Insider-trading prosecutions are easy to bring but difficult to defend against. Accused traders and portfolio managers, looking at decades-long prison terms, come to understand that a much-reduced sentence awaits them if they cooperate with prosecutors. The key is to testify that they let the boss know that their trading moves were based on prohibited tips—such as an impending announcement of the success or failure of new-product testing, or a coming tender offer—and that the boss responded knowingly and with an admonition not to spread the secret around.
Emails can be subpoenaed—and their shorthand discussions often lend themselves to damning interpretations—but documentary evidence of such exchanges isn't required. After all, illegal information is received and then passed along in secret, often by word-of-mouth or perhaps with only a knowing nod. And that's why this kind of "I told him" evidence is so highly valued.
In the sardonic description of such testimony, the witnesses not only sing—they also compose. As part of the deal-making, prosecutors must tell the witness that if he is caught lying, the deal will be revoked. Not surprisingly, few such deals fail to ensnare the higher-ups, and few are revoked. Everyone pretends that the system produces justice rather than career advancement and the institutional accretion of governmental power.
Might the average person find something wrong with an inducement to such cooperation in which prosecutors offer witnesses reduced prison time in exchange for favorable testimony? Logic, legal ethics and consistency all say yes.