The question, raised by the Reporters' Committee for Freedom of the Press in Manhattan's federal court, was not a simple one.
What if a reporter doing a story on General Motors heard that the company was having problems and -- before writing the story for his paper -- tipped off his mother so she could sell her GM stock?
Is it enough that his employer chastises, reprimands or fires him? Or should he also be liable to government charges of stock fraud?
"This may be an issue for the company, a clear violation of a company's conflict of interest policy," said Benjamin W. Heineman, Jr., lawyer for the reporters' committee and other press groups. "But what the hell is the government, the SEC Securities and Exchange Commission doing in here?"
The case at issue -- one that has drawn quiet consternation among press advocates -- involves R. Foster Winans, a former Wall Street Journal reporter accused of selling advance word of how certain stocks would be treated in upcoming editions of the paper.
Winans, formerly a writer for the Journal's widely-read "Heard on the Street" column, and two codefendants are charged in U.S. District Court with conspiracy, securities fraud, and mail and wire fraud by illegally using Winans' position to make quick profits on the stock market.
The criminal trial is expected to be followed by an SEC civil action that includes one charge dropped in the criminal proceedings -- that Winans had a responsibility to tell readers which stocks he bought and sold and how they matched up with stocks he was writing about.
And while the libel suits of former Israeli defense minister Ariel Sharon and retired general William C. Westmoreland drew the spotlights in the same courthouse during the last few months, some media experts fear that the First Amendment may be subject to a sneak attack in the Winans case being tried quietly upstairs by U.S. District Court Judge Charles E. Stewart Jr.
"What we've got here is an unsavory case that can make bad law," said Heineman, who used the hypothetical GM story in a brief filed for the reporters' committee in support of Winans. "Nobody condones Winans, but this is taking one presumably bad apple and creating a whole new area of law."
To some in the financial world, the case is most noteworthy for expanding the definition of "insider trading." In the past, the courts have held that someone inside a company who used nonpublic information to make money on the stock market could be charged with insider trading.
But gradually the SEC has expanded the definition to embrace people previously considered financial outsiders. And now the term is being applied to a newspaper reporter -- a development that could pose a new conflict between the need for regulation of the stock market and the freedoms of the press.
Peter Romatowski, the assistant U.S. attorney handling the case, said last week that by leaking information about how stocks would be treated in Journal articles, Winans "knew he was participating in a fraud."
But Romatowski went on to say that among the charges against Winans is one that he participated in "a fraud on The Wall Street Journal that had stressed to Mr. Winans from the outset his obligations not to do the very thing he did . . . . "
The question is crucial for Winans, whose lawyer, Don D. Buchwald, argued last week that the entire case was "about a violation of a Journal policy."
"It is a case in which the government contends that the violation of a private policy of a private employer is a violation of the law," he said.
The policy, as articulated by a series of Wall Street Journal editors last week, is that any stock holdings or tradings should be reported to one's superior and, more importantly, that word of upcoming stories about stocks should not be leaked outside the paper.
One Journal editor, Richard E. Rustin, said he told Winans that he must be extraordinarily careful not to tell those he was interviewing that he was working on a story.
"I was standing at Foster's desk," Rustin recalled, "and he was on the telephone, and . . . he opened the conversation by saying 'We are doing a story on XYZ Company . . . . I waited until he got off the phone and said to him,'That is not the way to open the conversation. You have to mask your intention, you have to dissemble a little bit. Don't tell somebody outright you are going to write about a company.' "
For press analysts, the fear is that this "intrusion" by the government -- by enforcing an internal policy of The Wall Street Journal -- will be "the camel's nose under the tent," causing an expansion of government control over not only financial reporting but also other types of journalism.
But the case also raises the question of who owns the information. Robert Sack, attorney for Dow Jones & Co. Inc., said today in an interview that the issue is also what Winans was doing with company property -- that is, the information that certain stories would be in the paper.
Calling it "a peculiar variety of theft," Sack said of the case: "The guts of it is the abuse of the authority of a reporter to take Wall Street Journal property and use it to his own detriment and to the detriment of The Wall Street Journal."
John C. Boland, author of "Wall Street's Insider," a book published by Wm. Morrow & Co. Inc., agreed in part. "It's not unreasonable for The Journal to say that any information a reporter comes across in pursuit of his job is corporate property," he said.
But he added: "That doesn't establish a fiduciary responsibility. What happened was that the SEC had nothing to hang this case on so they hung it on [Winans'] responsibility to The Journal."