Supreme Court won’t hear First Amendment challenge of newsletter prosecution

WASHINGTON, D.C. (AP) — The Supreme Court won’t stop the securities fraud prosecution of an investment newsletter that published a report about a stock based on a statement that was later denied by the company’s owner.

The high court on Monday refused to hear an appeal from Pirate Investor LLC – now known as Stansberry and Associates Investment Research – and Frank Porter Stansberry. The Securities and Exchange Commission says they violated a law that forbids any “untrue statement” as well as “fraud or deceit” in connection with the purchase or sale of any security.

Stansberry wrote a newsletter saying he had interviewed a company executive who told him to watch their stock on May 22. The executive later denied saying that, but Stansberry’s company made hundreds of thousands of dollars off selling newsletters. Nothing major happened with the stock on May 22 but the stock prices later rose.

News organizations, including The Associated Press, say the prosecution is in violation of the First Amendment. But federal judges have upheld the conviction.

The case is Pirate Investor LLC v. SEC, 09-1176.

Copyright 2010 The Associated Press