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The president and CEO of Computer Horizons, John Cassese, entered merger discussions with another computer company, Compuware Corp., but Horizons' board rejected the proposal. Later, Compuware's CEO called Cassese and informed him that they were no longer interested in buying Computer Horizons, and that his company was about to acquire another company. Cassese then purchased 15,000 shares of that company, which he sold following the public announcement of the acquisition. The SEC filed an insider trading complaint against Cassese who consented to an order of judgment against him, disgorged his profits and paid penalties and interest. Cassese was also prosecuted for insider trading. Following an initial mistrial, Cassese was convicted by a jury of securities fraud in connection with a tender offer under Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3. The district court judge overturned the verdict, however, finding that in criminal cases under '14(e) and Rule 14e-3, where no other securities laws violations are alleged, the government, in order to prove willfulness, must prove that the defendant believed that the material nonpublic information he traded upon related to, or most likely related to, a tender offer. The district court found that the evidence at trial was insufficient to support the jury's finding that Cassese acted with criminal intent.

On appeal, the divided court found that, even after affording the government all the presumptions to which it is entitled, it 'failed to prove beyond a reasonable doubt that Cassese willfully violated Rule 14e-3 even under the more relaxed definition of willfulness it proposes.' By purchasing the shares of his rival, 'Cassese did not breach any duty, nor did he misappropriate any confidential information ' The information Cassese received was not related to Computer Horizons or to any company in which he could be considered an insider by virtue of a directorship or otherwise. Accordingly, he was under no legal duty to refrain from trading on the information by virtue of being an insider, or to keep it confidential.' Significantly, the court noted, the government did not prove nor contend that when Cassese traded he knew the company would be the subject of a tender offer.