NEW YORK (AP) — Targets of government probes of insider trading are increasingly the small-time trader hoping to score big on a hot illegal tip, a Securities and Exchange Commission official says. “We’ve seen a shift away from the Wall Street kingpins to Main Street America,” SEC Enforcement Director Richard Walker said as the government watchdog of the securities industry announced one of its biggest cases ever.
“In many cases we’ve brought over the past couple of years, the amounts are much smaller and the people are not Wall Streeters. They are neighbors, cousins, friends, business or personal acquaintances,” Walker said.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
The case unveiled recently differed from those of the late 1980s and early 1990s, when top executives at Wall Street financial firms or publicly traded companies were accused of cashing in on secret information.
This time, the tipper was a secretary for International Business Machines Corp., Lorraine K. Cassano, who told her husband, Robert, that the technology giant was about to acquire Lotus Development Corp. When the deal was announced, Lotus stock jumped nearly 90 percent.
Before long, a circle of people ready to trade illegally in advance of the news had reached 25, including a teacher, a delicatessen owner and a doctor who was told of the tip when he went to the store for lunch.
Within hours on June 2, 1995, the group of friends, acquaintances and colleagues had bought enough stock to earn a $1.3 million profit, though the secretary and her husband only made $7,500, the SEC said.
Juan Marcel Marcelino, district administrator of the Boston SEC office which handled the investigation, said the case was one of the largest ever in terms of number of people charged.
The SEC said IBM has since fired Mrs. Cassano, a North Salem, N.Y., resident.
Among those charged in the case was a pizzeria owner, a bank vice president, a private school teacher, a grocery store owner, a lawyer, the president of a direct-mail marketing company, a doctor, an engineer and several stockbrokers. Thirteen of the charged live in Staten Island, N.Y., and six live in New Jersey.
In its court papers, the SEC asked the court to order the defendants to obey all securities laws, return any illegally obtained profits and be fined civil penalties up to three times their ill-gotten gains.
The SEC said Mrs. Cassano’s husband, Robert, pleaded guilty to insider trading on Jan. 15, 1998.
The Cassanos could not immediately be reached for comment on the charges.
Many of the defendants tried to conceal their trades or the illicit nature of their trading activity by lying under oath about the reasons for their trades and falsely denying they knew the others in the group, the SEC said.
Others who have pleaded guilty in the case thus far include lawyer Carmine DeSantis of Staten Island, salesman Michael Paul Green of Edison, N.J., computer technician P. Gerard Mazzone of Staten Island, delicatessen owner Peter G. Mazzone of Staten Island, computer technician Joseph Petrosino of Brooklyn, N.Y., and Dr. Gary Spierer of Staten Island.
DeSantis pleaded to conspiracy to commit obstruction of justice, Green to obstruction of justice, both Mazzones to insider trading and perjury, Petrosino to perjury and Spierer to obstruction of justice.
The SEC said both Cassanos as well as Green and Spierer have already settled the SEC civil charges, agreeing to obey securities laws and to pay back profits.
