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The Daily

Recent Court Cases Say a Little Lying in Business Negotiations is OK

Chris Gaetano
Published Date:
Apr 19, 2016
GavelWhile most people are truthful in business negotiations, sometimes people lie. While most people would consider this fraud, The New York Times pointed to several recent court cases that ruled in favor of "not necessarily." A federal appeals court in Chicago recently overturned the fraud conviction of David Weimart, a former vice president of AnchorBank, connected to the sale of commercial real estate shares. He was charged with telling the buyers the bank wanted him as a partner in the deal, while telling the bank that the buyers wanted him to take a piece of the transaction.

While the appeals court agreed that Weimart indeed manipulated both sides, it noted that in business negotiations it's not unusual for parties to conceal their true goals, values and priorities or to reserve prices. This means that, while frowned upon, the court did not think what he did was illegal. For that, the deception needed to be one that a reasonable person would consider important in a transaction. Reasonable people, the court said, should not expect negotiating parties to be 100 percent candid with each other. 

The Times said the decision is similar to two others this past December. In one, a securities trader was accused of lying to buyers about the prices his firm paid for residential mortgage backed securities. The appeals court, however, pointed to evidence that institutional investors in general, like the ones the trader lied to, don't care what the firm paid for the securities. Another decision in Boston overturned a fraud conviction where a firm presented investors with slides from a typical bond portfolio rather than the actual holdings, which turned out to be fraudulent, said The Times. The court said the investors could have inquired further if they were really interested, and so the deception wasn't material. 

Given this, The Times recommended taking presentations with a grain of salt, as there is every possibility you're being lied to, legally.