TEGNA sign on the building in Tysons Corner, Virginia. Tegna Inc. is an American publicly traded broadcast, digital media and marketing services company.

When reporting on litigation, it's an occupational hazard that interested parties may try to manipulate press coverage to advance their agendas.

But there's been so much spinning and counter-spinning in a brutal proxy fight involving broadcaster Tegna that I'm getting motion sickness just thinking about it. 

Shareholders of Tegna (which was formed in 2015 when Gannett Co. split in two) are voting today in a virtual election to select the company's 12-member board of directors. 

Tegna's largest shareholder, New York-based hedge fund Standard General LP, has put forward a slate of four candidates, including fund chairman Soohyung Kim. Represented by Fried, Frank, Harris, Shriver & Jacobson, they argue that the current board "has presided over a massive destruction of shareholder value," and that replacing one-third of the incumbent directors will "advance change that is urgently needed."

The current Tegna board, in turn, says that a vote for all its nominees "is a vote for a highly qualified, engaged and diverse board that is delivering superior value to all of our shareholders."

Nothing too unusual so far. But things started to get squirrelly when a woman named Donna Chechele sued Standard and Kim on April 22 in the Southern District of New York.

Chechele, who is represented by James Hunter of Hunter & Kmiec, is something of a serial plaintiff. By my count, this is her 19th case in the SDNY alleging an obscure securities law violation: Section 16(b) of the Securities Exchange Act of 1934.

Also known as the "short-swing profit" rule, Section 16(b) (per Nasdaq) "requires that any profit realized by a company insider from the purchase and sale, or sale and purchase, of the company's equity securities within a period of less than six months must be returned to the company."

Suing as a Tegna shareholder, Chechele claims Standard and Kim violated this rule by executing a series of stock transactions that "unwittingly carried it over the 10% threshold, exposing it to Section 16 of the Act."

She says Standard should disgorge $4.8 million in short-swing profits to Tegna (which declined to take action on its own), and also that she should be awarded attorney's fees and costs.

Given the less-than-thrilling nature of Section 16(b) litigation—which doesn't even require showing scienter—it's not surprising that Chechele's suit made nary a ripple.  

That is, until Baxter Townsend, a vice president at Tusk Strategies ("We're the people you hire if you have a lot at stake and winning is absolutely essential") allegedly sent an email on April 24 to various reporters about the lawsuit, presumably acting on behalf of a client that Tusk has declined to identify. 

"I wanted to let you know about a recent lawsuit filed against Standard General and its chair Soohyung Kim alleging insider trading in connection with Kim's current proxy fight with Tegna," Townsend wrote, according to a lawsuit filed against her and Tusk by Standard and Kim on April 28.

Standard and Kim are crying foul, focusing on her use of the phrase "alleging insider trading."

"Townsend sought to have prominent journalists publish the false and defamatory claim that plaintiffs have been accused of a crime; the lawsuit to which the email referred is, in actuality, a frivolous civil disgorgement claim by one small shareholder of TEGNA," wrote Fried Frank's Michael Keats and James Wareham in the suit filed in Manhattan federal court. 

(Ahem. It's worth pointing out that insider trading can be a civil or criminal offense, though that's not something they acknowledge.)

"Tusk's reasons for pursuing this malicious and defamatory article are obvious: A story accusing Standard General and Mr. Kim of a crime would likely be a knockout blow to Standard General's prospects in the proxy contest," they continued.

Tusk did not respond to a request for comment, nor did the Fried Frank lawyers when contacted via a firm spokeswoman.

Townsend's pitch doesn't seem to have been particularly successful. The Fried Frank lawyers only identify one ensuing article—a piece by Radio Business Report headlined "Standard General Head Soohyung Kim Accused of Insider Trading," that has since been changed.

Standard and Kim are not suing the publication. Instead, they're going after Tusk and Townsend for defamation, as well as well as violating Section 14(a) and Rule 14a-9 of the Securities Exchange Act.

 "While Ms. Townsend's email solicitation does contain a link to the complaint at the very bottom, she never mentions the actual basis for the complaint under Section 16(b) —likely assuming (correctly, as it turns out) that non-lawyer reporters would not catch the trick until it was too late," wrote Keats and Wareham.

But wait—was it actually a trick? 

Chechele's suit may indeed be (as the Fried Frank lawyers put it) "a frivolous civil disgorgement claim by one small shareholder." But does that mean it's flat-out wrong to describe a 16(b) claim as insider trading? 

Sure, it's not insider trading like when a banker tips a friend about an upcoming merger, but still… a variety of insider trading? After all, the suit is grouped under the same Pacer code—850—as the tipster insider trading cases.

For that matter, insider trading isn't really even defined by statute. Oh wait, except in one place where it is: Chechele in her suit quotes Professor Richard W. Jennings et al, who wrote in "Securities Regulation: Cases and Materials 1202," that Section 16 is the "original and only express 'insider' trading provision" of the Securities and Exchange Act.

Or Fordham Law Professor Steve Thel, who wrote, "It is hornbook law that the purpose of Section 16 is to keep corporate insiders from trading on the basis of inside information; the statute says almost as much."

The statute itself is too long and wordy to quote here in full, but this is how it begins: "For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him…"

Which sorry, that sounds to me like a form of insider trading, albeit a lame one. But still, insider trading.

Who is trying to trick reporters now?