The use of so-called blue collar tactics in white collar cases is the current hot topic in the wake of the Galleon insider trading cases. There, the government is using intercepted telephone calls and wired informants to fashion the largest insider trading case involving a hedge fund. While this is not the first securities case to employ such tactics, it may be the most prominent. The blue collar tactics seem to be yielding results based on in increasing number of guilty pleas prosecutors have obtained. The tactics are, however, being challenged by the defense in both the criminal case and the civil SEC action.

Cases built on intercepted and record conversations sound like the predicate for an air tight case prosecution. That is not necessarily true, however. To the contrary, blue collar tactics do not always translate to success in the court room for prosecutors. Consider for example the insider trading case brought against Andreas Hofmann and Ossian Hellers. The two men are co-defendants in the largest insider trading case brought by Swedish authorities.

Swedish authorities claimed that Messrs. Hofmann and Hellers engaged in insider trading involving twenty different companies. That trading is reputed to have yielded profits of over 100 million Swedish kronor or about $13 million. The two men were arrested in 2007. At the time, a police search turned up almost a half a million kronor in cash under the stuffing in a child’s car seat at Mr. Hofmann’s home. Prosecutors obtained a pretrial asset freeze.

Intercepted telephone calls were the center of the government’s trial evidence. Prosecutors argued the calls established that the defendants had exchange information on future events which would impact the share price.

The court disagreed. Both men were found not guilty on the insider trading charges. The so-called blue collar tactic of intercepted telephone calls more typically reserved for the mob failed to result in a conviction. Another long established tactic used against the mob did however yield convictions. In a tradition dating back to at least famous Chicago crime boss Al Capone, both men were convicted of tax evasion on the profits from the trading. The court did, however, release the asset freeze and ordered the government to reimburse legal fees from the insider trading charges of 10 million kronor or about $1.3 million.