In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 05-1091
UNITED STATES OF AMERICA,
                                               Plaintiff-Appellee,
                                v.

RYAN D. EVANS,
                                           Defendant-Appellant.
                         ____________
           Appeal from the United States District Court
      for the Northern District of Illinois, Eastern Division.
           No. 03 CR 928-2—Milton I. Shadur, Judge.
                         ____________
       ARGUED MAY 2, 2006—DECIDED MAY 15, 2007
                     ____________


 Before CUDAHY, RIPPLE, and WOOD, Circuit Judges.
  WOOD, Circuit Judge. Paul Gianamore was a financial
analyst at Credit Suisse First Boston, an investment
banking firm. He gave information to his friend, Ryan
Evans, who traded on that information very lucratively.
For their efforts, both men wound up being charged in an
eight-count indictment with violations of the federal
securities laws. The first time the case went to trial, the
jury acquitted Gianamore on all counts, including one
that accused him of conspiring with Evans to violate the
anti-fraud provisions of the securities laws. The jury also
found that Evans was not guilty on the conspiracy charge,
but it deadlocked on the substantive securities laws
violations. The district court rejected Evans’ motion for
2                                               No. 05-1091

acquittal and retried him. The second time around, the
jury convicted him on the seven substantive violations of
federal securities laws, four of which involved insider
trading and three of which charged fraud in connection
with a tender offer.
  On appeal, Evans argues that as Gianamore’s tippee he
cannot be convicted because Gianamore (the tipper) was
acquitted. He also asserts that the district court gave an
erroneous jury instruction on the insider trading counts,
that evidence was erroneously admitted, and that without
the insider trading convictions his tender offer convic-
tions cannot stand. We conclude that his conviction must
be affirmed: Gianamore’s acquittal did not foreclose
Evans’s own liability as a matter of law, and the district
court acted within its discretion with respect to its eviden-
tiary rulings and instructions.


                             I
  Following his graduation from college, Gianamore
worked at Credit Suisse First Boston from October 1999
through October 2000, first in Chicago and later in San
Francisco. As a financial analyst, he had access not only
to his own work but to that of other analysts. In this way,
he was privy to information about tender offers and
proposed mergers. Tender offers are essentially offers to
the shareholders of a targeted company to buy some or all
of their stock at a particular price. Credit Suisse helped
both buyers and targets to gather information, including
nonpublic information, to determine either what price to
offer or whether to accept the offered price. Because
Gianamore began working at Credit Suisse in the
month of October, which was not the company’s regular
start time for new analysts, he received an abbreviated
form of the orientation required for new analysts. As part
of that process, he was shown a videotape that covered the
No. 05-1091                                               3

topics of confidentiality and insider trading, and he signed
statements on the day he started acknowledging that he
had received and reviewed the Credit Suisse Compliance
Policy Manual.
  Gianamore and Evans were friends. They met as college
freshmen at DePaul University in Chicago, although
Gianamore moved to New York to attend Cornell after
his freshman year. When Gianamore moved back to
Chicago, the two resumed their friendship; they talked
daily via email or phone and saw each other frequently.
Friends of both men testified that Gianamore talked about
work, but that his comments were of a general nature.
During the first trial, Gianamore’s former roommate Mark
Hauber also testified that Gianamore talked “in detail”
about his work, including specific transactions, and even
showed Hauber confidential documents. At the govern-
ment’s urging, the district court excluded Hauber’s testi-
mony from the second trial, finding it immaterial to how
much information Gianamore shared with Evans and
Gianamore’s motive for his revelations.
  While Gianamore worked at Credit Suisse, Evans traded
on three tender offers and one merger in which Credit
Suisse was involved between December 1999 and August
2000. Evans used his online brokerage account to make
the trades. The first trade involved Jostens, Inc., which
hired Credit Suisse to help evaluate a merger offer from
Investcorp, SA, a privately held company. In December
1999, Gianamore was assigned to work on this potential
transaction. A few days later, Evans bought the maxi-
mum amount of Jostens stock he could afford; he raised
the funds by selling all of the other securities in his
brokerage account. Six days later—the first day of trading
after the merger was announced—he sold the shares,
making a profit of almost $8,000. This was the smallest of
the four trades identified in the indictment, although all
four followed the same pattern.
4                                               No. 05-1091

  The second trade involved Lincoln Electric Company, a
longstanding client of Credit Suisse. During the spring
of 2000, Lincoln Electric made a cash tender offer for the
outstanding shares of Charter PLC. Although Gianamore
himself did not work on this transaction, the analyst on
the deal recalled alerting Gianamore to the date on which
the press release announcing the tender offer would be
issued. Evans bought Charter stock on the very day that
the company’s board of directors approved the deal and
sold it the next day, right after it was announced to the
public. In total, Evans made about $244,000 in profit. In
the third transaction, Hussman International hired
Credit Suisse in April 2000 to evaluate Ingersoll-Rand’s
offer to buy Hussman’s stock. Again, an analyst other than
Gianamore had responsibility for the deal. Again, Evans
bought his stock on the day the Hussman board of direc-
tors met to approve the transaction, and sold it the next
day, again following the public announcement. This time
Evans made nearly $136,000. Finally, in July 2000, Burns
International hired Credit Suisse to evaluate Securitas’s
tender offer. Gianamore was assigned the project. As
before, Evans purchased Burns stock on August 2, 2000,
the day the board met and approved the transaction;
Evans sold his stock the next day, making $74,714
in profit.
  As we noted, the jury at the first trial acquitted
Gianamore on all counts and acquitted Evans of conspiracy
but not of the substantive offenses. In light of this
result, Evans asked the district court to dismiss the
insider trading charges against him as well, arguing that
he was entitled to prevail as a matter of law in light of the
jury’s conclusion that neither man had been engaged in a
conspiracy. The district court denied that motion and tried
Evans a second time. During the second trial, in addition
to excluding Hauber’s testimony, the district court altered
the jury instructions from the first trial, largely because
No. 05-1091                                              5

Gianamore was not a defendant in the second trial. The
second jury found Evans guilty of four counts of insider
trading in violation of § 10(b) of the Securities Exchange
Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R.
§ 240.10b-5, and three counts of fraud in connection
with a tender offer in violation of § 14(e) of the Exchange
Act, 15 U.S.C. § 78n(e) (the Williams Act), and Rule 14e-3,
17 C.F.R. § 240.14e-3. Evans was sentenced to 21 months
in prison on each count, to run concurrently, as well as
a fine of $7,500 and a term of supervised release of three
years. He appeals.


                            II
  We begin with the insider trading violations. Evans’s
arguments here focus on the legal requirements for a
conviction, and thus our review is de novo. We must
consider what is necessary to convict a person who receives
confidential, inside information from someone else and
trades upon it—in other words, a tippee. Evans contends
that following the acquittal of Gianamore, the alleged
tipper, and his own acquittal for conspiring with
Gianamore, he cannot possibly be guilty as a tippee. In
essence, he argues that the government is estopped from
prosecuting him again because the first trial necessarily
decided issues that preclude his convictions. He also
contends that the jury instructions in his second trial are
improper because they fail to require that the tipper have
personally benefitted from giving the tippee the infor-
mation.
  Before turning to Evans’s individual arguments, it is
helpful to review the fundamentals of tippee liability. In
Dirks v. SEC, 

(1983), the government prose-
cuted an officer of a New York broker-dealer firm who
investigated and publicized allegations that Equity
Funding of America, a diversified corporation, had vastly
6                                              No. 05-1091

overstated its assets. Neither Dirks nor his firm traded on
the information about Equity Funding, but others to
whom Dirks spoke during the course of his investigation
did. The corporation’s stock price fell, leading to a com-
plaint against Equity Funding by the SEC. 

Although Dirks’s investigation had brought massive
fraud to light and he himself had not traded on insider
information, an administrative law judge nevertheless
found that he had aided and abetted insider trading. 

Because of his role in bringing far greater mis-
deeds to light, he was merely censured, but he nonethe-
less sought review.
  In examining the question of tippee liability, the Su-
preme Court pointed out that insider trading is a crime
because of the relation between the insider and the
corporation. 

(discussing Chiarella v. United
States, 

(1980)). For this purpose, insiders
include corporate officers, directors, or controlling stock-
holders, all of whom have a fiduciary relation with the
corporation. See 

(citing Cady,
Roberts & Co., 40 S.E.C. 907, 911 (1961)). An insider
violates Rule 10b-5 when two elements are established: “(i)
the existence of a relationship affording access to inside
information intended to be available only for a corporate
purpose, and (ii) the unfairness of allowing a corporate
insider to take advantage of that information by trading
without disclosure.” 

(quoting

). In Chiarella, the Court had
concluded “that there is no general duty to disclose be-
fore trading on material nonpublic information, and held
that ‘a duty to disclose under § 10(b) does not arise from
the mere possession of nonpublic market information.’ ”

(quoting 

).
Instead, the duty arises from the combination of a fidu-
ciary duty and some kind of manipulation or deception. 

alternative, the insider always has the option of
refraining from trading. 

                                                7

  Tippees, of course, are not insiders themselves, and so
the question has arisen how far the duty either to dis-
close or to refrain from trading extends to them. This was
the subject of the Supreme Court’s decision in Dirks,
where the Court found that “[t]he need for a ban on some
tippee trading is 

. Critically for
Evans’s case, it held that “the tippee’s duty to disclose or
abstain is derivative from that of the insider’s duty.” 

decided that before tippee liability can exist,
there must have been a breach of the insider’s fiduciary
duty. The test “is whether the insider personally will
benefit, directly or indirectly, from his disclosure.” 

“Absent some personal gain,” the Court continued,
“there has been no breach of duty to stockholders. And
absent a breach by the insider, there is no derivative
breach.” 

In determining whether there was
a breach, the proper focus is on “objective criteria, i.e.,
whether the insider receives a direct or indirect benefit
from the disclosure, such as a pecuniary gain or a
reputational benefit that will translate into future earn-
ings.” 

As Dirks illustrates, however, the concept
of gain is a broad one, which can include a “gift of confi-
dential information to a trading relative or friend.” 

(“The tip and trade resemble trading by the in-
sider himself followed by a gift of the profits to the recipi-
ent.”). Because Dirks was only a tippee and his insider-
tippers were motivated not by a desire for personal gain
(or even to give a gift) but by a desire to expose fraud, the
Court found no liability. 

  The final ingredient of the Dirks test focuses on the
tippee. As Chiarella and Dirks itself demonstrate, not all
tippees will be liable, no matter how unfaithful the
tipper was. Instead, as the Court put it in Dirks:
    [A] tippee assumes a fiduciary duty to the sharehold-
    ers of a corporation not to trade on material nonpublic
8                                                No. 05-1091

    information only when the insider has breached his
    fiduciary duty to the shareholders by disclosing the
    information to the tippee and the tippee knows or
    should know that there has been a 

(emphasis added). See also SEC v. Maio,

, 632 (7th Cir. 1995); United States v. Falcone,

, 231-32 (2d Cir. 2001).
  Tipper liability (and the tippee liability derived from it),
the Supreme Court noted in United States v. O’Hagen, 

(1997), is a species of the “misappropriation”
theory of liability under § 10(b) and Rule 10b-5. 

. Under this theory, “a fiduciary’s undisclosed,
self-serving use of a principal’s information to purchase or
sell securities, in breach of a duty of loyalty and confidenti-
ality, defrauds the principal of the exclusive use of that
information.” 

that criminal liability
under § 10(b) “may be predicated on the misappropria-
tion 

.
  With these general principles in mind, we turn to Ev-
ans’s estoppel argument. We begin with a reminder that
    it is well established that “[i]nconsistent verdicts in a
    criminal case are not a basis for reversal of a convic-
    tion or the granting of a new trial.” United States v.
    Reyes, 

, 1168 (7th Cir. 2001) (collecting
    authority). This is because the Supreme Court has
    recognized that inconsistent jury verdicts may occur
    for various reasons, including mistake, compromise, or
    lenity. See United States v. Powell, 

, 65,
    

, 

(1984).
United States v. Askew, 

, 501 (7th Cir. 2005).
We do not know why the jury in the first trial was not
convinced beyond a reasonable doubt that Evans and
Gianamore had conspired with one another, or why it
chose to acquit Gianamore on the substantive counts. The
No. 05-1091                                                9

important point here is that those acquittals did not
prevent a properly instructed second jury from finding
both that Gianamore’s tips were unlawful and that Evans,
by knowingly trading on that information, violated the
law. The Supreme Court’s decision in Standefer v. United
States, 

, 25 (1980), all but forecloses Evans’s
argument: there the Court held that a defendant accused
of aiding and abetting in the commission of a federal
offense (making gifts to a public official in violation of 18
U.S.C. § 201(f)) may be convicted after the named principal
has been acquitted of the offense.
  The Court’s holding in Standefer that nonmutual
estoppel does not apply against the government in criminal
cases means, at a minimum, that there was no bar to
Evans’s second trial on the basis of claim preclusion. We
have recognized, however, a narrow version of issue
preclusion that may still apply in criminal cases. “[T]he
defendants have the burden of proving, based on the
indictment, evidence, instructions, and verdict, that the
jury’s acquittals necessarily determined issues which, on
retrial, must be proven beyond a reasonable doubt.” United
States v. Bailin, 

, 280-81 (7th Cir. 1992). See
also United States v. Salerno, 

, 740-41 (7th
Cir. 1997). In Salerno and Bailin, this court identified
three rules governing the application of issue preclusion
in criminal cases: (1) the court cannot engage in
hyper-technicality, but rather must examine the pleadings,
evidence, charge, and other relevant material to determine
whether a rational jury could have based its verdict on a
different issue; (2) “issue preclusion only applies when a
relevant issue in a subsequent prosecution is an ‘ultimate
issue,’ i.e., an issue that must be proven beyond a reason-
able doubt”; (3) the defendant bears the burden of proof
in proving that the ultimate issue was “necessarily deter-
mined by the prior jury.” 

; see

.
10                                              No. 05-1091

  Gianamore was acquitted of both conspiracy and sub-
stantive violations of the securities laws. To convict on
conspiracy, the jury had to find an agreement between the
two men and a substantive step in furtherance of the
agreement. See United States v. Soy, 

, 768
(7th Cir. 2006); see generally Whitfield v. United States,

, 214 (2005) (noting that 18 U.S.C. § 371, the
general federal conspiracy statute, includes an overt act
requirement). Because Evans was also acquitted of con-
spiracy, we can deduce that the jury either found that the
government failed to prove an agreement, or that the
government failed to prove that he took the requisite
substantive step to implement the alleged agreement.
For the substantive securities law violations, the jury
was required to find (1) that Gianamore had a relation-
ship of trust with Credit Suisse or its clients, (2) that he
breached it by communicating material nonpublic infor-
mation to Evans in violation of his duty of confidentiality,
and (3) that he received a direct or indirect personal
benefit, including even a gift. The jury was further re-
quired to find that Gianamore acted willfully. Reviewing
the jury’s verdict and the evidence at trial, one possibility
is that the jury concluded that Gianamore had a duty of
confidentiality as a corporate insider (derivatively through
Credit Suisse), breached it by giving Evans the informa-
tion as a gift, but did not act with the requisite level of
intent nor enter into an actual agreement with Evans.
Alternatively, the jury might have found that Gianamore
did not receive any benefit from giving out the information,
even the benefit of a gift, if he did not think that he was
violating clients’ confidentiality.
  Unlike Dirks, Gianamore was not a whistleblower.
Instead, he was an insider acting either carelessly or
negligently by giving his friend material insider informa-
tion that the friend then traded on. It is possible that
Gianamore acted without the requisite level of intent to
No. 05-1091                                               11

hold him responsible under the criminal laws and yet that
he nevertheless breached the duty of confidentiality he
had to Credit Suisse and its clients. From the victim’s
perspective, the breach is equally damaging whether
Gianamore acted willfully or negligently. Where an insider
is duped into breaching her duty of confidentiality and the
tippee who induces that breach willfully trades on the
information, knowing its disclosure to be improper, there
is still liability. See 18 U.S.C. § 2(b) (“Whoever willfully
causes an act to be done which if directly performed by
him or another would be an offense against the United
States, is punishable as a principal.”).
  It may be the rare case where the tipper is acquitted and
yet the relationship between the tipper and the tippee
is such that the tippee may yet be prosecuted for acting
upon the tipper’s breach. Nonetheless, it is not essential
that the tipper know that his disclosure was improper.
Where the tippee has a relationship with the insider and
the tippee knows the breach to be improper, the tippee
may be liable for trading on the ill-gotten information.
Thus, where a tippee, for example, induces a tipper to
breach her corporate duty, even if the tipper does not do
so knowingly or willfully, the tippee can still be liable
for trading on the improperly provided information.
  Evans bears the burden of demonstrating that the
acquittals in the first trial necessarily decided in his favor
an issue that was ultimately required to convict him in
the second. In our view, he has not done so. The elements
of tipper and tippee liability are not the same, as we
have already explained. We conclude that the earlier
acquittals did not necessarily resolve the question of
Evans’s liability on the substantive securities law charges.
  Next, we turn to Evans’s argument that the jury in-
structions were improper. This court reviews a district
court’s jury instructions de novo. See United States v.
Stewart, 

, 827 (7th Cir. 2005).
12                                               No. 05-1091

     The court’s instructions to the jury must be correct
     statements of the law that are supported by the
     evidence. This court reviews instructions in their
     entirety and considers “whether the jury was misled
     in any way and whether it had understanding of the
     issues and [of] its duty to determine those issues.” We
     give deference to the district court’s discretion con-
     cerning the specific wording of the instructions, as
     long as the essential elements of the offenses charged
     are covered by the instructions given.
United States v. Perez, 

, 1137 (7th Cir. 1994)
(internal citation omitted). Evans contends that the
district court’s jury instruction “eliminated the crucial
element that in a tipper-tippee case the tipper must
commit a violation of Rule 10b-5.”
 The jury instruction read as follows:
     In considering the element of a “device, scheme or
     artifice to defraud” for purposes of any of Counts One
     through Four, then, you must first consider whether
     Paul Gianamore had a relationship of trust and
     confidence with Credit Suisse First Boston or its client
     referred to in the count you are considering, or both. If
     you so find, then you must next consider whether
     Gianamore breached that duty by communicating
     material, nonpublic information to Ryan Evans, in
     breach of Gianamore’s duty to keep such information
     confidential.
     To find that Evans was forbidden to buy or sell the
     securities in question, you must find that he knowingly
     participated in such a breach of trust or confidence by
     the person to whom material, nonpublic, confidential
     information had been entrusted. Here the government
     must establish not only that the person from whom
     Evans allegedly received the information—alleged to
     have been Paul Gianamore—breached his fiduciary
No. 05-1091                                                13

    duty to keep the material, nonpublic information
    confidential by having disclosed the information to
    Evans but also that Evans knew or should have known
    that the person from whom he received the confiden-
    tial information had breached his fiduciary duty of
    nondisclosure.
Although this instruction required the jury to find that
Evans acted willfully or with knowledge, it did not re-
quire the same finding with respect to Gianamore. In
addition, this instruction did not ask the jury to consider
why Gianamore gave Evans the information. Another part
of the instruction, however, explained that “[t]he elements
of fiduciary duty and exploitation of nonpublic informa-
tion also may exist when a person who has insider status
as to a corporation makes a gift of material, confidential
nonpublic information to a trading relative or friend.” This
reflects the requirement in Maio that, in order to be liable,
a tippee must have a derivative duty not to trade on
material nonpublic information because the insider’s
disclosure was improper and the tippee knew or should
have known that it was improper. Moreover, this instruc-
tion draws a line between an improper disclosure by an
insider and a disclosure that is made both willfully and
with the expectation of a benefit—both of which must be
shown in order for the insider herself to be liable. What
this means is that, despite the derivative nature of tippee
liability, the elements for tipper and tippee liability differ.
Because a tippee can be liable even where the tipper did
not act willfully, so long as the tippee knows that the
information was provided in violation of a duty of confiden-
tiality, these jury instructions did not mislead the jury
and did not eliminate any element necessary for tippee
liability.
  Finally, we turn to Evans’s argument that the district
court erred in excluding the testimony of Gianamore’s
former roommate, Mark Hauber, from the second trial. We
14                                              No. 05-1091

review the decision to admit or exclude evidence for an
abuse of discretion. See United States v. Seals, 

, 606 (7th Cir. 2005). Hauber testified at the first trial
that Gianamore shared a great deal of confidential infor-
mation with him and that, for all practical purposes,
Gianamore did not understand the nature of confidential-
ity. The district court excluded Hauber’s testimony be-
cause it did not shed light on why Gianamore gave Evans
confidential information or on Evans’s state of mind. The
district court reasoned that the fact that Gianamore may
have breached his confidential relationship more than once
did not make each indiscretion less of a breach. The fact
that Gianamore may not have acted willfully or criminally
does not necessarily mean that Evans failed to appreciate
that this information was material and nonpublic, that
Gianamore was violating his duty of confidentiality, and
consequently that Evans himself had to refrain from
trading on the information. Hauber’s evidence at most
shed light on Gianamore’s state of mind, not Evans’s, and
therefore we cannot find that the district court abused
its discretion in excluding it. Furthermore, even if the
district court had abused its discretion, any error would
have been harmless; in the broader picture, this testi-
mony would have had little impact on the jury.
  Evans’s challenges to his tender offer convictions are
based on the assumption that his insider trading convic-
tions were flawed and must be overturned. Since we have
rejected that argument, we do not need to discuss the
tender offer convictions any further.
                          * * *
  The judgment of the district court is AFFIRMED.
No. 05-1091                                        15

A true Copy:
      Teste:

                   ________________________________
                   Clerk of the United States Court of
                     Appeals for the Seventh Circuit




               USCA-02-C-0072—5-15-07