trading charges, but the government’s glaring misconduct make Walters’ conviction ripe for being overturned on appeal.

And since Walters’ conviction in May, Judge Castel has grown impatient with the snail’s pace of Justice’s probe of Chaves and the leaks from Bharara’s office. This summer, Castel demanded that Justice provide confidential quarterly updates on its probe. To date, the judge said Justice’s updates to him had provided “virtually no substance.” Given that Chaves is facing possible criminal prosecution and a contempt-of-court finding by the judge that’s hardly reassuring to Walters or his lawyers.

All of this – the growing reversals of Bharara’s convictions, the outrageous leaks in the Walters case and the molasses-like pace of the investigation of FBI agent Chaves’ misdeeds and whether they involved others – are all part of a larger context that should concern the Trump administration, Congress and the general public.

Under Barack Obama’s administration, both the Justice Department and the FBI came under sharp criticism for the way in which they handled the probe of Hillary Clinton’s e-mail server. A key witness in the case, Cheryl Mills, was allowed to sit in on Clinton’s FBI interview as her lawyer. The interview was neither taped nor transcribed nor held under oath. Immunity agreements with other witnesses were broken but with no legal consequences against them. Attorney General Loretta Lynch met privately on an airport tarmac with Bill Clinton with no aides present. FBI Director Jim Comey prepared memos outlining why he would not legally charge Clinton even before his agents interviewed her. In the probe of the Trump campaign’s 2016 contacts with Russian sources, it has been revealed that Comey himself arranged for privileged information about the probe to be leaked to the New York Times. His actions are now been investigated by Justice’s Office of Inspector General.

Where there is this much smoke there may be real fire. The Trump Administration needs to ask serious questions about just how deep the rot at Justice and the FBI goes. One area they should start with is the increasingly obvious mess that Preet Bharara left behind him at the U.S. Attorney’s office, including the shameful behavior surrounding the Walters case.

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