The agricultural industry is more than just a set of commodities to be traded; it deals with public access to food, a basic necessity. Any unnecessary upheaval created in these markets through unfair speculation or misuse of sensitive information could have dramatic consequences for the markets and the food supply.
For this reason, it's a federal crime under 18 U.S.C. 1902 for any government official or employee to mishandle such information or to use it for their gain. If you're charged with unlawful disclosure of crop information or speculating on this information, you could face up to 10 years in federal prison if convicted.
18 U.S.C. 1902 says, “Whoever, being an officer, employee or person acting for or on behalf of the United States or any department or agency thereof, and having by virtue of his office, employment, or position, become possessed of information which might influence or affect the market value of any product of the soil grown within the United States.
Which information is by law or by the rules of such department or agency required to be withheld from publication until a fixed time, willfully imparts, directly or indirectly, such information, or any part thereof, to any person not entitled under the law or the rules of the department or agency to receive the same; or, before such information is made public through regular official channels, directly or indirectly speculates in any such product by buying or selling the same in any quantity, shall be fined under this title or imprisoned not more than ten years, or both.
No person shall be deemed guilty of violating any such rules unless, prior to such alleged violation, he shall have had actual knowledge thereof.”
What Does the Law Say?
In effect, 18 U.S.C. 1902 states that if you work for the U.S. government or any of its departments and you receive inside information that could change the value of crops grown in the U.S., you are prohibited by law from doing either of the following things:
- Sharing this information with anyone who is not authorized to know it or
- Using this information to buy or sell these crops before the information is officially made public.
This law serves an essential function in protecting the integrity of agricultural markets. Its purpose is to maintain a level playing field in the market, preventing unauthorized manipulation of prices based on privileged information.
18 U.S.C. 1902 contains a noteworthy exception that may serve as an essential defense for someone accused of this crime: you must have prior knowledge about this rule to be convicted. In other words, you can't be considered guilty of breaking these rules if you didn't know about them before doing something wrong. You must knowingly violate the rule.
What Are the Elements of the Crime?
To convict you of unlawful disclosure or speculation concerning crop information, federal prosecutors must prove the following elements beyond a reasonable doubt:
- You were employed as an officer, employee, or agent of the United States, or any department or agency thereof, at the time the crime was committed,
- In this role, you obtained information that could influence or affect the market value of a soil product grown within the United States,
- The information was legally required to be withheld from publication until a specified time,
- You either willfully shared the information with an unauthorized person or speculated on the product before it was publicly announced through official channels and
- You had actual knowledge of the law prohibiting the disclosure or speculation before doing so.
What Are Some Examples?
EXAMPLE 1: George is a high-ranking United States Department of Agriculture (USDA) government official. He has access to non-public information regarding the upcoming corn harvest, which is expected to be significantly lower than average due to adverse weather conditions.
George shares this confidential information with his commodities broker prior to the USDA's public announcement. The broker then uses this insider information to speculate on the corn futures market, making substantial financial gains when the report is officially released and corn prices rise dramatically. George can be charged under 18 U.S.C. 1902.
EXAMPLE 2: Angela is a junior staff member at the USDA who stumbles upon a report on the office printer detailing the projected soybean yield for the year. Unaware of the document's significance or the rules prohibiting its dissemination, Angela casually mentions the figures in conversation with a friend who happens to trade in agricultural futures.
Angela would likely not be convicted under 18 U.S.C. 1902 because she divulged the information innocently, unaware of the rule prohibiting her actions and unaware that the information was embargoed.
What Are the Related Federal Laws?
18 U.S. Code Chapter 93, public officers and employees, has several federal statutes related to section 1902, disclosure of crop information and speculation thereon, including the following:
- 18 U.S.C. 1901 - Collecting or disbursing officers trading in public property,
- 18 U.S.C. 1903 - Speculation in stocks or commodities affecting crop insurance,
- 18 U.S.C. 1905 - Disclosure of confidential information generally,
- 18 U.S.C. 1906 - Disclosure of information from a bank examination report,
- 18 U.S.C. 1907 - Disclosure of information by farm credit examiner,
- 18 U.S.C. 1909 - Examiner performing other services,
- 18 U.S.C. 1910 - Nepotism in appointment of receiver or trustee,
- 18 U.S.C. 1911 - Receiver mismanaging property,
- 18 U.S.C. 1912 - Unauthorized fees for inspection of vessels,
- 18 U.S.C. 1913 - Lobbying with appropriated money,
- 18 U.S.C. 1915 - Compromise of customs liabilities,
- 18 U.S.C. 1916 - Unauthorized employment and disposition of lapsed appropriations,
- 18 U.S.C. 1917 - Interference with civil service examinations,
- 18 U.S.C. 1918 - Disloyalty and asserting the right to strike against the Government,
- 18 U.S.C. 1919 - False statement to obtain unemployment compensation for Federal service,
- 18 U.S.C. 1920 - False statement or fraud to obtain Federal employees' compensation,
- 18 U.S.C. 1922 - False or withheld reports concerning Federal employees' compensation,
- 18 U.S.C. 1923 - Fraudulent receipt of payments of missing persons,
- 18 U.S.C. 1924 - Unauthorized removal and retention of classified documents or material.
What Are the Penalties Upon Conviction?
Violations of 18 U.S.C. 1902 come with potentially significant penalties. If found guilty of this crime, you could face the following:
- Up to $250,000 in fines and
- Up to 10 years in federal prison.
What Are the Common Defenses?
Despite the seriousness of this crime, a skilled federal criminal defense attorney can employ several strategies to defend you against these charges. Common defenses include the following:
- Mistake of Fact: Your attorney may argue that you were unaware the information was restricted or genuinely believed you were authorized to disclose or speculate on the information.
- No Intent to Defraud: If your attorney can demonstrate that you did not intend to defraud or manipulate the market value of the agricultural product, this may serve as a valid defense.
- Lack of Knowledge of the Rules: If you can establish that you were unaware of the rules or laws prohibiting the disclosure or speculation, you cannot be convicted of this crime.
If you need more information, contact our law firm by phone or through the contact form. Eisner Gorin LLP has offices in Los Angeles, California.