HIGH COURT TO REVIEW BROKER-THEFT CASE, RANDOM DRUG TESTING IN PUBLIC SCHOOLS

WASHINGTON -- The Supreme Court said it will decide whether theft by a
broker amounts to securities fraud.

Accepting an appeal from the Bush administration, the justices agreed to
review a government lawsuit against a former Bethesda, Md., stockbroker
accused of siphoning money from the account of an elderly client and his
daughter.

Charles Zandford was convicted in 1995 of 13 counts of wire fraud and
sentenced to more than four years in prison. Soon after, the Securities and
Exchange Commission filed a civil suit seeking to recover $343,000 in
ill-gotten gains. The SEC alleged that Mr. Zandford violated federal
securities law when he sold stock from the discretionary account and
pocketed the proceeds. But a federal appeals court in Richmond, Va.,
disagreed, ruling in January that Mr. Zandford's theft didn't constitute
fraud under the statute.

While finding Mr. Zandford's actions "reprehensible," the court concluded
that the securities-fraud provisions don't "encompass every conversion or
theft that happens to involve securities." The court ordered the lawsuit
dismissed.

The SEC was watching the case closely. The government said the ruling
stripped regulators of an important tool that has long been wielded against
unscrupulous brokers who steal from clients, churn customer accounts or lie
about the risks of margin accounts.

"The case was important enough that we petitioned for a Supreme Court
review," said David Becker, SEC general counsel. "The Solicitor General
will present our case to the Supreme Court and we're optimistic about the
result."

The provision at issue in the case requires the SEC to prove the fraud
occurred "in connection with the purchase or sale" of any security. The
appeals court said Mr. Zandford couldn't face securities-fraud claims
because the theft wasn't sufficiently connected to the securities
transactions. (SEC v. Zandford.)

Also Thursday, the justices agreed to use an appeal from a rural Oklahoma
school district to revisit the debate over random student drug tests.

Testing student athletes for illegal drug use received the high court's
blessing in a 1995 case from Vernonia, Ore., where school officials blamed
discipline problems on football players and other athletes who used drugs.
But a federal appeals court in Denver ruled this spring that educators in
Tecumseh, Okla., went too far when they decided also to randomly screen
band and choir members, academic team members and Future Farmers of
America. The court declared the testing an unreasonable search under the
Constitution's Fourth Amendment.

The Tecumseh policy was challenged by three students who said the school
board had little reason to think youngsters in those interscholastic
programs were using illegal drugs. The students, backed by the American
Civil Liberties Union, didn't contest the school district's random testing
of athletes.

In order for a random drug-testing program to pass muster, the appeals
court said, a school district must show there is "some identifiable
drug-abuse problem among a sufficient number" of the students to be tested,
and that the testing will "actually redress" the district's drug problem.
(Board of Education of Independent School District No. 92 of Pottawatomie
County v. Earls.)